Financial analysis of VIETNAM DAIRY joint stock company (VINAMILK)

- Financial expenses: Slightly changed from 2016 to 2018, increased from 2018 to 2020 191 billion VND Chart 09: The chart shows Vinamilk’s Financial expenses  The enterprise has not man

FACULTY OF FINANCE AND COMMERCE

Topic: Financial analysis of VIETNAM DAIRY Joint Stock Company (VINAMILK)

from 2016 to 2020

HCM City, 21/06/2021

I INTRODUCTION

1.1 About the company

Table 01- General information of Vinamilk

VINAMILK

Address Tan Xuan Street, Tan Phu Ward, District 7, Ho Chi Minh City

1.2 About the product:

Vinamilk has a lot of products made from milk, such as:

- Organic Nutritional Products

- Vinamilk Water Milk

- Vinamilk Yogurt

- Vinamilk Powdered Milk for Pregnant

Mothers and Children

Vinamilk continues to consolidate and affirm its position as the No 1 dairy company in Vietnam

1.3.2 Overseas markets

In general, Vinamilk is still asserting its strength with stable business results According to recently

published statistics, this enterprise has risen six places in the list of top 50 dairy companies in the world,

1

rising to 36th position This shows that the internal strengths are being properly promoted by Vinamilk At the right time and in the right way, in choosing a sure direction in the domestic market to create the impetus for reaching out to international markets.

Up to now, Vinamilk has exported to 56 countries and territories with a total turnover of more than 2.4 billion USD in which there are countries with very high requirements for nutritional quality such as Japan, Canada, USA, Australia, Thailand

1.4 Opponents

1.4.1 Direct opponent

The competition of dairy companies in the battle over pasteurized fresh milk, pasteurized fresh

milk, and raw milk (milk powder).

With the characteristics of the industry, the dairy market is increasingly competitive There are more than

50 dairy companies in Vietnam, most of which are small and medium-sized companies

However, the dairy market is mainly focused on the two manufacturers with the largest market share,Vinamilk, accounting for more than 50% of the dairy industry, followed by Friesland Campina Vietnam.Followed by products with the same market share of imported milk from firms like Mead Johnson,Abbott, Nestle…TH true Milk, Nutifood,

Powdered milk is the most fiercely competitive segment today.

In the Vietnamese market, powdered milk and imported dairy products account for a large market share, ofwhich Vinamilk is still being trusted by Vietnamese users and is on the rise, holding 40% of the domesticmarket share However, on the other hand, Vinamilk's representative also said that "will face manychallenges from the opportunities that are opening up" when Russia and EAEU countries are countrieswith a very developed dairy industry for a long time

Before the strategies of competitors, for Vinamilk to operate in strongly competitive dairy industry, itrequires the company to constantly invest in R&D, and at the same time strengthen marketing campaigns,promote images, create pressures Force for the company in many aspects such as cost, revenue, profit but it is also a positive factor contributing to increasing competitiveness and creating momentum forVinamilk to develop.

1.4.2 Potential opponent

The dairy industry in general and the market for pasteurized milk products in particular in Vietnam is anattractive industry with high profit margins On the other hand, the market potential in Vietnam is stillquite large, so it can be said that this is an industry that attracts many domestic and foreign companies toparticipate in the future Barriers to entering the industry:

- Technology techniques: quality management technologies ( KCS ), complex formulations as well as

high requirements on packaging to ensure milk quality

- Capital: to enter the industry, a large amount of initial investment is required for factories and

machinery…

- Commercial factors are difficult in creating a brand: customers are increasingly finding it difficult to

accumulate and create There is no small pressure from the system of difficult customers in thedistribution area

- Specific resources: such as input materials, especially raw materials must be imported from abroad,

human resources for production require high expertise…

 Although this is a very attractive industry, Barriers to market entry are also not lacking in difficulties

It can be said that in the future, milk products 100% pure pasteurized fresh milk products will facemany new domestic and foreign competitors

