Vinafood 2 deep in losses after successful IPO

14:00 | 28/05/2018
The outstanding loans of Vinafood 2 (Southern Food Corporation) from banks stood at nearly VND2.3 trillion ($101.25 million) at the end of 2017, including VND1.186 trillion ($52.25 million) owed by the parent company and VND1.113 trillion ($49 million) by the subsidiaries.
vinafood 2 deep in losses after successful ipo
Sales of Vinafood 2 convenient stores is good but their profit is still negative

The parent company Vinafood 2 (code: VSF) conducted its initial public offering (IPO) successfully in last March, selling all 23 per cent of the total capital to investors to gain VND1.159 trillion ($51 million) in proceeds, and listed on UPCOM since April 23.

However, the business results of the company are not good as it announced a big loss of VND196 billion ($8.6 million), including VND146 billion from the corporation office, while the equitisation plan was meant to put the corporation VND209 billion ($9.2 million) in the green.

For the first time, in 2017 Vinafood 2 lost its leading position and moved to the third rank in rice exports with the volume of 230,000 tonnes, while the country’s rice exports rose by 29 per cent to 6.6 million tonnes. Vinafood 2 faced many difficulties in developing export and domestic markets, which resulted in poor sales. Sales during the year reached only VND17.546 trillion ($773 million), equivalent to 93 per cent of the annual target.

In addition to the output markets, loans and debts were also big problems affecting the business results of Vinafood 2 last year. CafeF.vn claimed that the outstanding loans of Vinafood 2 from banks was nearly VND2.3 trillion ($101.25 million) at the end of 2017, including VND1.186 trillion ($52.25 million) held by the corporation office and VND1.113 trillion ($49 million) by the subsidiaries.

In October 2017, the Ministry of Public Security arrested and started proceedings against the former director of Tra Vinh Food Company on the charge of "deliberately acting against the state regulations on economic management, causing serious consequences".

The outstanding loans of the subsidiary Tra Vinh Food Company were VND367.4 billion ($16.2 million) and could not pay its loans. Thus, the bank also automatically deducted VND258.6 billion ($11.4 million) from the deposit account of Vinafood 2 to recover the debts and overdue interest of Tra Vinh Food Company. This is really a big amount and significantly affected Vinafood 2’s business performance last year.

According to Vinafood 2's financial statement in the first half of 2017, accumulated losses were more than VND900 billion ($39.6 million), liabilities were VND4.914 trillion ($216.5 million), while equity was VND3.885 trillion ($171 million). Thereby, the corporation was still able to balance its finances.

However, the sharp decrease in market share and business activities of its store chain are bad signs. According to the reports of the 12 subsidiaries operating 84 convenient shops, their sales in 2017 were VND2.28 trillion ($100 million), but profit was negative VND1.9 billion ($83,620), including VND5.9 billion ($260,000) of actual profit at eight subsidiaries and VND7.8 billion ($343,620) in losses at four.

This was because inventory in 2016 was too much, increasing production costs. Moreover, Vinafood 2’s subsidiaries failed to follow market trends and only depended on the Chinese market without developing other export markets. Sales volume was low, leading to high costs and losses.

Despite the losses in 2017, Vinafood 2 still set out rather high business targets for 2018, including a 15 per cent rise in sales revenue to VND20.156 trillion ($888 million) and profit of VND240 billion ($10.6 million). This plan is based on the assumption that the amount of export consignment will quintuple.

Achieving the 2018 plan set forth depends on many factors, including the performance of subsidiaries and reducing losses or interest costs for Vinafood II.

ID

List

2017 performance estimation

Plan

2018

2019

2020

1

Total assets

501.3

531

562.7

598.7

2

Liabilities

277.3

305

335.6

369.2

3

Equity

224

225.8

227

229.5

4

Charter capital

220.3

220.3

220.3

220.3

5

Net revenue

475.8

523.4

575.8

633.4

6

Gross profit

86.4

95

104.6

115

7

Pre-tax profit

4.6

6.5

7.4

9.7

8

Corporate Income Tax

0.93

1.3

1.5

1.94

9

After-tax profit

3.7

5.2

5.9

7.75

Vinafood 2's 2018-2020 targets (unit: million USD)

By Nguyen Huong

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