Analysis of vinamilks financial ratios compared to rival companies habeco and vinacafe

Hanoi Beer - Alcohol - Beverage Joint Stock Corporation HABECO...9 ii.. Vinacafe Bien Hoa Joint Stock Company VCF...12 II.. By applying these methods on this report, Group 1 aims to disc

NATIONAL ECONOMICS UNIVERSITY

SCHOOL OF ADVANCED EDUCATIONAL PROGRAMS

REPORT FINANCIAL BUSINESS

Group 1 Advanced Accounting 60

Ha Noi - 2021

Table of Contents

INTRODUCTION 3

I Overview 4

1 Vinamilk 4

2 Product Line 4

3 Market Share 4

4 Development Orientation 4

5 Financial Reports 5

6 Rival companies 9

i Hanoi Beer - Alcohol - Beverage Joint Stock Corporation (HABECO) 9

ii Vinacafe Bien Hoa Joint Stock Company (VCF) 12

II Analysis of Vinamilk operations 16

1 Analysis of Balance Sheet 16

2 Analysis of Cash Flow Statement 18

3 Analysis of Income Statement 19

III Analysis of Vinamilk's financial ratios compared to rival companies Habeco and Vinacafe 21

1 Liquidity Ratios 21

i Current Ratio (= Current Assets / Current Liabilities) 22

ii Quick Ratio (= (Current Assets - Inventory) / Current Liabilities) 23

iii Cash Ratio (= Cash / Current Liabilities) 24

2 Leverage Ratio 25

i Total Debt to Total Assets Ratio (= Total Liabilities / Total Assets) 25

ii Total Debt to Total Equity Ratio (= Total Debt / Total Equity) 26

3 Efficiency Ratio 27

i Profit ratio from business activities 28

ii ROA coefficient 28

iii ROE coefficient 28

iv Ratio of the ability to pay interest on EBIT / interest 29

4 Market price indexes 30

i Price to Earning Ratio (P/E) 30

ii Price to Book Ratio (P/B) 31

IV Conclusion 32

Financial analysis is used to review economic conditions, to develop financial policies, todevelop long-term corporate activities strategies and to recognize investment ventures orbusinesses The processing of financial figures and statistics is used for this A financialanalyst will analyze the financial statements of a company thoroughly, including thestatement of income, balance sheet and cash flow In both business finance and investmentfinance, financial reporting will be carried out One of the most popular methods of analyzingfinancial data is to measure data ratios and equate those of other firms and the pastperformance of a firm

By applying these methods on this report, Group 1 aims to discuss about financial positionand financial performances of Vietnam Diary Joint Stock Company – Vinamilk in the three-year period, staring from 2017 and make comparisons with Hanoi Beer - Alcohol - BeverageJoint Stock Corporation – HABECO and Vinacafe Bien Hoa Joint Stock Company – VCF interm of ratios (discussed below) for the same timeframe

I Overview

1 Vinamilk

Vinamilk Dairy Company, established in 1976, was one of the first listed companies on thestock exchange of Vietnam After more than 40 years of consumer launch, up to now, thecompany has had 3 branches of sales offices, 2 logistics factories, 14 factories stretching fromNorth to South, and 220,000 points of sale covering all 63 provinces nationwide In 2018,Vinamilk is one of the top 200 companies with the best over a billion-dollar revenue in AsiaPacific Nowadays, Vinamilk is still the most favored milk brand used by consumers inVietnam with revenue in 2019 reaching 56,300 billion VND (equivalent to more than 2billion USD) In early 2020, thanks to the strict conditions of complying with the Covid 19epidemic prevention regulations, the solidity of resources and appropriate strategicadjustments, Vinamilk has been able to stand firmly in the domestic market during a turbulentperiod because of Covid 19

2 Product Line

Vinamilk provides the market with a wide range of products for consumers The companycurrently has over 250 dairy products with key product groups such as liquid milk, yogurt,and powdered milk; products with added value like condensed milk, cream and cheese, soymilk, fruit juices, and so on

3 Market Share

After years of operation, Vinamilk not only maintains its leading role in the domestic marketbut also competes effectively against foreign dairy brands In general, Vinamik accounts forover 50% of the domestic market share depending on the type of product Over 90% ofVinamilk's export turnover is from the Middle East, especially Iraq To reduce risk, Vinamilk

is expanding its market to other markets like Australia, the USA, Canada, and Thailand Inaddition, VNM is trying to penetrate the coffee and beer market

