4 Part 2: The situation of the profitability of I.D.I International Development &Investment Corporation .... or factors of each business such as debt usage, asset investment level, busi
Theories of the profitability
Definition, content of the profitability
Profitability is a business’s ability to generate revenue that exceeds its expenses, a measure of how efficiently it converts sales into profit It is commonly assessed with ratios such as gross profit margin, EBIT margin, and net profit margin, along with related profitability metrics that compare earnings to sales, assets, or equity These indicators help investors and managers evaluate financial performance, cost control, pricing effectiveness, and long-term sustainability By tracking profitability, a company can identify opportunities to improve margins and drive sustainable growth.
Profitability is measured by the net profit margin and the earnings per share (EPS) ratio A higher net profit margin or higher EPS is typically pursued by most companies, since it signals strong performance through growing revenues and net income and indicates attractive profitability metrics for investors.
Revenue is a foundational element of the profit margin calculation used to gauge a company’s profitability It encompasses all money earned from selling products or delivering services to customers, representing the total income generated by the business’s core activities.
Net income is the profit your company earns after subtracting all costs incurred to produce a product or deliver a service from total revenue These costs include supplies, depreciation on equipment, materials used to create the products you sell, rent, marketing expenses, and salaries Net income is also commonly referred to as the after-tax income, representing the amount left after taxes have been deducted.
Profitability is most clearly expressed through the profit margin, which is calculated by dividing net income by revenue and then expressing the result as a percentage This percentage shows how much profit is generated from each dollar of revenue, indicating how effectively the company converts sales into earnings.
Financial indicators of the profitability
Profit Margin, also known as Return on Sales (ROS), is one of the most commonly used profitability ratios to gauge how effectively a company or business activity turns sales into profit It represents the percentage of each sales dollar that remains as profit, providing a clear measure of overall profitability and operating efficiency.
Meaning: One VND of net sales creates a VND of net profit
Basic Earning Power (BEP) is a key profitability metric, with margin being one of the commonly used profitability ratios BEP measures return on assets by showing that, on average, each unit of assets invested in the business generates several units of profit before interest and taxes This asset-based view of earnings highlights how efficiently assets are turned into operating income, independent of financing structure and taxes.
Meaning: One VND of assets creates b VND of EBIT
Return on Assets (ROA) is a financial ratio that indicates how profitable a corporation is in relation to its total assets This metric is commonly used to compare a company's performance across different periods or to benchmark two companies of similar size within the same industry, revealing how efficiently assets are being deployed to generate earnings.
Meaning: One VND of assets creates c VND of net profit
Return on Equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity Because shareholders' equity equals a corporation’s assets minus its debt, ROE represents the return on net assets invested by shareholders.
Meaning: One VND of equity creates d VND of net profit
DuPont analysis shows how the profit margin, the total asset turnover ratio, and the use of debt interact to determine the return on equity This method is applied to analyze two indicators: ROA and ROE The profit margin multiplied by the total asset turnover is called the Basic DuPont Equation, and it gives the rate of return on assets (ROA).
ROA = Profit margin (ROS) x Total assets turnover
ROA, in the DuPont equitation, is affected by two factors They are profit margin, total asset turnover
ROE = Profit margin(ROS) x Total assets turnover x Equity multiplier
ROE, in the DuPont equitation, is affected by three factors They are profit margin, total asset turnover and equity multiplier Dupont measures:
Operating efficiency: How efficiency inputs are being used to generate profits
Assets use efficiency: How well total assets are being used to generate revenue/net sales (turnings)
Financial leverage: How well the business is leveraging its debt capital (leverage).
Factors affecting the profitability
The essence of profitability is a firms Revenue – Costs with revenue depending upon price and quantity of the good sold
These factors will all determine the profitability of firms:
Highly contestable markets drive lower prices and push profits toward normal levels because firms must respond to actual competition and the threat of potential entrants By contrast, monopolies with high entry barriers can sustain supernormal profits in the long run, since limited competition allows firms to earn above-normal earnings.
Rate of growth of market demand:
Profitability is squeezed during a recession as demand declines and pricing power ebbs The price elasticity of demand for goods and services matters, because firms with market power can use price discrimination to capture higher revenue.
Costs in a business are influenced by changes in variable factors, such as wages and raw materials, and by fluctuations in fixed costs, including insurance, interest rates, and capital equipment Government regulations, subsidies, and potential losses also affect profitability and risk Additionally, shifts in the productivity of factor inputs used by a business change efficiency and output, shaping overall cost structures and competitive performance.
