FINANCIAL STATEMENT ANALYSIS OF TUONG AN VEGETABLE OIL JOINT STOCK COMPANY

VIETNAM NATIONAL UNIVERSITY HO CHI MINH UNIVERSITY OF ECONOMICS AND LAW ⁕⁕⁕֍֍֍⁕⁕⁕ FINANCIAL STATEMENT ANALYSIS OF TUONG AN VEGETABLE OIL JOINT STOCK COMPANY SUBJECT: Financial Statement Analysis Teacher: Mr Nguyen Vinh Khuong GROUP Member of group Do Thi Nguyet …………………………………………………………… K174050530 Ho Nguyen Yen Nha …………………………………………………… K174050531 Nguyen Huong Nhi ……………………………………………………… K174050533 Le Kieu Oanh …………………………………………………………… K174050539 Phuong Vo Ngoc Thao ……………………………………………………K174050548 Table of Contents I TUONG AN OVERVIEW General Information Establishment and development history Organization and human resources Corporate structure Vision & Mission II BUSINESS STRATEGY ANALYSIS Industry Analysis: Competitive Strategy Analysis Corporate Strategy Analysis 11 SWOT Analysis 13 III PEST Analysis 17 ACCOUNTING ANALYSIS 18 Identifying Key Accounting Policies 18 Assess Accounting Flexibility 21 Evaluate Accounting Strategy .22 Evaluate Quality of Disclosure 23 Identify Potential Red Flags 24 Undo Accounting Distortions 25 Analysis of the Statement of Financial Position/ Balance Sheet 25 IV Analysis of statement of cash flow: 27 FINANCIAL ANALYSIS 29 Common-size analysis 29 Analysis of Profitability 34 Analysis of Liquidity of Short-term Assets 44 Analysis of Long-term Debt-Paying Ability 54 Analysis of Ratios in Cash Flows 56 I TUONG AN OVERVIEW General Information Charter capital (Equity): VND 338,796,480,000 Address: No 138-142 Hai Ba Trung Street, Da Kao Ward, District 1, Ho Chi Minh, Vietnam Phone number: (028) 38 277 489 Fax: (028) 38 277 832 Email: tuongan@tuongan.com.vn Website: www.tuongan.com.vn Establishment and development history 1977 Established in 1977, Tuong An has been a trademark associated with all generations of Vietnamese families for the past 42 years 1986 After being empowered to self-supervise production and business activities, plus the completion of a new production facility, Tuong An quickly expanded its development between 1985 and the early 1990s 1990 In the late 1990s, Tuong An faced new challenges as the economy began to integrate with the world and fierce competition from imported brands of avocado and vegetable oil Tuong An has been flexible and creative in promoting and approaching consumers in order to raise awareness about nutritional cooking oil by launching many new products that are fortified with micronutrients, using high quality raw materials, increasing production of bottled refined cooking oil products to serve the domestic market 1991 In October 1991, "Cooking Oil - Tuong An Cooking Oil" - the most famous product of the Company until now has been officially introduced to the market and since then Tuong An brand has been and has been leading market leader in edible oil production in Vietnam Currently, Tuong An cooking oil continues to lead the market share and Cooking Oil becomes Tuong An key product always trusted and used by consumers 2003 In December 2003, the Company conducted an experimental study to add micronutrients to edible oil products with products such as pure soybean oil for heart health; ViO oil supplements nutrients for children found in Gac fruit oil, helps brain development, good for the skin, eyes and heart Today Tuong An will realize the corporation's goal of dominating the essential food market to bring nutritious, safe and quality products to millions of Vietnamese families' meals Along with preserving the core values, developing sustainably with its valuable assets, Tuong An has deepened the hearts of the Vietnamese people for 42 years, becoming a "national brand" Always focusing the happiness in every meal of every Vietnamese family, Tuong An still makes great efforts to offer consumers excellent products at reasonable prices Organization and human resources As at 31/12/2019, total number of employees was 1,407 persons With large and increasingly growing number of employees, Tuong An’s BOD and BOM always focus on human resource development as this is the key to the success and effectiveness of the company Nguyen Thi Hanh Tran Le Nguyen Le Thi My Van Board of Directors Nguyen Thi Thanh Van Nguyen Van Thuan Ha Binh Son Ha Binh Son Board of Management Vu Duc Thinh Nguyen Duc Thuyet Ho Minh Son Supervisory Board Cao Hoai Thu Corporate structure Tuong An