Make Vinamilk brand the most trusted nutrition brand nationwide through the strategy ofapplying scientific research on consumers' specific nutritional needs to develop the mostoptimal product lines

Strengthen the distribution system and quality to gain more share in markets whereVinamilk's one is not high, especially in rural and small urban areas

Comprehensively develop the portfolio of dairy and dairy products to target a large number

of consumers, and at the same time, expand the manufacture of high value products with highselling prices to improve overall profit margin of the whole Company

Continue to improve supply system management capacity

Develop organic milk materials in Moc Chau and expand market share in the North by raisingits ownership in GTN to 75%, Vinamilk and increasing the total herd of cows to 155,000Until 2021, continue to M & A with dairy companies in other countries to expand marketshare and sales

Undistributed profit after tax 5,736,921 7,155,434 7,875,462

Liabilities & Owner’s equity 34,667,319 37,366,109 44,699,873

Income statement (VNM)

Unit: 1,000,000 VND

Net Sales 8,208,982 100% 10,613,771 100% 15,752,866 100,0% Cost of goods sold (5,610,969) -68.4% (6,735,062) -63,5% (10,579,208) -67,2%

Gross Profits 2,598,013 31,6% 3,878,709 36,5% 5,173,658 32,8%

Financial Income 264,810 3,2% 439,936 4,1% 448,530 2,8% Operating expenses (197,621) -2,4% (184,828) -1,7% (153,199) -1,0% Interest expenses (26,971) -0,3% (6,655) -0,1% (6,172) 0,0% Selling expenses (1,052,308) -12,8% (1,245,476) -11,7% (1,438,186) -9,1% Administration expenses (297,804) -3,6% (292,942) -2,8% (388,147) -2,5% Operating Profits 1,315,090 16,0% 2,595,399 24,5% 3,642,656 23,1%

Other expenses (6,730) -0,1% (7,072) -0,1% (374,202) -2,4% Net others income 130,173 1,6% 135,959 1,3% 608,786 3,9%

Total profit before tax 1,371,313 16,7% 2,731,358 25,7% 4,251,207 27,0%

Current income tax (161,874) -2,0% (361,536) -3,4% (645,059) -4,1% Deferred income tax 39,259 0,5% 6,246 0,1% 9,344 0,1%

Profit after tax 1,248,698 15,2% 2,375,693 22,4% 3,616,185 23,0%

Indirect Cash Flow Statement (VNM)

Unit: 1,000,000 VND

2017 2018 2019

I Cash flows from operating activities

1 Profit before tax 12,228,945 12,051,696 12,795,710

2 Adjustments for

Depreciation and amortization 1,299,870 1,626,632 1,948,073

(Profits)/losses from allowance and provisions 9,212 (91,866) 7,333 Unrealized foreign exchange (gains)/losses 3,716 (1,358) 6,458 (Profits)/losses from investing activities (67,134) (576,618) (1,513)

Gain/Losses on disposals of fixed assets 11,626 43,964

3 Operating profit before changes in working capital 12,770,169 13,059,853 14,255,870

(Increase)/decrease in receivables (1,599,146) (108,536) 373,595 (Increase)/decrease in inventories 318,470 (1,685,437) 401,995 (Increase)/(decrease) in payables (excluding Interest expense

payable, Income tax payable)

958,730 (14,513) (399,803)

(Increase)/decrease in prepayments (10,000) 68,659 16,409

Other payments for operating activities (837,987) (1,189,616) (972,149)

Net cash flows from operating activities 9,601,595 8,140,239 11,409,929

II Cash flows from investing activities

Payments for additions to fixed assets and other long-term assets (2,672,989) (3,185,795) (2,158,249) Proceeds from disposals of fixed assets 120,711 94,476 114,090 Payments for lending loans, purchase of debt instruments of other

Buy-back of capital contributions from minority shareholders in

the subsidiary

Other receipts from investing activities 6,206

Other payments for investing activities

Net cash flows from investing activities (1,770,989) (1,045,145) (6,747,875) III Cash flows from financing activities