The situation of the profitability of I.D.I International Development &Investment Corporation
Overview of I.D.I International Development &Investment Corporation
Unit name: I.D.I International Development &Investment Corporation
Address: at Highway 80, Vam Cong Industry Cluster, An Thanh Hamlet,
Binh Thanh Commune, Lap Vo District, Dong Thap Province, Vietnam
Website: http://www.idiseafood.com
Charter capital at the beginning: 29 billion VND
Business: processing and preserving of fisheries and fishery products.and
Buying and selling building materials, interior decoration Production, transmission and distribution of electricity Exploitation of stone, sand, gravel and clay Fish oil production and trading Real estate business
2.1.2 The history of I.D.I International Development &Investment
I.D.I International Development & Investment Corporation was establish in
2003, under the bussiness registration certificate No 4103001715 issued by the Department of Planning and Investment of Ho Chi Minh City on 15/07/2003
In 2005, IDI started the Vam Cong industrial cluster project with a scale of nearly 23 hectares in Lap Vo district, Dong Thap province
In 2007, IDI officially began the construction of the No 1 seafood processing factory and its ancillary facilities, marking the first plant to be built in the Vam Cong industrial cluster The company also continued to compensate the remaining portions of the Vam Cong industrial cluster and launched its project to raise raw fish.
In 2008, the Company completed the construction and installation of equipment for the first phase of No 1 seafood processing factory, delivering a designed capacity of 300 tons of raw materials per day and a cold storage capacity of 4,600 tons, and bringing this phase into operation It officially put IDI's name on the project.
This article identifies six Vietnamese pangasius exporters It also reports that the company supported the Tourism Investment and Fisheries Development Joint Stock Company (Trisedco) to begin Phase 1 of the construction of its pangasius processing factory.
Initiated in 2011, the Fish Oil Refining Factory project is designed to process 100 tons of crude fish oil per day with a total investment of 300 billion VND, on a usable area of 10,600 square meters The pangasius farming area is being developed to meet GlobalGAP, ASC, and BAP standards, spanning nearly 6 hectares in An Thanh Trung commune, Cho Moi district, An Giang province, and 10 hectares in Tan Hoa commune, Lai Vung district, Dong Thap province.
On October 10, 2015, IDI Company commenced the project to build an aqua feed processing factory with a designed capacity of 360,000 tons per year The corporation has boldly invested in state-of-the-art technology to deliver high-quality products at competitive prices.
2.1.3 Recent developments and recent performance
According to the financial statements, total revenue increased in 2019, but 2020 was affected by the COVID-19 pandemic and market factors that reduced import and export activities The company faces difficulties exporting its products to foreign markets, which has significantly impacted revenue and net profit, leading to a lower net profit margin Although revenue remained high, net profit was low, indicating that operating costs are substantial The corporation should pursue cost-saving measures to reduce operating costs and restore profitability.
Total revenue net profit net profit margin
Situation of the profitability of I.D.I International Development & Investment Corporation
(Source: extracted and calculated from Financial statement of I.D.I International
Table 2.1: Situation of profitability of I.D.I International Development & Investment
According to Table 2.1, the corporation’s sales rose sharply by 22.1% in 2019, reaching 1,401.7 billion VND In 2020, the COVID-19 pandemic disrupted import and export activities, causing a sharp sales decline of 1,370 billion VND and bringing revenue to 82.3% of the 2019 level.
Facing a sharp drop in sales, the corporation's profitability deteriorated significantly during the 2018–2020 period In 2018, net profit after tax stood at VND 643.8 billion, but it was halved in 2019, and by 2020 profit after tax had fallen to VND 107.1 billion Overall, the corporation's profits showed a continuous and steep decline from 2018 to 2020.
We continuously analyze the profitability ratio to gain a clearer understanding of the corporation's profitability, identify the root causes of any performance gaps, and propose targeted solutions to enhance the company's operations This ongoing analysis highlights efficiency improvements, revenue opportunities, and cost-saving measures, enabling informed decisions that boost profitability and support sustainable growth.
Table 2.2: The profitability ratios of the I.D.I International Development &
(Source : calculated from Financial Statement of I.D.I International Development &
Investment Corporation from 2018 to 2020) From table 2.2, we can see clearly see thethe fluctuations of each items in the profitability ratios of the corporation:
Return on Sales (ROS), also known as profit margin, is a key measure of how effectively a corporation controls costs to convert revenue into profit In 2018, ROS reached 10.15%, signaling strong profitability driven by efficient cost management In 2019, ROS fell sharply to 4.21% even as revenue grew, indicating rising operating costs that eroded net profit By 2020, ROS declined further, underscoring the need to tighten cost control and improve cost management to boost net profit.
BEP (Basic Earning Power) measures the basic return on assets, showing how much profit before taxes and interest an asset base can generate In 2018, BEP was 14.44%, with pre‑tax profit of VND 891.9 billion on total assets of VND 6,177.3 billion, signaling strong asset profitability The BEP trend declined in the subsequent two years By 2020, BEP had fallen to 1.95%, while EBIT was only VND 148.2 billion; in 2019, EBIT accounted for 29.74%.
