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The “battle” of the dairy industry: Compare Vinamilk, Moc Chau Milk, IDP and Hanoimilk22/04/2022
(Dan Tri) – The business picture in 2021 of listed dairy companies shows that the “playing field” of the dairy industry no longer belongs to enterprises with large market share but to manufacturers with room for growth.
Gross profit margin: “Small man” molts, “big man” goes backwards
Almost dominating the Vietnamese dairy market with over 55% market share, Vietnam Dairy Products Joint Stock Company (Vinamilk, stock code: VNM) was questioned about its growth potential when its business results in 2021. of this company is not very prominent.
Specifically, Vinamilk’s net revenue in 2021 increased only 2% compared to 2020, reaching VND 60,919 billion. In which, domestic net revenue reached 51,202 billion dong, up 0.7% compared to 2020, direct export revenue reached 6,128 billion dong, up 10% over the previous year and net revenue of foreign branches reached 3,589 billion dong, up 11%.
Gross margin is an important indicator in business activities of an enterprise. A high index is a sign that the company’s profitability is very good.
The increase in raw material prices and competition from other competitors in the industry caused Vinamilk’s gross profit margin to narrow. In 2021, the company’s gross profit margin reached 43.1%, a sharp decrease compared to 46.4% in 2020 and 47.3% in the period of 2018 – 2019. This caused Vinamilk’s net profit to decrease by 5%. compared to the previous year, there was 10,633 billion VND.
Moc Chau Milk (stock code: MCM) under Vinamilk’s management, recorded net revenue of VND 2,926 billion in 2021, up 4% compared to 2020. Gross profit margin reached 30.7%, down compared to the level of 31.5% in 2020 due to high costs but also significantly improved compared to previous years.
Meanwhile, having suffered huge losses in the period of 2016 – 2018, now, the owner of 3 milk brands Ba Vi, Lif and Kun – International Dairy Joint Stock Company (stock code: IDP) has a makeover. spectacular with double-digit growth in business results.
Specifically, in 2021, the company achieved VND 4,827 billion in net revenue and VND 823 billion in net profit, up 26% and 64% respectively compared to 2020. Gross profit margin was also widened from 41% to 43. 2% – on par with Vinamilk even though it doesn’t have the advantage of scale like this industry leader.
This achievement was established by the International Dairy Products Joint Stock Company after only 2 years of “changing owners”.
Remember this business started to sink in losses in 2014 and 2017 was the year with the heaviest loss with 300 billion dong. At that time, VinaCapital and Daiwa sold all their capital in International Dairy. The company welcomes new shareholders including Ban Viet Securities, Lothamilk and Blue Point, and a few key individuals. By the end of the first quarter of 2021, Lothamilk divested all of its shares, the buyer was Gold Field International.
There was also a time when it was flooded with losses like the International Dairy Joint Stock Company, the owner of the milk brand IZZI – Hanoi Dairy Joint Stock Company (Hanoimilk, stock code: HNM) recovered with accelerated business results in 2021.
Specifically, the company achieved 272 billion dong in net revenue, an increase of 31% compared to 2020. Gross profit margin increased sharply from 26.1% (in 2020) to 28.7% (in 2021), helping to increase the net profit by 8 times. ,5 times last year, up 17 billion.
Established in 2001, Hanoimilk used to be a big “power” in Vietnam’s dairy industry, with a glorious period 2006 – 2007 thanks to the IZZI product line. However, the melamine incident in 2008 and inefficient investments outside the industry caused enterprises to sink deeper into crisis and lose money, being further and further behind in size by major competitors. The business has turned to be profitable again in the last 2 years.
How do dairy companies borrow?
In terms of total assets at the end of 2021 and for many years, Hanoimilk’s assets are mainly financed by financial loans with nearly VND 204 billion, exceeding equity, causing the risk of insolvency. greater. The most obvious example is that Hanoimilk’s interest expense in 2021 will cost nearly 10 billion dong, and in 2020 it will be nearly 7 billion dong.
Meanwhile, the outstanding loans of the International Dairy Products Joint Stock Company increased lower than total assets, causing the structure of debt to total assets to decrease significantly compared to previous years, from 22% to 18%.
Vinamilk also showed a very high capital autonomy with a low debt-to-total asset ratio of 18%. Particularly, Moc Chau Milk almost does not use financial leverage when the debt-to-total asset ratio is only 3%.
Careful business plan in 2022
In the context that input costs are forecasted to increase, Vietnamese dairy companies have set a cautious business plan for 2022.
Specifically, Vinamilk, International Dairy Products Joint Stock Company and Moc Chau Milk – the three listed dairy companies with the largest market capitalization value – set a target profit after tax of VND 9,770 billion, respectively (down 8%, down by 8%). compared to 2021), VND 572 billion (down 45%) and 344 (up 8% compared to 2021).
In a recent report, Rong Viet Securities Company (VDSC) said that the price of whole milk powder is trading at $4,596/ton, up 13% year-on-year on March 15 – near the peak. 10 years.
Tensions between Russia and Ukraine are increasing energy prices as well as Europe’s need to stockpile food, causing feed prices to continue to rise. In addition, global beef farms (especially in Europe and Australia) are raising more cows for meat instead of milk, leading to a decreasing number of dairy herds. In particular, the announcement of the Chinese government on the health benefits of consuming dairy products against the harmful effects of the Covid-19 pandemic has supported the unceasing growth of milk consumption in China.
All of the above factors are expected to create a wave of rising raw milk prices globally. Therefore, importing raw milk may increase input costs in the second half of this year for Vietnamese dairy companies that import large amounts of raw milk such as Vinamilk and Dairy Products Joint Stock Company. International.
Meanwhile, VDSC believes that companies with a more diversified product portfolio and herd ownership such as Moc Chau Milk will mitigate these negative effects as they can capture the recovery of milk consumption. and transfer part of the increased cost into the selling price.
At the same time, the increase in sugar prices is another important factor that causes input costs to skyrocket, dragging down the gross profit margin of dairy producers. This year’s global sugar supply is expected to decrease due to hot dry season conditions. Therefore, along with tax policies to limit imported sugar, the price of Vietnamese sugar is increasingly expensive. VDSC forecasts that the profit margin of Vietnamese dairy companies is expected to suffer a double negative impact due to the increase in raw sugar and raw milk prices.
However, this securities company stated that Moc Chau Milk will be under pressure from higher sugar prices than the price of raw milk because it has to buy 100% raw sugar from a third party, while the company do not import raw milk. In contrast, Vinamilk will be less affected by the increase in sugar prices thanks to owning a sugar company – Vietnam Sugar Joint Stock Company has the production capacity to be able to supply enough sugar for production needs. from this “dairy giant”.
On the other hand, rising fuel prices also boosted logistics prices, leading to higher selling costs, signaling a decline in business margins for dairy producers.
VDSC believes that dairy companies that distribute products through both domestic and foreign channels, such as Vinamilk or International Dairy Joint Stock Company, will face heavier pressure from increasing logistics costs. This is because these companies have to pay other fees related to overseas shipping such as container costs or exchange rate fluctuations.
However, these additional costs can be offset by higher selling prices in foreign markets. Therefore, companies with a worldwide distribution network such as Vinamilk (57 countries) will be able to mitigate the impact of rising energy prices thanks to the high price differential between the domestic and foreign markets.