Proceeds from shares issued, receipt of capital contribution 127,769 Payments for shares returns and repurchases (5,983) (3,326) (1,159) Proceeds from short-term and long-term borrowings 2,777,050 4,827,980 10,426,775 Payments to settle loan principals (4,224,187) (4,103,589) (6,233,113) Payments to settle finance lease liabilities

Payments of dividends (5,805,808) (7,256,172) (7,836,251) Other receipts from financing activities

Other payments for financing activities (276,417)

Net cash flows from financing activities (7,535,345) (6,535,107) (3,515,979) Net cash flows during the period 295,260 559,987 1,146,075 Cash and cash equivalents at the beginning of the period 655,423 963,336 1,522,610 Effect of exchange rate fluctuations 12,653 (713) (3,491)

Cash and cash equivalents at the end of the period 963,336 1,522,610 2,665,195

6 Rival companies

i Hanoi Beer - Alcohol - Beverage Joint Stock Corporation (HABECO)

Hanoi Beer-Alcohol-Beverage Joint Stock Corporation (HABECO) is the third largest beercompany in Vietnam and is the owner of the Hanoi Beer and Truc Bach Beer brands It isowned and authorized by the Ministry of Industry and Trade, Vietnam and has a strategicpartnership with the Carlsberg Group, which owns more than 10% of the company's shares as

of November 2012

The main operating lines of the Corporation include: Manufacturing and trading Beer - Wine

- Beverage and Packaging; Import and export of raw materials, materials, equipment, spareparts, raw materials, chemicals; Science and technology services, investment consulting,creating investment capital, organizing raw material areas, trading real estate, other services,and professions according to the law

Beer and bottled water products include:

Hanoi only beer cans

Hanoi beer bottles

Hanoi canned beer

Hanoi Premium Beer

Hanoi Premium canned beer

Truc Bach Beer

Truc Bach canned beerHanoi green beerHanoi green beer cansHanoi Bold & Light bottled beerUniAqua bottled water

Total net profits before tax 869,467 626,452 669,523

Profit after enterprise income tax 658,051 484,333 523,128

Profit after tax of shareholders of the

Earnings per share for the last 4 quarters (EPS) 2,835 2,153 2,330

Price to book ratio (P/B) 6.55 3.81 3.38

Return on average equity (ROEA) 11.88 10.56 10.68

ii Vinacafe Bien Hoa Joint Stock Company (VCF)

On December 29, 2004, Bien Hoa Coffee Factory was transformed from a state-ownedenterprise to a joint stock company Since the Vinacafé brand name is already well known inVietnam and known to many foreign customers, the founding shareholders (mostly of theBien Hoa Coffee Factory) have renamed the company as Joint Stock Company for VinacafeBien Hoa, its abbreviated name is Vinacafe Bien Hoa

As of December 20, 2013, the Vietnam Coffee Corporation - the largest State shareholder inVinacafe, had sold out a majority of its shares in Vinacafe Currently, 90% of Vinacafe BienHoa's shares are in three organizations: Masan Consumer Joint Stock Company (MasanConsumer) with 53.2%, followed by Gaoling Fund (Gaoling Fund) (23.3%) and VietnamCoffee Corporation (12.8%)

Immediately after successfully producing the first batch of instant coffee, the main products

of the Bien Hoa Coffee Factory were still preliminary products due to the Vietnamese habit ofusing ground coffee Instant coffee products are mainly exported to the Soviet Union andEastern European countries only In the late 1980s, Vinacafé instant coffee orders declinedmore and more following the disintegration rate of the Soviet Union and Eastern Europe In

1990, Vinacafé officially returned to Vietnam market although some products of Bien HoaCoffee Factory were sold in this market before At that time, Vietnamese users still kept thehabit of drinking coffee roasting and blending with filter, not popularizing the habit of usinginstant coffee Therefore, the factory has launched Vinacafe 3-in-1 Instant Coffee to themarket, targeting users who have the habit of drinking coffee with milk without having towait for the coffee to drip through the filter

Products of Vinacafe Bien Hoa Joint Stock Company include:

2 Coffee roast:

Common roasted bean coffee

Excellent roasted bean coffee

Natural coffee blended

Absolute Heritage ground coffee

Heritage Crown coffee grindVinacafe Selected Coffee BlendedVinacafe Natural ground coffee