1.5 Company development orientation

- Vision: Vinamilk will focus all resources to become a healthy dairy and food company with the

fastest and most sustainable growth in the Vietnamese market with a strategy to build product lines with long-term competitive advantages

- Mission: Vinamilk constantly diversification of product lines, expanding distribution territory to

maintain a sustainable oil leading position in the domestic market, and maximize the profitability of the Company's shareholders

The company's objectives and pursuit of a business development strategy are based on the following key factors:

- Become 1 in 30 milk company the world's largest

- Leading in the first creative innovation nature high application

- Strengthening the leading position of Viet Nam dairy industry

- Become a dairy company that creates the most value in southeast ASIA

II SUSTAINABLE DEVELOPMENT

II.1Define and explain sustainable development

II.1.1 Define sustainable development

Sustainable development is a development that meets the needs of the current generation withoutdamaging the ability of future generations to meet those needs based on a close and harmoniouscombination of economic growth, solving social problems, and protecting the environment

2.1.2 Explain the three economic: social, environmental and factors

Factors Sustainable Development in a business: a sustainable development enterprise needs 03 importantand inseparable factors, including stable economic growth, solving social problems and protecting theenvironment

3

- Economic factors: is the process of achieving stable and steady economic growth; highly productive;

use science and technology in production without negatively affecting society and the environment.Ensure the sustainability of the economy not only develops an increasingly healthy economy but alsoavoids future economic recessions or stagnation

- Social factor: is developed to ensure fairness in society, zero hunger and reduce poverty, create jobs,

increase incomes for workers, and ensure that people have the opportunity to have full access to basicservices such as health and education but don't cause adverse economic and environmental impacts.Ensure social sustainability to create opportunities for everyone in society to be equal; reduce the risk ofsocial conflict or war

- Environmental factor: is the rational use of natural resources, avoiding over-exploitation of available

resources; maintaining biodiversity, atmospheric stability; limiting the problem of environmental

pollution; mitigating the impacts of climate change and natural disasters; Ensure environmental

sustainability to satisfy the natural and environmental needs of present and future generations

II.2Sustainable development at Vinamilk

Vinamilk has conducted the Sustainable Development Report since 2012 and is separate from theCompany's Annual Reports This enterprise is always appreciated for its consistency with sustainabledevelopment goals, maintaining growth in production and business activities in parallel with focusing onhuman development, social responsibility activities, community-oriented and environmental protection

- Economic factor: Based on Vinamilk's financial report data from 2016-2020, the team drew a chart to

see the difference between profit after tax and corporate income tax

2,000 4,000 6,000 8,000 10,000

12,000

10,554 11,236

Net income after Tax and Tax of Vinamilk in 2016- 2020

Net income after Tax Tax

Chart 01- Net income after Tax and Tax of Vinamilk in 2016- 2020 (Unit: billion)

In general, the company's profit after tax in 2017 increased compared to 2016 However, this numberdecreased in 2018 The reason is that Vinamilk has paid a large amount for selling expenses such asincreasing promotions, displaying, introducing products, and supporting sales Because of the purposefulinvestment, Vinamilk's profit after tax quickly recovered and increased sharply in 2019 and 2020 It can be

said that investing in selling and marketing expenses has helped this company increase sales revenue aswell as gain more market share, in both old and new segments, old products, and new products From theabove data, it can be concluded that: Vinamilk always maintains its No.1 position in Vietnam's dairyindustry because diversifying products to meet the nutritional needs of consumers; applying modernequipment to cow raising and milking to improve milk yield and quality….

