financial management group assignment report topic cdbeco financial analysis

Neo Gim Siong Bennett Chairman Majority-owned subsidiaries 1 Branch of CD Beverage Joint 40 2/4 Street, Vinh Hai Ward, NhaStock Company in Nha Trang Trang City 2 Sales and Distribution C

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

SCHOOL OF FINANCE

FINANCIAL MANAGEMENT

GROUP ASSIGNMENT REPORT

Lecturer: Mrs Tu Thi Kim Thoa

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PART I: INTRODUCTION

Chuong Duong Beverage Joint Stock Company was formerly the Usine Belgiquefactory belonging to B.G.I Group (France) This was the largest beverage factory inthe South before 1975 In mid-1977, BGI Group officially transferred ownershipand handed over the entire factory to the state with the name “Chuong Duong SoftDrink Factory” After many years of operation in the beverage industry, ChuongDuong is currently one of the leading companies in Vietnam

Company background1

Company

Parents company Saigon Beer - Alcohol - Beverage

Corporation (SABECO)

Postal address 606 Vo Van Kiet Street, Cau Kho Ward,

District 1, Ho Chi Minh City

Independent audit firm KPMG Limited Vietnam

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Listing floor Ho Chi Minh City Stock Exchange

Geographic areas served Vietnam

a) Founding

Chuong Duong has been a familiar soft

drink brand to most people in the Southern part

of Vietnam for more than 60 years with its

unique sarxi flavor Having been present in

Vietnam since the 1950s, but Chuong Duong

really marked an important turning point only

when officially operating as a joint stock

company on June 2, 2004 with a charter capital

of VND 85 billion In that total amount, Saigon

Beer - Alcohol - Beverage Corporation

(SABECO) held 51% controlling stake.2

Currently, as of March 16, 2021, SCD's largest shareholder is still Sabecowith 62% of charter capital, followed by Venture Investment Joint Stock Companyand PYN Elite Fund holds 12.47% and 5.65% of charter capital respectively

b) Expansion

Currently, the company is operating with a production line for extractingglass bottles, a line for filling PET bottles and a line for filling cans; with over 500employees working 2 shifts/day The average output of the Company has growncontinuously from 2.7 million liters in the period 1977 - 1985 to 22.9 million liters in

1988 - 1992 and reached more than 38 million liters up to the present time

According to CDBECO's 2020 financial report, the company's netrevenue in the year is about 259 billion VND and profit after tax is 12.8 billionVND, equivalent to a decrease of 3% and 26% compared to the 2019 results.Currently, the classification of small and medium-sized enterprises isbased on the average number of employees participating in social insuranceper year and revenue or capital source (with priority given to revenue) Fromthe above information, it can be seen that CDBECO is a medium-sizedenterprise in the manufacturing sector with more than 500 employees and 85billion VND investment capital

c) Organizational structure

The structure of CDBECO's Executive Board

Board of Directors Mr Neo Gim Siong Bennett Chairman

Majority-owned subsidiaries

1 Branch of CD Beverage Joint 40 2/4 Street, Vinh Hai Ward, NhaStock Company in Nha Trang Trang City

2 Sales and Distribution Center 176/5 Pham Hung Street, Block 1,

Ward 09, Ho Chi Minh City

3 Branch of Chuong Duong Lot D-5B, 5D, 5F-CN, My PhuocBeverage Joint Stock Company Industrial Park 3

4 Go Dau Branch - Chuong Duong 280 Go Dau Street, Tan Quy Ward, TanBeverage Joint Stock Company Phu District, Ho Chi Minh City

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d) The overall market

The company's business areas include:

● Producing and trading in beverages (mainly)

● Producing and trading in raw materials, packaging, equipment and

technology related to the beverage sector

The company's main products include:

● Carbonated soft drinks (glass bottles, cans and PET bottles): sarxi, orange flavor, strawberry flavor, mint, Cream soda, soda

● Non-carbonated beverage: aloe vera flavor

● Bottled purified water

e) Competitors

Beverage is a commodity in the FMCG industry, it has great consumption inthe world with advantages of convenience and deliciousness In Vietnam, thebeverage market is considered to have strong growth nationally Currently,according to estimates of the Vietnam Beer and Alcoholic Beverage Association(VBA), there are about 1800 beverage production facilities in the country with anannual growth rate of 6-7% Among them, prominent brands in the market can belisted as Coca Cola, Pepsico, Vinamilk, Vinacafé, Trung Nguyen Coffee, Tan HiepPhat Group, TRIBECO, Lavie, Vinh Hao, Sanna Khanh Hoa,

However, in this report, we choose Sanna Khanh Hoa Beverage JSC (SKN) as

a direct competitor based on the following criteria:

● Both Chuong Duong and Sanna Khanh Hoa are Vietnamese companies operating in the field of beverage production

● Sanna's most recent three-year financial statements is clear, audited by FAC and available on the official web

● Sanna has the same level of awareness and satisfaction as Chuong Duong

in the Vietnamese beverage market

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PART II: ANALYSIS OF PROFIT/LOSS AND BALANCE SHEET

a) Balance sheet

Through data collection and comparison with other companies in the same

FMCG industry that Chuong Duong Beverage is doing business in, our group chose

Sanna Khanh Hoa Beverage to compare with Chuong Duong, as a direct competitor.