Owner's invested capital 265,791 265,791 265,791

Net profits from operating activities 453,090 776,855 798,271

Profit / loss from associates

Total net profits before tax 453,274 776,311 791,419 Profit after enterprise income tax 369,343 636,977 677,776 Profit after tax of shareholders of the parent company 372,494 639,924 680,820 Basic earnings per share (VND) 14,015 24,076 25,615

Financial indicators (VCF)

Unit: 1,000, 000 VND

Earnings per share for the last 4 quarters (EPS) 14,015 24,076 25,615

Price to earnings ratio (P/E) 18.91 6.06 6.95

Return on average equity (ROEA) 25.55 59.05 47.87Return on average assets (ROAA) 11.08 22.07 30.65

II Analysis of Vinamilk operations

1 Analysis of Balance Sheet

Table of Assets (VNM)

Unit: 1,000, 000 VND

2017 2018 2019 2017 2018 2019 Short-term assets 20,307,435 20,559,757 24,721,565 58.58% 55.02% 55.30%

Cash and cash equivalents 963,336 1,522,610 2,665,195 2.77% 4.07% 5.96%Short-term investments 10,561,714 8,673,927 12,435,744 30.46% 23.21% 27.82%Short-term receivables 4,591,703 4,639,448 4,503,155 13.24% 12.41% 10.07%Inventory 4,021,059 5,525,846 4,983,044 11.59% 14.79% 11.15%Other current assets 169,623 197,926 134,427 0.48% 0.52% 0.30%

Long-term assets 14,359,884 16,806,352 19,978,308 41.42% 44.98% 44.69%

Fixed assets 10,609,309 13,365,354 14,893,540 30.6% 35.77% 33.32%Investment properties 95,273 90,248 62,018 0,27% 0.24% 0.14%Long-term investments 555,498 1,068,661 986,676 1.6% 2.86% 2.07%Other long-term assets 3,046,029 2,193,646 4,014,904 8.79% 5.87% 8.98%

Total assets 34,667,319 37,366,109 44,699,873 100% 100% 100% Liabilities 10,794,261 11,094,739 14,968,618 31.13% 29.69% 33.48%

Short-term liabilities 10,195,563 10,639,592 14,442,852 29.41% 28.47% 32.31%

Long-term liabilities 598,698 455,147 525,766 1,73% 1.22% 1.18%Owner’s equity 23,873,058 26,271,369 29,731,255 68.86% 70.31% 66.51%Owner's invested capital 14,514,534 17,416,878 17,416,878 41.87% 46.61% 38.96%Undistributed profit after tax 5,736,921 7,155,434 7,875,462 16.55% 19.15% 17.62%

Liabilities & Owner’s equity 34,667,319 37,366,109 44,699,873 100% 100% 100%

According to data from Vinamilk's financial statements in the 2017-2019 period, thecompany's total assets had gradually increased over the years In 2019, the company's totalassets reached more than 44,699 billion, a rise of 20% compared to 2018 and 30% compared

to 2017 This was a very stable growth for a company that had been operating for more than

40 years with a large scale like Vinamilk Between 2017-2019, the company's short-termassets expanded 1.2 times and long-term assets have also increased nearly 1.4 times However, in Vinamilk's total asset’s structure, at the end of 2019, short-term assets accountedfor 55%, down slightly from 59% of total assets in 2017

Notably, in 2019, short-term assets got bigger by 20%, with a total value of more than 4,100billion VND, of which mainly growth in short-term investments, reaching more than 3,750billion VND and contributing more than 90% of the whole In addition, cash and cashequivalents grew by more than 1,100 billion VND in 2019 In contrast to the huge increase inshort-term investments, short-term receivables and inventories of the company tended todecrease an amount of 500 billion VND per account The company cut its long-term depositsand converted it into short-term ones This shows that the company was probably in need offast and safe capital focus to implement the project or expand production next year

Regarding the company's long-term assets, the growth in 2019 is 18%, lower than the growthfrom short-term assets Fixed assets of the company, accounting for more than 75%, long-term assets, always expanding continuously over the years The increase in fixed assets,mainly machinery and equipment, shows that the company might be in the phase of boostingproduction, with the goal of creating higher and higher growth for the company

2 Analysis of Cash Flow Statement

Net cash provided by operating activities 9,601,595 8,140,239 11,409,929Net cash provided by investing activities (1,770,989) (1,045,145) (6,747,875)Net cash provided by financing activities (7,535,345) (6,535,107) (3,515,979)