financial management group assignment report topic cdbeco financial analysis

According to the financial statements published by Chuong Duong Beverageand Sanna Khanh Hoa companies for the years 2018, 2019 and 2020, respectively, wehave two balance sheets with the

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 ownership andhanded over the entire factory to the state with the name “Chuong Duong Soft DrinkFactory” After many years of operation in the beverage industry, Chuong Duong iscurrently 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

1 Công Ty Cổ Phần Nước Giải Khát Chương Dương Thongtindoanhnghiep.co (2015) Retrieved 19 September

Listing floor Ho Chi Minh City Stock Exchange

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 Sabeco with62% of charter capital, followed by Venture Investment Joint Stock Company andPYN Elite Fund holds 12.47% and 5.65% of charter capital respectively

b) Expansion

Currently, the company is operating with a production line for extracting glassbottles, 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 net revenue inthe year is about 259 billion VND and profit after tax is 12.8 billion VND, equivalent

to a decrease of 3% and 26% compared to the 2019 results

Currently, the classification of small and medium-sized enterprises is based onthe average number of employees participating in social insurance per year andrevenue or capital source (with priority given to revenue) From the aboveinformation, it can be seen that CDBECO is a medium-sized enterprise in themanufacturing sector with more than 500 employees and 85 billion VND investmentcapital

2 Câu chuyện thương hiệu - Chương Dương Retrieved 19 September 2021, from

https://www.cdbeco.com.vn/cau-chuyen-thuong-hieu/

c) Organizational structure

The structure of CDBECO's Executive Board

Board of Directors Mr Neo Gim Siong Bennett Chairman

Mr Dang Trung Kien Member

Majority-owned subsidiaries

1 Branch of CD Beverage Joint

Stock Company in Nha Trang

40 2/4 Street, Vinh Hai Ward, NhaTrang City

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

Ward 09, Ho Chi Minh City

3 Branch of Chuong DuongBeverage Joint Stock Company Lot D-5B, 5D, 5F-CN, My PhuocIndustrial Park 3

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

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 technologyrelated to the beverage sector

The company's main products include:

● Carbonated soft drinks (glass bottles, cans and PET bottles): sarxi, orangeflavor, 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, the beveragemarket is considered to have strong growth nationally Currently, according toestimates of the Vietnam Beer and Alcoholic Beverage Association (VBA), there areabout 1800 beverage production facilities in the country with an annual growth rate of6-7% Among them, prominent brands in the market can be listed as Coca Cola,Pepsico, Vinamilk, Vinacafé, Trung Nguyen Coffee, Tan Hiep Phat Group, TRIBECO,Lavie, Vinh Hao, Sanna Khanh Hoa,

However, in this report, we choose Sanna Khanh Hoa Beverage JSC (SKN) as a directcompetitor based on the following criteria:

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

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

● Sanna has the same level of awareness and satisfaction as Chuong Duong in theVietnamese beverage market

PART II: ANALYSIS OF PROFIT/LOSS AND BALANCE SHEET

a) Balance sheet

Through data collection and comparison with other companies in the sameFMCG industry that Chuong Duong Beverage is doing business in, our group choseSanna Khanh Hoa Beverage to compare with Chuong Duong, as a direct competitor

According to the financial statements published by Chuong Duong Beverageand Sanna Khanh Hoa companies for the years 2018, 2019 and 2020, respectively, wehave two balance sheets with the following absolute values Besides, according to thebalance sheet in the financial statements announced by the company, Sanna KhanhHoa does not disclose long-term debts (non-current liabilities) Therefore, it is notshown in Sanna Khanh Hoa's absolute balance sheet below

Total 66,100,081,492 63,719,649,907 63,977,313,544

Because the size of each company is different, in this case we will compare theratios through the common-size balance sheet shown below, which also mentions thechanges in each year

● Chuong Duong Beverage

Common-size balance sheet

Change in each year

liabilities Stockholders' equity

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%

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 % to9.72% 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 totalequity 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

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 49.75percent to 58.45%, and despite the impact of the Covid-19 epidemic in 2020, thecompany's current assets are still up 8.14 percent in that year, to 66.59% compared to2019

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 cashflow 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 KhanhHoa 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'scurrent assets plummeted with 39.12%, from 83.62% of total assets to 44.5%

Meanwhile, the decline rate of Sanna Khanh Hoa was only 8.7%, much lower thanChuong Duong Beverage

