Rice business was in trouble, Vinafood 2 relied on gold land

Cut “u boils” before equitization

Vinafood 2's business plan submitted to shareholders at the first General Meeting of Shareholders when the company officially transformed into a joint-stock company in October 2018 recorded a short note about the financial shortcomings. main: “More than 1,000 billion VND has not been completely dealt with before, it must set up a provision for doubtful debts, handle losses, leading to business results in the years after equitization that can generate big losses” .

In fact, even in the first business with a joint stock company model, Vinafood 2 has strongly deducted provision expenses of VND 1,785 billion, most of which were provisions for receivables, in addition to VND 425 billion for financial investments. and VND 41.5 billion for provision for devaluation of inventories.

Therefore, the total value of Vinafood 2's assets from VND 8,960 billion (October 9, 2018) has “evaporated” 23%, to over VND 6,900 billion at the end of 2018. Instead of dividend plan 2, 53% for the last 4 months of 2018 and 2019 according to the approved equitization plan, this ratio will be 0% and may continue until Vinafood 2 overcomes losses.

However, the losses incurred in the last 4 months of 2018 did not come from just cutting the “tumors” in the previous period. Vinafood 2 also had to suffer a loss of 51.5 billion dong from main business activities. According to Mr. Nguyen Ngoc Nam, General Director of Vinafood 2, in traditional export markets such as the Philippines and Malaysia, the Corporation has faced fierce competition from Thai businesses, resulting in a thin gross profit margin (only reached 5.4% in the fourth quarter of 2018), gross profit is not enough to offset the cost such as general management costs, depreciation of fixed assets …

In the first 9 months of 2019, although the gross profit-to-sales ratio improved to 9.6%, due to the large expenses, the largest of which was the selling expenses, causing Vinafood 2 to continue to report losses. nearly 74 billion dong. Accumulated losses up to September 30, 2019 increased to VND 1,900 billion, eroding to 38% of the charter capital.

2019 is also a bad year for the rice market, when rice prices plummeted from the beginning of the year. At one point, the Prime Minister had to request early purchase of 200,000 tons of rice reserves. Statistics of the General Department of Customs also show that the average export price of rice decreased by 13.4% over the same period. Vietnam's rice output sold despite increasing, but the export value in 9 months still fell more than 10%, reaching only 2.2 billion USD.

Competition in the industry increased sharply when a number of countries such as Cambodia, Myanmar and Pakistan joined. Along with that, after a series of conditions for rice export business changed according to Decree No. 107/2018 (effective from October 2018), Vinafood 2 still has to compete with domestic small and medium-sized enterprises in the centralized rice export contract. This is also one of the reasons why Vinafood 2's revenue plan set for 2019 is modest at VND 13,826 billion, while the whole year of 2018 is nearly VND 17,850 billion.

Find new business directions

The above mentioned 2019 business plan is actually a report of the Board of Directors, which has not been approved by shareholders. There are still 2 months to the end of the year, but Vinafood 2 is still asking to postpone the General Meeting of Shareholders to finalize the documents. After 9 months, the realized revenue of the Corporation is nearly 60%. With a net loss of nearly 75 billion dong, the profit target of 50.5 billion dong for parent company will be very difficult to accomplish.

A remarkable content to be submitted to shareholders in this meeting is the addition of 3 industries, including real estate business; retail sale of petrol, lubricant and engine cooling products; management of parking lots, keeping of road vehicles. The common point of all these 3 industries is that they can take advantage of another great resource that Vinafood 2 is managing, which is land.

At the time of equitisation valuation, Vinafood 2 and its subsidiaries hold 146 real estate facilities, a total land area of ​​3,405,950 m2, particularly the land area in Ho Chi Minh City is 89,842 m2 with 17 housing units. , land. A part of this area has been allocated to localities, the remaining land managed by Vinafood 2 still has a lot of golden land, in prime locations. Most of this is annual rented land, not included in the value of the business. Promoting the advantages of land plots to maximize profits is also the content mentioned in the previous equitization plan.

Finding new business directions to exploit advantage resources is an option that can help Vinafood 2 improve its performance in the context that the core business is still struggling due to competition, but it also requires transparency with property use decisions.

There are two major goals expected for an equitized enterprise to become a multi-ownership company: improving information management and transparency. While many businesses have been equitized, but not yet listed or registered for trading, Vinafood 2 is typical for early listing.

However, Vinafood 2 once had to explain because it was late for information disclosure, although the requirement to publish on UPCoM was simpler than the listing. At present, Vinafood 2's VSF shares are only traded on the Friday afternoon, because the Annual General Meeting of Shareholders has not been held yet. The “big” rice export industry is struggling to make information disclosure raises questions about the possibility of transparency in the decision to use assets later.

In particular, what is more important than expanding into another business is that Vinafood 2 needs to focus on solving the increasingly fierce competition problem in the rice market. The initiative in seeking customers and expanding markets is necessary for the Corporation to develop, instead of “living” thanks to the concentrated rice export contracts assigned as before.

According to the Securities News Fast