is a key business unit of the packaged food channel system that contributes to building the distribution platform of KIDO Group In order to achieve the set goals, the management system of the member units must be closely connected, in order to provide the right products with the right specifications, in the right place and at the right time for consumers Each company is guided by the Executive Management Committee (EMC), which oversees the implementation of the Group's strategic goals and promotes business performance at the unit Tuong An is organized in a Team structure and shares with its member companies a number of support services The Group's goal is to create a balance between long-term and short-term goals Team Business activities Team Supply chain management Team Support Tuong An owns large-scale factories: Phu My Oil Factory (80,000m2) and Dau Vinh Factory (37,000m2) Vision & Mission  Vision: The Vietnamese brand is the most popular of the delicious dishes that help nurture and unite the happiness of the Vietnamese family  Mission: Tuong An is committed to bringing the best quality of delicious and healthy food to the community and every Vietnamese family with dedication, understanding and responsibility to people and society II BUSINESS STRATEGY ANALYSIS Industry Analysis: a) Rivalry among existing firms:  It can be said that, in the national cooking oil market, there are currently two major brands that account for the majority of market share, Tuong An cooking oil and Neptune cooking oil Tuong An faces Neptune - a fairly heavy competitor in the market  Neptune is produced by Cai Lan Vegetable Oil Company under the production line of KUOK OILs & GRAINS PTE Company, which has just entered Vietnam market (after Tuong An) But Neptune's products are extremely rich, in addition to having a rich financial source, Neptune constantly promotes its brand with television advertising programs, cooking lessons on TV or manuals food on the newspaper In terms of price, Neptune is not a high-priced product, so it is accepted by many consumers and that is a big barrier for Tuong An  In addition to the aforementioned Neptune, Tuong an has to share the market with many other vegetable oils Typically, Tan Binh, Vinadaco, Marvela, and foreign products such as Ship, Floria, Sun Flower, These products gradually gain a foothold in the Vietnamese cooking oil market, especially domestic products The quality of these products is also quite high and knows how to toward to low-income consumers As for imported products, beautiful designs, diverse products, although high prices but also attract many consumers Therefore, the competitiveness on Tuong An is not small, but it only occupies a part of the Vietnamese market b) Threat of new entrants:  Many cooking oil products originating from Malaysia, Singapore, Indonesia rushed into Vietnam But Tuong An cooking oil has become familiar and close to most Vietnamese consumers  Regarding monopoly of input: Tuong An still does not have this advantage because it has not found a major oil-bearing tree  About conversion costs (costs that customers want to convert their shopping to other suppliers): easy to change without any cost  In particular, in the Vietnamese market, the psychology of preferring to use imported goods and the ASEAN tax preferential policy, the selling price is almost equal  The choice and replacement of products is not difficult so the threat of new entrants is not small c) Threat of substitute products:  Living conditions improved, so people look for more advanced products or products from abroad In contrast, low-income people: Find cheaper products when the same volume of bottle  Tuong An must share the market with many other products such as cheese butter or sauces, etc For example: Instead of mixing salad with oil people will mix with cheese  In addition, to reduce the fat of the food, people use a versatile non-stick pan to fry or fry without vegetable oil However, this option is only a temporary method It cannot use long term during cooking  Therefore, Tuong An's products still retain their market value d) Buyer’s power:  The food market in Vietnam is expected to continue to grow thanks to the increase in disposable income Thanks to the improved quality of life, Vietnamese consumers has paid much attention to health to have a better life, from