According to the financial statements published by Chuong Duong Beverage

and Sanna Khanh Hoa companies for the years 2018, 2019 and 2020, respectively,

we have two balance sheets with the following absolute values Besides, according to

the balance sheet in the financial statements announced by the company, Sanna

Khanh Hoa does not disclose long-term debts (non-current liabilities) Therefore, it is

not shown in Sanna Khanh Hoa's absolute balance sheet below.

Asset

Current asset 192,566,273,595 206,885,924,503 182,251,660,440 Non-current asset 43,069,208,100 40,515,659,043 227,283,080,585

Total 235,635,481,695 247,401,583,546 409,534,741,025 Liabilities and Stockholders'

equity

Current liabilities 45,692,923,589 42,329,352,132 39,810,293,760 Non-current liabilities 720,000,000 8,401,218,750 176,266,087,207 Stockholders' equity 189,222,558,106 196,671,012,664 193,458,360,058

Total 66,100,081,492 63,719,649,907 63,977,313,544 Liabilities and Stockholders'

equity

Current liabilities 15,419,199,164 12,419,317,443 10,251,113,847

Stockholders' equity 50,680,882,328 51,300,332,464 53,726,199,697

Total 66,100,081,492 63,719,649,907Because the size of each company is different, in this case we will

compare the ratios through the common-size balance sheet shown below,

which also mentions the changes in each year

● Chuong Duong Beverage Common-size balance sheet

Change in each year

Change Current asset Non-current asset

In this form, we can see that although current assets of Chuong Duong

Beverage increased slightly from 2018 to 2019 at about 1.9%, from 81.72 to 83.62%.

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However, their current assets were 44.5% of total assets in 2020, down from

83.62% in 2019, strongly decreased 39.12% Current liabilities declined from

17.11 % to 9.72% of total liabilities and equity over the period of 2019-2020 –

the time of Covid-19 Total equity decreased from 74.49% of total liabilities

and equity to 47.24%

Overall, Chuong Duong Beverage’s current assets, current liabilities and total

equity all decreased after the Covid-19 shock Thus, the company’s liquidity, as

measured by current assets compared to current liabilities, decreased over the year.

● Sanna Khanh Hoa

Common-size balance sheet

Change in each year

Change Current asset Non-current asset

In this form, we can see that Sanna Khanh Hoa's current assets increase

year by year by over 8% As we can see, from 2018 to 2019, their current assets rose from 49.75 percent to 58.45%, and despite the impact of the

Covid-19 epidemic in 2020, the company's current assets are still up 8.14 percent in that year, to 66.59% compared to 2019

In addition, the company's current liabilities also decrease year by year by over 3.5% per year In 2020, despite being affected by the epidemic, they still decreased by 3.47% At the same time, the company's total equity is still increasing year by year, especially during the epidemic period, this number has increased by about 3.47%.Therefore, in general, the above figures can be concluded that the

company's cash flow and liquidity are in good condition in the last 3 years

● Chuong Duong Beverage and Sanna Khanh Hoa comparison:

It can be seen that, in the period of 2018 - 2019, current assets of

Sanna Khanh Hoa increased much faster than Chuong Duong Beverage (at 8.7% compared to a rate of only 1.9%) During the Covid-19 pandemic in

2020, Chuong Duong Beverage's current assets plummeted with 39.12%, from83.62% of total assets to 44.5% Meanwhile, the decline rate of Sanna Khanh Hoa was only 8.7%, much lower than Chuong Duong Beverage

In addition, in terms of current liabilities, both companies have a decreasing trend in the years from 2018 to 2020, in the period of 2019 - 2020, Chuong Duong Beverage has a decrease of more than 2 times compared to Sanna Khanh Hoa

(7.39% compared to that of Sanna Khanh Hoa - about 3.47%) However, in terms of total equity, Chuong Duong Beverage is decreasing year by year, while Sanna Khanh Hoa is still growing, especially during the Covid-19 pandemic in 2020.

From that, it can be seen that, in normal state, the growth rate of current assets

of Chuong Duong Beverage is slower than that of Sanna Khanh Hoa, and when the pandemic occurs, this stat decreases much more than the opponent Although current liabilities have decreased over the years, the total equity of Chuong Duong Beverage has also kept that trend, while this index of Sanna Khanh Hoa - their direct competitor, has increased over the years, despite the pandemic situation complex Therefore, it can be concluded that Sanna Khanh Hoa has a liquidity advantage over Chuong Duong Beverage, as measured by current assets compared to current liabilities, and Sanna Khanh Hoa's balance sheet has grown “stronger” over the years.