Vinamilk pays taxes at the District 7 Tax Department, Ho Chi Minh City- where this business isheadquartered As well as profit after tax, the tax payable to the government of this company in 2017increased compared to 2016; in 2018: decreased; 2019 and 2020: strong increase Vinamilk hascontributed to promoting local economic development in dairy farms and factories; buying cow's milkfrom farmers; Despite all the fluctuations of Covid-19, Vinamilk has always actively contributed toeconomic growth in Vietnam

- Social factors: Based on Vinamilk's Sustainable Development Report, the team drew chart 02 to see the

increase in Vinamilk's employees over the years 2016-2020

Chart 02: Number of employees at Vinamilk in 2016-2020 (Unit: people)

Through the chart above, it can be seen that the number of employees of Vinamilk increases year by year The company has contributed to creating jobs for thousands of people, buying milk from farmers, and improving the material and spiritual life of its employees Therefore, Vinamilk is always rated as one of the best places to work in Vietnam The Company has deducted 10% of profit after tax into the Bonus and Welfare Fund to reward employees according to performance evaluation; implement the agreed benefits under the Collective Labor Agreement and spend on social, charity and community activities Some benefits that this company's employees receive such as human resource training courses tablets; routine health care; work-life balance (giving gifts to employees, giving gifts to employees' children, vacations,

es (officeor ac

sports-art activities ); regimes for female employees (maternity allowance, child care allowance, gifts ); allowances and rewards (lunch allowance, right to buy and own shares, etc.).

In addition to the benefits for the company's employees, Vinamilk also actively organizes volunteer programs for the community: community support activities (Mid-Autumn Festival, voluntary blood donation, flood support, ); Vietnam Rising Milk Fund - for children in difficult circumstances, without sufficient nutrients; The Vinamilk Scholarship Fund - Nurturing Vietnamese young talents - encourages primary school students across the country to have good academic achievements and a spirit of excellence

in learning and training Vinamilk is a company that implements social factors well; meets the target of 17 sustainable development goals of the United Nations as zero hunger, reduce poverty, healthy life, and reduce inequalities

- Environmental factors: As a company highly appreciated for sustainable development, Vinamilk

always seeks solutions to minimize adverse impacts on the environment; find ways to effectively use inputs (materials, energy, water), and control outputs to minimize impacts on the environment The company has built the "Fund of one million trees for Vietnam" to propagate environmental awareness to the community and contribute to a clean living environment In addition, the company also organizes internal programs such as: "Living green with Vinamilk", the "Green Project" collective contest for units, the festival of exchanging boxes - for trees,…

Through the analysis of 3 factors of sustainable development, we determine that: Vinamilk’s a sustainabledevelopment company with good economic growth and ensuring social and environmental factors.Vinamilk will grow stronger and develop in the long term with the direction associated with sustainabledevelopment as in the past years This is good news for the company

III STAKEHOLDER:

External Stakeholders Internal Stakeholders

Picture 01: Internal Stakeholders and External Stakeholders

3.1 Internal Stakeholders

- Employees: Vinamilk has over 9,000 staff and employees working in 40 units comprising branches, factories, dairy farms, warehouses and subsidiaries, both domestic and overseas

- Manager:

 Mrs Mai Kiều Liên: General Director

 Mr Mai Hoài Anh: International Business Executive Director and run a domestic business (Holding

Society: has performed

many charitable programs for the community

-Foreign shareholders-Foreign shareholders own more than 5% of the shares

Government:

tax code- 03005869

Owners: Mrs Lê Thị Băng

Tâm- President of the Board of Management of Vinamilk

Customer:

-Communication channel retail point:

240,000-Supermarket retail point: 5,400-Convenience store channel retail point:

2,400-Individuals, households

 Mr Nguyễn Quốc Khánh: Chief Executive Officer for Research and Development (Holding 29,755

shares of VNM at 0.00%)

 Mr Lê Thành Liêm: Chief Financial Officer and Chief Accountant (Holding 493,381 shares of

VNM at 0.02%).

 Mr Phan Minh Tiên: The CEO of Marketing (Holding 115,716 shares of VNM at 0.01%).

 Mr Trần Minh Văn: Executive Producer (Holding 887,236 shares of VNM at 0.04%).

- Owners:

 Mrs Lê Thị Băng Tâm: The Chairwomen of the Board of Directors, the head of the Personal

section, members of the Reward Subcommittee, Independent Board of Directors

 Mrs Mai Kiều Liên: Member of the Managing Board, member of the Personnel Subcommittee,

member of the Strategic Subcommittee, general Director (Holding 6,400,444 shares of VNM at00.31% until the date 31/12/2020 and 30,079 shares of the Vietnam Milk cow limited liability

Company until the date 30/06/2020).