which to pay more attention to substance food intake  In 2018, Vietnam's cooking oil market achieved the above revenue 25,000 billion VND, the level of edible oil consumption in Vietnam remains lower than other countries in the region The oil industry is expected to continue to grow within the next years  Is one of the big manufacturing cooking oil companies Vietnamese, Tuong An is taking advantage of great opportunity to capture the potential of the industry  When income increases, people's living standards are improved and the demand for cooking oil is required of the people will get bigger and bigger e) Supplier’s power:  The main input is raw vegetable oils produced from oil fruits and seeds, of which palm and soy beans are the two most used nuts (about 60% and 30%)  For cooking oil industry, source of auxiliary production materials large dependence on imports from abroad, mainly from Malaysia and Indonesia (accounting for nearly 80%)  The ability to negotiate with suppliers is very low  So far, Tuong An has not found the main oil-bearing tree to develop on a large scale, so it is difficult to take the initiative in the source of raw materials Competitive Strategy Analysis In terms of competitive strategy, the decision of TAC is the combination of cost leadership and differentiation Mission set out for this corporation is “Tuong An commits the community and every Vietnamese families bringing the best quality of delicious and healthy food with our dedication, understandings and responsibilities to people and society.” a) Eco-friendly factory  Phu My factory is the biggest vegetable oil manufacturing firm of TAC This is evaluated to be the one of the most environmentally friendly factories in Vietnam with green coverage accounts for 40% of the total area  Existing for almost 40 years, TAC always attaches special importance to both the prices and quality All of their products have a reasonable price in comparison with the other types of cooking-oil even though the quality is appreciated by authorities For example of the Soybean-oil listing price of TAC is just aroung 36,000VND per liter; whereas, over 40,000VND is the price of the same product of Simply This leads to the fact that all customers can purchase the TAC products with high quality b) Focusing on high technology  Being a traditional Vietnamese brand, TAC always pioneers in improving the latest technology Specific evidences are presented by the modernity and the majesty of high technological machines in TAC manufacturing company Vegetable oil refining lines imported from Belgium are considered to be the most modern in the "territory" of oil production these days These systems operate continuously and they are controlled automatically by PLC and Computer systems, ensuring the requirements of the best quality and keep maximum levels of Vitamin A, E naturally in oil c) Human is an essential component  In addition, in TAC, apart from the most modern technological machines invested, talented human resources with long-term experience and business ethics are also secret factors accompanying with the mission of dedicating to company for all along the way Through the regular professional training courses organized, the staffs always update the latest trends in the market Therefore, they can create outstanding solutions, helping TAC to maximize production and minimize costs at the same time along with product efficiently and effectively  The perfect combination of technology and human quintessence has made TAC have remarkable breakthrough in creating the best quality commodities with the best price to meet the needs of customers, bring Vietnamese meals to reach a new level Diversifying and improving products through each period while maintaining prices as reasonable as possible For those reasons mentioned, TAC has really conquered most of Vietnamese consumers’ hearts Differentition Year Profit Margin 2019 0.12 2018 0.15 2017 0.17 Average 0.15 Cost Leadership Year Asset Turnover Average 2019 0.71 2018 0.85 2017 1.07 10 0.88 b) Accounts Receivable Turnover 2019 Net Sales Average Gross Receivables 2018 2017 4,210,240,551,226 4,492,736,545,601 2016 4,427,714,235,206 3,995,040,191,032 202,493,836,498 161,408,265,951 132,774,109,842 98,748,411,439 20.79 27.83 33.35 40.46 Accounts Receivable Turnover c) Accounts Receivable Turnover in Days 2019 