ROA (return on asset): the ratios show application of assets in the business In
In 2018, the corporation posted an ROA of 10.42%, with net profit of 643.9 billion VND and total assets of 6,177.3 billion VND, demonstrating strong asset utilization in production By 2019 and 2020, ROA declined to 4.61% and 1.41%, respectively, signaling a deterioration in asset efficiency and indicating that asset use has not maintained its previous productivity This downward trend calls for a rapid action plan to restore asset utilization, optimize asset turnover, and boost profitability.
ROE (return on equity): the ratios shows the percentage of profit earned by shareholders In 2018, the shareholders of the coporation can earn a large profit, reaching 26,36% But in 2020, this figure only reached half, and ROE continued to decline sharply to only 3.64% In which, total equity increased but net profit of the coporation decreased sharply That led to a rapid decrease in the value of ROE Investors need to consider carefully before making investment decisions to achieve the desired effect
In summary, from the above analysis, it shows that the corporation's profitability ratio still not really effective, the asset utilization efficiency is not reasonable, there are still many shortcomings, businesses need to quickly find a solution ways to increase the corporation's profitability
Table 2.3 the du pont analysis of I.D.I International Development & Investment
(Source : calculated from Financial Statement of I.D.I International Development &
ROA, or return on assets, gauges how efficiently a corporation turns its investments into profits and is driven by two components: profit margin (ROS) and total asset turnover According to the company's performance data, the profit margin (ROS) declined from 10.15% in 2018 to 4.21% in 2019 and 1.68% in 2020, signaling a substantial erosion of profitability and a corresponding weakness in ROA.
Besides ROA, total asset turnover directly affects a company's Return on Assets ratio Asset turnover measures how efficiently a corporation uses its assets to generate sales and revenue from its products This ratio serves as a key indicator of operating efficiency, showing how effectively asset investments translate into revenue In evaluating a corporation's operating value, the total asset turnover over the three-year period beginning in 2018 provides insight into asset utilization and performance.
In 2020, asset turnover values stood at 1.02, 1.09, and 0.83 respectively, reflecting fluctuations over the years and signaling a projected significant decline for 2020 The relatively low turnover ratio indicates that the company's asset utilization is not yet highly efficient, highlighting the need to improve and innovate management and investment approaches so that the asset turnover increases and the return on assets improves.
Among the two factors that directly affect return on assets, profit margin has the greatest influence Consequently, to raise return on assets, businesses focus on strategies that improve net profit and enhance profit margin By optimizing pricing, controlling costs, and boosting efficiency to lift net income, companies can strengthen their ROA.
ROE, viewed through the DuPont analysis, is determined by three main factors: the after-tax profit-to-sales ratio (net profit margin), asset turnover, and the equity multiplier (assets-to-equity) The net profit margin reflects how effectively the company manages revenue and costs, with net after-tax profit falling from 10.15% in 2018 to 4.21% in 2019 and 1.68% in 2020 Asset turnover measures how efficiently assets are used to generate sales, showing only modest fluctuations but a sharp 23.85% decline in 2020 versus 2019 The equity multiplier captures financial leverage and capital structure, indicating how assets are financed relative to shareholder equity Taken together, these three components explain the change in ROE, and the declines in net margin and asset turnover point to weaker profitability and asset efficiency impacting ROE.
Beyond the ROS factor and its impact on profitability, financial leverage also influences return on equity (ROE) Companies often use debt to cover capital shortfalls in operations with the aim of raising ROE From 2018 to 2020, the equity ratio remained stable around 2.55, and the limited volatility means that economic leverage has little effect on ROE The results clearly show how financial leverage, profitability, and the stable equity ratio collectively affect return on assets (ROA).
From the analysis, financial leverage is the shared driver of the two ROA factors and the three ROE factors, with profit margin having the largest impact on ROA The sizable year‑to‑year swings in ROS cause ROA and ROE to move directly, highlighting how changes in profitability margin affect overall performance even when revenue remains stable This explains how net profit can decline while revenue stays flat and suggests that profitability margin is the critical lever behind ROA and ROE fluctuations, amplified by leverage.
12 corporation's operating cost management is not really effective, business performance is not good Need to find solutions to improve the efficiency of the corporation's use of equity.
Assessment of the profitability of I.D.I International Development &Investment Corporation
From 2018 to 2020, the corporation saw profitability decline while revenue from selling goods and providing services remained stable despite numerous market factors and import-export conditions Even though profit decreased compared to the prior year, the business still posted 107.1 billion in profit after tax.