 Mrs Đặng Thị Thu Hà: The Board of Directors does not run, member of the Auditing

Subcommittee, member of the Reward Subcommittee

 Mr Đỗ Lê Hùng: The Board of Directors does not run, the Head of the Audit Committee.

 Mr Lê Thành Liêm: Member of the Board of Management, member of the Subcommittee ofAuditors, financial Executive director and chief accountant

 Mr Lee Meng Tat: Member of the Board of Management does not run, member of the StrategicSubcommittee, member of the Personnel Subcommittee

 Mr Michael Chye Hin Fah: Member of the Board of Management does not run, member of theSubcommittee of Audit, member of the Reward subcommittee

3.2 External Stakeholders:

- Suppliers: Dairy farms are very important strategic partners of Vinamilk in providing consumers with

leading premium products

- Society: Vinamilk has carried out many charity programs for the community

 For example: Vietnam during fund; “For the health and safety of children – join hands to fight against Covid-19”; A million tree fund for Vietnam; To finish the one million green trees milestone; A school milk program; Pioneering brings optimal nutritional benefits to school age development; Covid-19 precention and control activities

- Government: Tax code: 03005869- pays taxes at the District 7 Tax Department, Ho Chi Minh City

- Creditors:

 Short - term loan: 7,316,497,078,307 VND (31/12/2020)

Table 02: Terms and conditions of current short-term loans with balances as follows:

LENDERS PRESEN

T

CURRENC

Sumitomo Mitsui Banking

Corporation, Ho Chi Minh City branch (i) USD 2,130,220,000,000

Joint Stock Commercial Bank for

Foreign Trade of Vietnam, Ho Chi

Minh City branch

MUFJ Bank, Ho Chi Minh City branch (i) USD 1,670,816,000,000

The Development Bank of Singapore

HSBC Bank Vietnam Limited, Ho Chi

(i) These loans are not secured

(ii) This loan is secured by assets with a recorded value of 819,579 million VND on December

MATURIT

Y YEAR 31/12/2020 VND

Shareholders: Such as a large list of

 State Capital Investment and Trading Corporation–Limited Company: ownership 36.00%

 F&N Dairy Investments Pte Ltd (1): Owns 17.69%

 F&Nbev Manufacturing Pte, Ltd (1): ownership 2.70%

 Platinum Victory Pte, Ltd: Owns 10.62%

Notes: (1) F&NBev Manufacturing Pte, Ltd is a wholly-owned subsidiary of F&N Dairy Investments Pte, Ltd.

- Customers:

 Media channel retail point: 240,000 VND

 Supermarket retail point: 5,400

 Convenience store channel retail point: 2,400

 Individuals, households

IV Evolution of the financial reports

4.1 Horizontal and vertical analysis

to 2020.

Chart 03: The

chart shows Vinamilk’s cash

 Cash: Financial investment, paying part of the debt, advertising products for businesses, sending banks

- Short-term receivables: Increase over the years from

2016 to 2020, an increase of 2,320 billion VND

Chart 04: The chart shows Vinamilk’s Short-term receivables.

 The enterprise has not managed the receivables effectively  Businesses should collect money faster.Example: Negotiate and extend the payment term, renegotiate the discount (0.1% - 0.5%)

 Short–term receivables: Negotiate and renew the payment term for old and new agents, renegotiate the discount (0.1% - 0.5%)

- Current liabilities:

Increase over the years from 2016

to 2020, 7,230 billion VND Chart 05: The

chart shows Vinamilk's current liabilities

 Lots of current liabilities, lots of risks for businesses  collect receivables to pay debts,

push inventory (2020: 4,905 billion VND) to collect interest on debt repayment

 Current liabilities: collect receivables to pay debts, push inventory to collect interest to pay part ofshort-term debts

- Fixed assets: Increase from

2016 - 2019 (6,573 billion VND), decrease slightly from

2019 - 2020 (1,040 billion VND)

Chart 06: The chart shows Vinamilk’s Fixed assets.