2018 45 2017 2016 Average Gross 202,493,836,498 161,408,265,951 132,774,109,842 98,748,411,439 Receivables Net Sales 4,210,240,551,226 4,492,736,545,601 4,427,714,235,206 3,995,040,191,032 Accounts Receivable Turnover in 17.55 13.11 10.95 9.02 Days d) Days’ Sales in Inventory 2019 2018 2017 2016 Ending Inventory Cost of Goods Sold 559,790,795,363 842,799,373,413 581,645,608,624 541,756,313,649 3,480,623,376,050 3,846,447,929,113 3,773,926,331,144 3,603,759,875,433 Days’ Sales in 58.70 Inventory 79.98 56.25 54.87 (days) e) Inventory turnover 2019 Cost of Goods Sold Average Inventory 2018 2017 2016 3,480,623,376,050 3,846,447,929,113 3,773,926,331,144 3,603,759,875,433 701,295,084,388 712,222,491,019 561,700,961,137 575,524,219,964 4.96 5.40 6.72 6.26 Inventory Turnover (times per year) 47 f) Inventory Turnover in Days 2019 Cost of Goods Sold Average Inventory 2018 2017 2016 3,480,623,376,050 3,846,447,929,113 3,773,926,331,144 3,603,759,875,433 701,295,084,388 712,222,491,019 561,700,961,137 575,524,219,964 73.54 67.58 54.33 58.29 Inventory Turnover in Days g) Working Capital 48 2019 Current Assets Current Liabilities Working 2018 2017 2016 1,600,637,536,645 1,890,371,054,646 1,423,014,730,537 1,035,437,560,726 1,021,794,606,553 1,392,948,587,888 946,465,212,389 695,306,904,930 578,842,930,092 497,422,466,758 476,549,518,148 340,130,655,796 Capital h) Current Ratio 2019 Current Assets Current Liabilities 2018 2017 2016 1,600,637,536,645 1,890,371,054,646 1,423,014,730,537 1,035,437,560,726 1,021,794,606,553 1,392,948,587,888 946,465,212,389 695,306,904,930 Current 1.57 1.36 1.50 1.49 Ratio i) Acid-test Ratio 2019 Current Assets Inventory Current Liabilities 2018 2017 2016 1,600,637,536,645 1,890,371,054,646 1,423,014,730,537 1,035,437,560,726 559,790,795,363 842,799,373,413 581,645,608,624 541,756,313,649 1,021,794,606,553 1,392,948,587,888 946,465,212,389 695,306,904,930 0.89 0.71 Acid-test Ratio 1.02 0.75 j) Cash ratio 2019 Cash equivalents 53,963,419,150 2018 2017 2016 210,766,277,286 295,382,117,621 349,902,332,846 50 Marketable Securities Current Liabilities 288,000,000,000 135,000,000,000 353,000,000,000 1,021,794,606,553 1,392,948,587,888 946,465,212,389 695,306,904,930 0.69 0.50 Cash Ratio 0.33 0.25 k) Sales to Working Capital (Working Capital Turnover) 2019 Sales 2018 2017 2016 4,210,240,551,226 4,492,736,545,601 4,427,714,235,206 3,995,040,191,032 Average Working 538,132,698,425 486,985,992,453 408,340,086,972 305,739,453,053 7.82 9.23 10.84 13.07 Capital Sales to Working Capital (times per year) 51 l) Liquidity Index Group 2019 2018 2017 2016 Current Ratio 1.57 1.36 1.50 1.49 Acid-test Ratio 1.02 0.75 0.89 0.70 Cash Ratio 0.05 0.15 0.31 0.49 Current ratio, acid-test ratio and cash ratio of TAC were considered to match industry averages However, in 2019 these figures of TAC were in a good growth trend, being slightly better than 52 other competitors in the same industry These rates were good for TAC because of the fact that this company was able to pay short-term obligations m) Group of Efficiency Indicators Accounts receivable turnover Inventory turnover 2019 2018 2017 2016 20.79 27.83 33.35 40.46 4.96 5.4 6.72 6.26 In 2016, the company had a higher receivable turnover ratio than its peers (Capital are appropriated), but this index decreased in from 2017 to 2019 This shows that the credit policy that businesses apply to customers is effective However, compared to other companies in the same industry, this index of TAC is quite stable, because if this index is high that can lose customers because customers switch to consuming products of competitors providing longer credit time Inventory turnover of TAC is lower than the industry average This index shows that the company's ability to manage inventory is not really effective This affects the capital of enterprises such as stuck capital, stagnant capital As we can see, Inventory Turnover in Days is increasing from 58.29 to 73.54 (2016-2019) However, with the increasing market demand, a lot of inventory can be a strategy of the company because if the market demand increases suddenly, the company will be able to win customers and occupy market share 53 Analysis of Long-term Debt-Paying Ability a) Debt Ratio The debt ratio increased gradually from 2016 to 2018, but dropped sharply in 2019 (down 8.27%) The reason is that TAC can reduce