Vietnam's seafood exports enjoy a lower average import tax of 0%–5.2%, while major rivals India and China face higher average tariffs of about 0%–10.7% and 0%–10.8%, respectively This tax advantage strengthens Vietnam's seafood competitiveness in key global markets by reducing landed costs and improving price efficiency for importers.
Seafood processing companies have faced a sharp decline in operating capacity as harvest-ready products encounter transportation and consumption hurdles Export activities are at risk of losing markets or market share, including in traditional markets, because partner countries are hesitant to import due to concerns about disease control in processing plants and on seafood products.
Cash flow from the seafood sector's core operations is weakening, signaling a strong downward trend in the industry's financial health If these difficulties persist, many companies with weak liquidity and high debt could face intensified pressure, risking wider disruption in the market Moreover, firms are not utilizing their equity and assets efficiently, undermining profitability and resilience in a challenging environment.
The decline in corporate profitability is primarily driven by the impact of the COVID-19 pandemic The outbreak remains dangerous and complex across many localities, severely affecting the country’s socio-economic conditions This disruption threatens the seafood production, processing, and export chain, risking breaks in supply and export capacity due to the ongoing pandemic.
Subjective reasons behind corporate strategy include the constant pressure of rising costs and inventory management challenges Companies must balance the need to maintain employee wages to attract and retain workers with the imperative to control overall labor costs There is also pressure to secure raw materials efficiently, including exploring the use of waste products from the processing industry as cost-effective inputs These intertwined pressures drive supply chain optimization, smarter procurement, and sustainable sourcing to protect margins and stay competitive in a volatile market.
Suggested solutions
From the above limitation, some suggestions are made to contribute to the profitability to IDI International Development & Investment Corporation
The company should optimize the use of equity and asset capital while implementing financial measures to promote product consumption and guard against capital misappropriation It should employ tools such as payment discounts to stimulate timely purchases and penalties for overdue debt to enforce financial discipline.
Effective inventory management, coupled with minimizing inventory costs, and controlling other operating and incidental expenses through cost grouping, reduces total expenditures and enhances profit margins This approach boosts the business’s overall profitability.
The company monetizes idle assets by selling or leasing them and reinvesting the proceeds to grow the business and boost profits With a large frozen warehouse, it can preserve inventory effectively, reducing storage and preservation risks and thereby mitigating overall inventory risk.
Regularly monitor the commodity market to predict fluctuations, enabling you to adjust input purchases and stock levels in a timely manner before price movements impact operations This proactive inventory management helps optimize procurement, minimizes risk during volatility, and preserves the company's capital.
Diversification of processed seafood products beyond traditional shrimp and fish aligns with changing consumer preferences after the epidemic and supports a broader product lineup This expansion shapes the company’s future strategic direction by responding to evolving post-pandemic demand.
The company ensures smooth harvest, circulation, transportation, and export of products, including manufactured and processed goods and raw materials for production and processing, reducing operating costs and boosting business performance and profit margins Additionally, profitability can be increased by raising selling prices to reflect the higher costs incurred during the epidemic.
To boost revenue and strengthen its position in the seafood sector, the company implements a set of strategic measures, with a key emphasis on sourcing high-quality input materials for seafood processing and strict adherence to domestic and international food safety standards This commitment to quality assurance and regulatory compliance enhances product safety, supply chain reliability, and customer trust across markets, supporting sustainable growth and competitive differentiation in the industry.
Continued investment in modern, advanced, and synchronized processing technology is essential for enhancing the quality of the company's seafood products and strengthening their competitiveness in regional, national, and international markets By upgrading these systems, the company can differentiate itself from competitors through superior quality and processing efficiency, supporting sustainable growth and a stronger market position.
To succeed in international trade, a clear understanding of both import and export standards and the target markets is essential This knowledge helps ensure products meet regulatory requirements, quality expectations, and regional documentation across different jurisdictions By diversifying markets rather than relying on a single main market, businesses can reduce exposure to country-specific shocks and demand volatility In short, aligning offerings with varied standards and market needs minimizes risk and creates opportunities for sustainable growth.
Every enterprise in the economy serves as a vital link that accelerates industrialization and modernization, making sustainable development and growth central goals for businesses This article highlights Nam Việt’s profitability and applies the profitability ratio theory to IDI International Development & Investment Corporation to analyze factors affecting profitability Using an index-based framework, we examine metrics such as profit after tax, profit before tax, and asset turnover to assess overall performance The analysis indicates that IDI’s profitability is not strong and shows room for improvement By identifying the company’s strengths and weaknesses, we propose targeted measures to enhance the profitability ratio and drive sustainable growth.
1 Pham Thi Van Anh, Diem Thi Thanh Hai (2018), Basis corporate finance, Finance Publishing House
2 Financial statement of IDI International Development & Investment Corporation in the period 2018-2020