 This asset is used inefficiently, tangible fixed assets account for the highest proportion  leased toother businesses

 Fixed assets: increase in the period 2016 - 2019, this shows that the business is expanding itsmarket size, slightly decreasing 2019 - 2020 due to the increase in asset depreciation costs

b) Statement of results of business activities:

Table 06: Revenues of sales and services, financial income, financial expenses, net income after tax

Services & NetIncome AfterTax

- Revenues of

- Profit after corporate income tax: Increase over the years from 2016 to 2020 (12,758 billion VND)

- Reduce costs as low as possible such as discounts, financial expenses, selling and administrative

expenses  renegotiating discounts with agents; for financial expenses, enterprises should more closelymanage financial activities, cut down if such activities are high risk; for selling expenses, enterprisesshould cut unnecessary selling expenses; for corporate management costs, businesses should rebuildKPIs for employees to achieve higher productivity and revenue

- Financial income: Slightly

fluctuating from

2016 to 2018, increasing from

2018 to 2020 (821 billion VND)

Revenues Of Sales And Services & Net Income After Tax

Revenue of Sales and Services Net income after Tax

Chart 08: The chart shows Vinamilk’s Financial income

 Expenses of large enterprises, increasing over the years  Keep costs as low as possible

- Financial expenses: Slightly changed from 2016 to 2018,

increased from 2018 to

2020 (191 billion VND) Chart 09: The chart shows Vinamilk’s Financial expenses

 The enterprise has not managed this account effectively  Use cash to pay down, push inventory tocollect interest to pay down debt

 Profits or investment returns of large enterprises  Businesses should use it more efficiently.Example: Pay off part of the debt, use the money to advertise, P.R products of the business

4.2 Analyzing the ratios

4.2.1 Liabilities ratios

Liquidity ratios are an important group of financial ratios used to determine a business's ability to pay itsdebts in the short term without the need to raise external capital It includes the current ratio and the quickratio

4.2.1.1 The current ratio is a financial ratio that measures a company's ability to pay its short-term debtobligations It’s calculated using the formula below:

- The current ratio = Current Asset

The current ratio of Vinamilk in 2019-2020

The current ratio Industry average

Chart 10: The chart shows Vinamilk’s current ratio in 2019-2020

- Explain: The company's current assets were 2,89 times the current liabilities in 2016; 1,99 times in

2017; 1,93 times in 2018; 1,71 times in 2019 and 2,09 times in 2020 Vinamilk's current assets aresufficient to pay its short-term liabilities when they come due

- Trending: Through chart 01, we can conclude that: the current ratio decreased from 2016 to 2019: not

good for the company; and increased sharply from 2019 to 2020 (because current assets increase andcurrent liabilities decrease in 2020): so good for the company

- Comparing: Through chart 01, we can see that: the current ratio of 2016 is larger than the industry

average: good for the company However, from 2017-2020 these ratios have decreased and are lowerthan the industry average: not good for the company; but the current ratio in 2020 increased slightly-that's great news for Vinamilk

- Recommendation: Current ratio is increasing and is close to the industry average > good for the

company, needs to be promoted The company's short-term debt is a lot, it needs to repay the seller by:

 Selling inventory: pr, marketing and advertising for the products and company; provide promotionalpolicies to consumers; increase discounts for distributors and agents;…

 Collecting debt from customers: offer discounts and discounts if buyers pay early; agree with thecustomer on the payment time in the contract;…

4.2.1.2 The quick ratio: measures a company's ability to meet its short-term debt obligations with its most liquid assets This ratio is calculated by the formula:

- The quick ratio = Current Assets−Inventory

Current Liabilities

- Calculate and draw line chart: Vinamilk's quick ratio in 2016- 2020

Table 08: Current Assets, Inventory, Current Liabilities, The quick ratio, Industry Average