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b) Income statement

With an annual growth rate of the beverage market forecasted at 6% to 2020,the beverage industry in Vietnam is one of the fastest growing FMCG sectors However, the complicated pandemic situation has prevented the development

of many industries, including the beverage market Although domestic

companies have tried to cope with this change, there are still many difficulties

As a case in point, Chuong Duong Beverage’s operating revenue has decreased 104,694,979,234 VND, about 39.2% compared to the previous

year, 2019 The reasons for this drop in revenue are supposed to be:

- The Covid-19 wave in 2020 has reduced the demand for consumer shopping.

- Covid 19 has disrupted the global supply chain, affecting the flow of goods

- Insufficient supply due to production interruption

However, this significant reduction has happened even before the

Covid-19 spread widely in Vietnam From 2017 to 20Covid-19, the operating revenues

gradually went down From 327,297,597,399 VND in 2017, it decreased by

49,298,295,803 VND (15.06%) in 2018 and continuously dropped to

267,086,490,066 VND These datas explain the company’s performance, which isgetting worse over the years There has been a decline in units sold over the

years, therefore, cost of goods sold (which aredirectly tied to the production of

the products, including the cost of labor, materials, and manufacturing overhead) and total expenses also gradually went down Specifically,

● Cost of goods sold in 2017 was 327,297,597,399 VND, decreased 15,58%

in 2018, 7.3% and 37.87% in 2019 and 2020 respectively In 2020, the year of difficulties for

of Chuong Duong Beverage was 74,892,892,159 VND, approximately 77.11% smaller than that in 2017.

● Similarly to the cost of goods sold, total expenses experienced a downward trend during the 2017-2020 period During 4 years from 2017 to 2020, total expenses were 90,994,719,162 VND, 78,314,146,099 VND, 66,514,529,427 VND, 53,199,281,264 VND respectively In other

words, the total expenses lessened around 15% annually

Besides manufacturing and trading soft drinks, the company also invests

in real estate and producing things related to the beverage sector such as raw materials, packaging, equipment and technology These activities give the

company both gains and losses every year

The year 2018 witnessed a significant increase in the total non-operating gains 2,201,607,931 VND compared to just about 446,371,020 VND in 2017 (a 393,22%

rise) This data showed that the company was making positive changes thanks to the reduction of expenses such as sales, corporate management and financial expenses.3

In addition, the company also invested in real estate projects such as the land plot in

My Phuoc and Vo Van Kiet From the year 2018 onwards, the amount of

non-operating gains steadily decreased to the present, 495.67% and 45.11% respectively However, the figure for non-operating losses showed an opposite pattern From

2017 to 2019, it kept increasing from 521,395 VND to 5,524,979 VND and reached a peak

at 502,884,966 VND This was the result of the construction of a new factory in Dong Nai Province that commenced at the end of 2019 In the following year, the amount of non-

operating losses was estimated at 236,516,599 VND, a decrease of

3 Quang Thang (2018, October 20) “Vua” Sá Xị Chương Dương đang trở lại? ZingNews.vn Retrieved September

24, 2021, from https://zingnews.vn/vua-sa-xi-chuong-duong-dang-tro-lai-post885716.html

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50% compared to 2019 because the company must focus on recovering fromthe impact of the pandemic Overall, it is clear that the non-operating gains over years is always higher than non-operating losses but the company has

to put more efforts to achieve the best results

Different from Chuong Duong Beverages, Sanna Khanh Hoa has less non-operating activities That is the reason why Sanna Khanh Hoa’s

operating gains are much lower than Chuong Duong

It is clearly stated that the gap between non-operating gains of Chuong Duong and Sanna Khanh Hoa is large In this aspect, while Chuong Duong had 446,371,020 VND in 2017 and always greater than 500 million VND, it even

peaked at 2,201,607,931 VND in 2018; Sanna Khanh Hoa had the highest operating gains was only 200,124,234 VND during that 4 year period

non-Sanna Khanh Hoa hadn't put too much effort on investing in non-operating activities.

As a result, the company didn’t bear any losses in this area

Mentioning how these 2 companies’ cost of sales and Gross profit

proportion, we have: Over the last 3 years, Sanna Khanh Hoa has gained a positive growth compared to Chuong Duong

From the year 2018 onwards, it seems like the amount of COGS and

Gross Profit allocated for Chuong Duong experienced a stabilities at around 75%,while the COGS portion of Sanna Khanh Hoa reduced little by little through 3

years In detail, the proportion of cost reduced from 73,49% to 69,11% in 2019

and 65,33% in 2020 With this decline in cost of sales, Sanna Khanh Hoa

company seems to have efficiently produced the revenue, therefore they are

likely to have more spending money for business operations

PART III: RATIO ANALYSIS

a) Liquidity ratio

The tables below compare 3 different liquidity ratios of CDBECO and

Sanna Khanh Hoa

Table a

Year percentage Quick ratio percentage Cash ratio percentage

Year percentage Quick ratio percentage Cash ratio percentage

The current ratios for CDBECO from 2017 to 2020 are generally high, showing

a large investment in the company’s net working capital These figures also

experienced a rapid increase from 3.59 in 2017 to 4.89 in 2019 before a slight dip of

6.33%, down to 4.58, in 2020 The 2020 current ratio is 4.58, meaning that it has

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