VietnamCredit
VietnamCredit About Us Cafe€redit Contact Us
Login
0
USD
Go to cart
Checkout
Vietnam’s sugar manufacturers before ATIGA

Vietnam’s sugar manufacturers before ATIGA

Friday 10, 01 2020
The “protective door” of the domestic sugar industry is going to be removed soon (ATIGA takes effect). Major sugar enterprises have reported a marked decrease in business performance due to the fall of sugar prices and smuggled sugar.

Vietnam's sugar enterprises are about to face with the most radical challenge ever when the ASEAN Trade in Goods Agreement (ATIGA) officially comes into effect on January 1, 2020. Until now, efforts to call for help to extend protection time for sugar industry of Vietnam Sugar Association (VSSA) have not shown any results. Meanwhile, the financial data collected shows a gloomy future for large sugarcane enterprises when imported sugar, mainly from Thailand, enters Vietnam.

The giant TTC Sugar made a profit thanks to its financial activities

Among listed sugar companies, Thanh Thanh Cong - Bien Hoa JSC (TTC Sugar) is the largest in terms of scale, holding about 40% of the domestic market share. This is the result of a historic merger between Bien Hoa Sugar and TTC Sugar Tay Ninh in 2017. Last year, TTC Sugar's net sales reached VND 10,857 billion, an increase of 6% over the previous year. However, the gross profit margin of this business was much thinner, falling from 13% to 8%. The increase in operating expenses has consumed TCC Sugar's gross profit, not including financial expenses, which is mainly interest of up to VND 800 billion.
 
Accordingly, TTC Sugar recorded profit in 2018 mainly from financial activities. Last year, the largest sugar company in Vietnam sold all its stake in Tay Ninh Sugar Joint Stock Company (Tanisugar) and Ben Tre Import and Export Joint Stock Company (Betrimex) to related parties and recorded financial revenue of VND 859 billion. In addition, the other profit of VND 103 billion mainly came from the liquidation of assets, contributing to TTC Sugar's profit of VND 259 billion after tax.

According to TTC Sugar, the sugarcane crop 2018 - 2019 recorded an average selling price lower than the same period, while there still left a lot of high-cost inventory. In addition, the impact of a sharp decrease in the world sugar prices and an increase in smuggled sugar across the border also caused a decline in the domestic sugar price, which reduced the company's profit margin.

Sales expenses of TTC Sugar increased over the previous year due to the fact that consumption of the whole industry increased by 31%. The company has planned a strategy to expand market share, invest in the system of developing B2C channels, small and medium customer channels to ensure sustainability and stability, and boost export. TTC Sugar said consumption of B2C channels and small and medium customer channels increased by 11% and 43%, respectively, at 69,550 tons and 82,745 tons.

Compared to the beginning of the crop year 2018 - 2019, TTC Sugar’s debt decreased by about VND 1,150 billion. The loan structure at the end of the term includes VND 7,284 billion of short-term debt (most will be due at the end of 2019) and VND 1,850 billion of long-term debt. At the end of July, TTC Sugar said it had raised about VND 650 billion in the form of dividend preference shares with the right to convert from DEG, a financial institution under the German Government. The disbursed amount in September will be used to invest in the plant project in Laos as well as to restructure the capital source.

Lasuco: Pressure from adjacent debt and divestment of Nong Cong Sugarcane

Lam Son Sugar Joint Stock Company (Lasuco) has many similarities in the business operation situation with TTC Sugar. In the crop year 2018 - 2019, Lasuco achieved net sales of VND 1,758 billion, up 31% over the same period. However, like TTC Sugar, Lasuco's gross profit margin also decreased from over 12% to 8%, along with high costs, especially from loans, causing the after-tax profit of the parent company's shareholders decrease to only VND 8.4 billion. Lasuco accelerated the liquidation of finished goods inventory. Financial statements showed that the total value of finished products has decreased from VND 735 billion to VND 412 billion.
 
Decreasing inventories made Lasuco's asset size also reduce by nearly 20%, to VND 2,320 billion at the end of the fiscal year 2018 - 2019. This partly reflects the "defensive" action of a big business in Vietnam's sugar industry before a “fierce storm comes”. Currently, the remaining inventory of Lasuco and its subsidiary, Nong Cong Sugar Joint Stock Company, is used as collateral for short-term loans.