short-term debts, especially payables and short-term loans However, the total assets of TAC also decreased Cash and cash equivalents decrease due to financial investment and payment of loans Inventory of TAC also plummeted, showing that businesses have a better view of production management But the investor will be concerned about the reduction of assets because it may affect the company's main business, which could reduce profits and shareholders' interests b) Debt/ Equity Ratio 54 In 2016, 2017 and 2019, the Debt/ Equity Ratio remained at an average of 1.53 However, in 2018, the debt ratio increased significantly (2.25, 1.5 times higher than in 2017) The company may have had financial difficulties so it used short-term debts to finance its business operations For an enterprise with a history of capital mobilization by debt like TAC, this is understandable, proving that the business has exploited the benefits of tax savings efficiency, as evidenced by the 2019 ratio Debt/ Equity of the business returned to normal c) Debt to Tangible Net Worth Ratio 55 This ratio is more conservative than debt ratio or debt/equity ratio due to exclusion of intangibles Looking at the chart, it can be seen that this ratio of TAC is particularly high in 2018 TAC borrowed to invest in tangible assets, which made this index increased sharply (1.4 times higher than in 2017) and showing the viability of TAC in difficult times d) Times Interest Earned TAC has high ability to pay interest by pre-tax income, company could ensure the ability to pay interest annually This shows that the business operation of TAC is efficient, the debts and capital that the business has used have generated high profits Although the times interest earned ratio has gradually decreased from 2017 to 2019, in general, this ratio is still high, and with the business ability of TAC, this ratio will always remain at a high level Analysis of Ratios in Cash Flows 56 a) Operating Cash Flow to Total Debt 2019 Operating Cash Flow Total Debt 2018 115,906,818,443 2017 2016 (254,219,672,195) 336,500,494,719 86,107,485,747 1,054,982,632,989 1,408,806,050,638 963,390,285,677 707,487,802,152 Operating Cash Flow to 11% Total Debt (18%) 35% 12% (%) From 2016 to 2017, this ratio increased sharply due to the significant increase in operating cash flow But in 2018, this ratio was negative due to negative operating cash flow Debts in 2018 also increased due to promote sales activities and develop distribution systems By 2019, the ratio will be much improved due to the appropriate business policies of the company b) Operating Cash Flow to Cash Dividends 2019 Operating Cash Flow Cash Dividends 2018 115,906,818,443 (254,219,672,195) 2017 2016 336,500,494,719 86,107,485,747 80,902,351,080 80,054,742,240 53,330,196,960 22,783,765,550 1.43 (3.18) 6.31 3.78 Operating Cash Flow to Cash 57 Dividends (times per year) From 2016 to 2017, this ratio nearly doubled compared to the previous year, the company owns abundant cash resources, more than the ability to pay cash dividends to shareholders But by 2018, the negative operating cash flow led to the negative ratio, but the company still had to pay a large amount of dividends, the company suffered a high cash shortage By 2019, this ratio will improve, not as much as in 2018 58 References https://www.tuongan.com.vn/ https://finance.vietstock.vn/TAC-ctcp-dau-thuc-vat-tuong-an.htm http://s.cafef.vn/hose/TAC-cong-ty-co-phan-dau-thuc-vat-tuong-an.chn https://www.vndirect.com.vn/portal/bao-cao-luu-chuyen-tiente/;jsessionid=BB94869EDCF7D53846078FCC8E5B58B91588840787468PRO-OLTPORTAL22?fbclid=IwAR1rvMaF0EmsCVv4n7kqcnZFnLgg6EoSYfzUIZpVSfyhj54eVrALtTOpF8 https://bizfluent.com/info-8407208-debt-tangible-net-worth-ratio.html https://vi.wikipedia.org/wiki/Tỷ_số_khả_năng_trả_lãi 59 ... makes it easier to analyze and evaluate Analysis of the Statement of Financial Position/ Balance Sheet a) Financial Structures of WC/WCN/NC Tuong An Vegetable Oil Joint Stock Company (TAC) 2019 FA/NCA... 25 Analysis of the Statement of Financial Position/ Balance Sheet 25 IV Analysis of statement of cash flow: 27 FINANCIAL ANALYSIS 29 Common-size analysis ... evaluation and analysis of the Tuong An' s audited financial statements, it shows that there is no accounting distortions The financial statement financial statements provide complete and accurate