- Explain: Current assets minus inventory is 2.19 times the current liabilities in 2016; 1.6 times in 2017;

1.41 times in 2018; 1.37 times in 2019 and 1.74 times in 2020 Vinamilk's short-term assets, afterdeducting inventory, are still sufficient to pay short-term debts when they come due

- Trending: Looking at chart 02, we see that the quick ratio decreased sharply from 2016-2019: it's not

good for the company, and this ratio increased a lot in 2020: it's great news for Vinamilk

- Comparing: The quick ratio of 2016 is larger than the industry average: good for the company From

2017-2019, the quick ratios have decreased and are lower than the industry average: not good for thecompany; but this ratio in 2020 increased more than the industry average: it’s so good

- Recommendation

 Continue to promote and maintain a higher ratio of 1.65 as done in 2020

 Lots of inventory -> handling inventory by:

 Pr for the Company, marketing and advertising for the products to be known by many people.Vinamilk is a company that has been known to Vietnamese consumers for a long time; so it shouldrefresh Marketing messages, change the way its products are marketed, so that it becomes morepopular and different from what consumers know about it

 Provide promotional policies to consumers when they buy products in combos; give gifts tocustomers when they buy goods on the 2nd, 3rd time; flash sale;

 Sell inventory on e-commerce sites like Shopee, Lazada, Sendo,

 Increase discounts for distributors and agents to make them buy more products

4.2.2 The activity ratios

The activity ratio measures a company's performance measuring the different accounts that can convertinto revenues or cash flows Measures the effectiveness of managing accounts: receivable, inventory,payable, fixed assets, and total assets

4.2.2.1 Inventory Turnover: Measure performance or liquidity of inventories

- Inventory Turnover = Cost of goods sold

Table 09:

Cost ofgoods sold,Inventory,InventoryTurnover,IndustryAverage

Chart 12: The chart shows Vinamilk’s Inventory turnover of Vinamilk from 2016 to 2020

- Explain: Inventory turnover (2016) is 5.4 which means that inventory converted into revenue 5.4 times in 2016; 6.67 times in 2017; 5.06 times in 2018; 5.97 times in 2019; 6.52 times in 2020

- Trending: Vinamilk's inventory turnover for 2016-2020 in a zigzag pattern It increased in 2017: it's

good for the company; decreased sharply in 2018: it's not good for the company; gradually increase

in 2019 and 2020: it's great news

- Comparing: This ratio is lower than i.a in 2016: not good; greater 0.24 time than i.a in 2017- larger

than the industry average slightly: good But in 2018 and 2019, inventory turnover is lower than i.a: not good And in 2020, it increased slightly than i.a: good

- Recommendation: Push inventory as fast as possible

 Promote Marketing

 Discount on inventory items, use flash sale strategy and give attached gifts

 Market expansion, product refresh, or remarketing

4.2.2.2 Average payment period: The average days required to pay for sellers

- Average payment period = Payables∗365

Cost of goods sold

Average payment period

Inventory turnover of Vinamilk 2016 - 2020

Inventory Turnoner Industry Average

Chart 13: The chart shows Vinamilk’s Average payment period

- Explain: in 2016, an average of 39 days for enterprises to pay debts to suppliers, loans from credit

institutions and banks; 54 days in 2017; 53 days in 2018; 45 days in 2019 and 37 days in 2020

- Trending: the average payment period from 2016 to 2017 sharply increased from 39 to 54 days 

not goof for the company But it gradually decreased from 2017-2020  it's great news

- Recommendation: Enterprises are effectively managing this ratio, need to promote it by

 For suppliers of old materials: need to renegotiate the repayment period after 30 days

 For suppliers of New Materials: payment agreement after 30 days

 These agreements should be clearly stated in the contract

4.2.2.3 Average collection period: The average days to collect receivables, evaluate the fast or slow payments to make decisions for the debt collection policy

- Average colletion period = Recievables∗365

Net Revenues

Table 11: Receivables, Net Revenues, Average collection period, Industry Average.

Average payment period

Average payment period