Lasuco’s debt is also mostly short-term that is close to due date. Specifically, the company will have to pay VND 177 billion of principal debt from now until the end of 2019 and VND 287 billion of principal debt in the first quarter of 2020. In that situation, Lasuco has recently decided to divest from Nong Cong Sugar Joint Stock Company for the purpose of capital recovery. The majority of workshops and machines worth about VND 80 billion of this company have also been used as collaterals for short-term loans of about VND 36 billion.

Son La sugar has the best business performance 

Compared to its fellows, Son La Sugar Joint Stock Company has a remarkable profitability. Last year, the company achieved net revenue of VND 878 billion, up 46% with a gross profit margin of nearly 14%. The advantage of Son La Sugar is that it does not have to spend too much on sales activities. It is known that Son La Sugar is a member of the business group Kim Ha Viet - one of the “giants” of Vietnam's sugar industry.

As an agricultural production enterprise in remote areas, Son La Sugar is exempt from corporate income tax. This helps the company to preserve profits which, in the 2018-2019 crop, reached over VND 63 billion, down nearly 50% from the previous year. Net profit margin of Son La Sugar is among the best in the market, at more than 7%. Like other sugar enterprises, debt is also an "alarm" issue for Son La Sugar in the context that the market is forecasted to be more difficult than ever. The total short-term and long-term debt at the end of the 2018-2019 fiscal year of this business was VND 544 billion, exceeding equity.

Vietnam’s sugar manufacturers before ATIGA

Quang Ngai Sugar "lives well" thanks to soy milk

While many sugar companies are struggling in the market, Quang Ngai Sugar Joint Stock Company is still "living well" thanks to its strategy of reducing dependence on sugar products and focusing on products with higher profit margins. The period of 2012 - 2013 was a big turning point to Quang Ngai Sugar when this company invested the first soy milk factory with the capacity of 90 million liters/year in Ha Nam province. In the following years, it continued to invest in the soy milk factory in Ha Nam phase II, doubling its capacity and investing in a soy milk factory in Binh Duong with a capacity of 90 million liters/year.
Quang Ngai Sugar has made Vinasoy become the number soy milk brand Vietnam as well as its "golden goose". In fact, in the first 6 months of 2019, the revenue from soymilk of Quang Ngai Sugar reached VND 1,984 billion, nearly double that of sugar. The performance of soy milk segment also proved outstanding with gross profit margin reaching 45% compared to 4% of sugar products.
 
In addition, since 2017, QNS has also invested in a biomass power plant in An Khe with a capacity of 95 MW to take advantage of the by-products of sugar industry to produce electricity and return to serve the plants. This can help factories of Quang Ngai Sugar significantly reduce cost of goods sold and increase overall efficiency for the whole company when operating at the right capacity. In the first half of 2019, Quang Nam Sugar reached more than VND 4,070 billion in net revenue, just over a quarter of which came from sugar. The company's net profit is over VND 520 billion, down slightly by 6% YoY.
Currently, the owner of Vinasoy brand owns an abundant amount of cash and deposit of VND 2,150 billion. A strong financial foundation along with the "tripod" may help Quang Ngai Sugar prepare for the invasion from imported sugar that promises to destroy, when ATIGA officially becomes effective. It is known that Quang Ngai Sugar is continuing to invest heavily in the project of An Khe sugar factory of 18,000 TMN, RE refined sugar project and sugarcane seed research projects with the total value of unfinished investment at the end of June / 2019 worth more than VND 730 billion to increase production efficiency.

>>> 0% tariff on import cars: Vietnam automobile manufacturers to face challenges

Source: Vietnambiz

Categories
Economy News

You may also like

Fitch: Vietnam's credit rating upgraded
Monday 17, 02 2020

Fitch: Vietnam's credit rating upgraded

Fitch Ratings has moved up the outlook on Vietnam's long-term foreign-and...
VietnamCredit became an official member of Vietnam Export Support Alliance (VESA).
Wednesday 11, 03 2020

VietnamCredit became an official member of Vietnam Export Support Alliance (VESA).

Vietnam Export Support Alliance (VESA) has created a cross-sectoral service...
1
0
+84 981861066