In addition, in terms of current liabilities, both companies have a decreasingtrend in the years from 2018 to 2020, in the period of 2019 - 2020, Chuong DuongBeverage 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 totalequity, 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 thepandemic occurs, this stat decreases much more than the opponent Although currentliabilities have decreased over the years, the total equity of Chuong Duong Beveragehas 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, itcan be concluded that Sanna Khanh Hoa has a liquidity advantage over Chuong

Duong Beverage, as measured by current assets compared to current liabilities, andSanna Khanh Hoa's balance sheet has grown “stronger” over the years

As a case in point, Chuong Duong Beverage’s operating revenue has decreased104,694,979,234 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-19spread widely in Vietnam From 2017 to 2019, the operating revenues gradually wentdown 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 datasexplain the company’s performance, which is getting worse over the years There hasbeen a decline in units sold over the years, therefore, cost of goods sold (whicharedirectly 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 most industries, the cost of goods sold

of Chuong Duong Beverage was 74,892,892,159 VND, approximately77.11% 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, 78,314,146,099VND, 66,514,529,427 VND, 53,199,281,264 VND respectively In otherwords, the total expenses lessened around 15% annually

Besides manufacturing and trading soft drinks, the company also invests in realestate and producing things related to the beverage sector such as raw materials,

packaging, equipment and technology These activities give the company both gainsand losses every year

The year 2018 witnessed a significant increase in the total non-operating gains2,201,607,931 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 thereduction of expenses such as sales, corporate management and financial expenses.3 Inaddition, the company also invested in real estate projects such as the land plot in MyPhuoc and Vo Van Kiet From the year 2018 onwards, the amount of non-operatinggains 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 apeak at 502,884,966 VND This was the result of the construction of a new factory inDong Nai Province that commenced at the end of 2019 In the following year, theamount 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

50% compared to 2019 because the company must focus on recovering from theimpact of the pandemic Overall, it is clear that the non-operating gains over years isalways higher than non-operating losses but the company has to put more efforts toachieve 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 gainsare much lower than Chuong Duong

It is clearly stated that the gap between non-operating gains of Chuong Duongand Sanna Khanh Hoa is large In this aspect, while Chuong Duong had 446,371,020VND 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 non-operating gainswas only 200,124,234 VND during that 4 year period

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 GrossProfit allocated for Chuong Duong experienced a stabilities at around 75%, while theCOGS 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 spendingmoney for business operations

PART III: RATIO ANALYSIS

Quick ratio

Annual percentage change

Cash ratio

Annual percentage change

Quick ratio

Annual percentage change

Cash ratio

Annual percentage change

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

4.58 VND in current assets for every 1 VND in current liabilities This is affected byvarious types of transactions within the year, one of which may be due to the largesudden rise in long-term debt of CDBECO: from a total of 720 million VND in 2017and 2018, to 8,400 million in 2019 (more than 10 times), and 176 billion in 2020(more 200 times), while total current liabilities just change slightly (see …).

CDBECO is a company in the FMCG industry so the quality of inventory isstrictly considered In case the beverage products of CDBECO become damaged,obsolete, or lost, the quick ratio is more preferable to evaluate liquidity of a company.Quick ratios of CDBECO in 2018 and 2019 experience a quite similar trend withcurrent ratios: rapid rises, but there was much deeper low in percentage change in

2020 (at 3.66, dropped by nearly one-fifth of the previous year) This is perhaps

another cause for the high current ratio as already stated

The final index in this category is cash ratio It can be seen that in 2018, theindex rose by over half of the previous year to 1.2 Then it decreased by about 16.5%before going back to 1.08 in 2020 This was true when the cash of CDBECO was justless than 53 billion in 2018, but it was around 42.5- 43 billion VND in 2017,2019 and

2020 The event showed that there was a great amount of retained earnings from2017’s operation, but much less in the next consecutive years

● Sanna Khanh Hoa

Table a’ shows different liquidity ratios for Sanna Khanh Hoa from 2018 to

2020 Overall, figures for Sanna Khanh Hoa are lower than CDBECO in every

corresponding ratio, implying that it’s less capable of dealing with short-term

liabilities

However, the figures also show a more stable trend of growth for SannaKhanh Hoa For the current ratio of Sanna Khanh Hoa, the number steadily rose byaround 40% each year from 2.13 in 2018 to 4.16 in 2020 Figures for the quick ratiomoved in the same pattern, with an increase of 37% each year The cash ratio alsoincreased throughout the years, but it was much less significant in 2020 than in 2019.b) Long-term solvency ratios

Table b

Table b’