financial management group assignment report topic cdbeco financial analysis

UNIVERSITY OF ECONOMICS HO CHI MINH CITY SCHOOL OF FINANCE FINANCIAL MANAGEMENT GROUP ASSIGNMENT REPORT Topic: CDBECO FINANCIAL ANALYSIS Lecturer: Mrs Tu Thi Kim Thoa Class : IBC02 Group: Members: Bùi Nguyễn Phương Thảo - 31191024855 Võ Thu Thảo - 31191021217 Lê Dương Anh Tuấn - 31191025110 Hồ Thảo Vy - 31191025222 Nay Đinh Nhật Vỹ - 31201024701 ⤺⤻⇜฀⇝⤺⤻ 2021, October TABLE OF CONTENTS PART I: INTRODUCTION Founding Expansion Organizational structure The overall market Competitors 3 5 PART II: ANALYSIS OF PROFIT/LOSS AND BALANCE SHEET Balance sheet Income statement 6 10 PART III: RATIO ANALYSIS Liquidity ratio Long-term solvency ratios Efficiency ratio Profitability ratio Market value ratio 13 13 14 15 16 18 PART IV: CONCLUSION IN EACH OF ASPECTS IN GENERAL 18 18 20 PART V: REFERENCES 21 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ssignment.report.topic.cdbeco.financial.analysis PART I: INTRODUCTION Chuong Duong Beverage Joint Stock Company was formerly the Usine Belgique factory belonging to B.G.I Group (France) This was the largest beverage factory in the South before 1975 In mid-1977, BGI Group officially transferred ownership and handed over the entire factory to the state with the name “Chuong Duong Soft Drink Factory” After many years of operation in the beverage industry, Chuong Duong is currently one of the leading companies in Vietnam Company background1 Name Chuong Duong Beverages Joint Stock Company Short name CDBECO Parents company Saigon Beer - Alcohol - Beverage Corporation (SABECO) Postal address 606 Vo Van Kiet Street, Cau Kho Ward, District 1, Ho Chi Minh City Internet address www.cdbeco.com.vn Independent audit firm KPMG Limited Vietnam Tax code 0300584564 Stock code SCD Công Ty Cổ Phần Nước Giải Khát Chương Dương Thongtindoanhnghiep.co (2015) Retrieved 19 September 2021, from https://thongtindoanhnghiep.co/0300584564-cong-ty-co-phan-nuoc-giai-khat-chuong-duong financial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.re 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ssignment.report.topic.cdbeco.financial.analysis Listing floor Ho Chi Minh City Stock Exchange Industries served Beverage Geographic areas served Vietnam Current Chairman Neo Gim Siong Bennett a) Founding Chuong Duong has been a familiar soft drink brand to most people in the Southern part of Vietnam for more than 60 years with its unique sarxi flavor Having been present in Vietnam since the 1950s, but Chuong Duong really marked an important turning point only when officially operating as a joint stock company on June 2, 2004 with a charter capital of VND 85 billion In that total amount, Saigon Beer - Alcohol - Beverage Corporation (SABECO) held 51% controlling stake.2 Currently, as of March 16, 2021, SCD's largest shareholder is still Sabeco with 62% of charter capital, followed by Venture Investment Joint Stock Company and PYN Elite Fund holds 12.47% and 5.65% of charter capital respectively b) Expansion Currently, the company is operating with a production line for extracting glass bottles, a line for filling PET bottles and a line for filling cans; with over 500 employees working shifts/day The average output of the Company has grown continuously from 2.7 million liters in the period 1977 - 1985 to 22.9 million liters in 1988 - 1992 and reached more than 38 million liters up to the present time According to CDBECO's 2020 financial report, the company's net revenue in the year is about 259 billion VND and profit after tax is 12.8 billion VND, equivalent to a decrease of 3% and 26% compared to the 2019 results Currently, the classification of small and medium-sized enterprises is based on the average number of employees participating in social insurance per year and revenue or capital source (with priority given to revenue) From the above information, it can be seen that CDBECO is a medium-sized enterprise in the manufacturing sector with more than 500 employees and 85 billion VND investment capital Câu chuyện thương hiệu - Chương Dương Retrieved 19 September 2021, from https://www.cdbeco.com.vn/cau-chuyen-thuong-hieu/ 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ssignment.report.topic.cdbeco.financial.analysis c) Organizational structure The structure of CDBECO's Executive Board Board of Directors Mr Neo Gim Siong Bennett Chairman Mr Tran Duc Hoa Member Mr Trinh Huy Hoa Member Mr Dang Trung Kien Member Mr Pham Tan Loi Member Majority-owned subsidiaries No Name Address Branch of CD Beverage Joint Stock Company in Nha Trang 40 2/4 Street, Vinh Hai Ward, Nha Trang City Sales and Distribution Center 176/5 Pham Hung Street, Block 1, Ward 09, Ho Chi Minh City Branch of Chuong Duong Beverage Joint Stock Company Lot D-5B, 5D, 5F-CN, My Phuoc Industrial Park Go Dau Branch - Chuong Duong Beverage Joint Stock Company 280 Go Dau Street, Tan Quy Ward, Tan Phu District, Ho Chi Minh City 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ssignment.report.topic.cdbeco.financial.analysis d) The overall market The company's business areas include: ● Producing and trading in beverages (mainly) ● Producing and trading in raw materials, packaging, equipment and technology related to the beverage sector The company's main products include: ● Carbonated soft drinks (glass bottles, cans and PET bottles): sarxi, orange flavor, strawberry flavor, mint, Cream soda, soda ● Non-carbonated beverage: aloe vera flavor ● Bottled purified water e) Competitors Beverage is a commodity in the FMCG industry, it has great consumption in the world with advantages of convenience and deliciousness In Vietnam, the beverage market is considered to have strong growth nationally Currently, according to estimates of the Vietnam Beer and Alcoholic Beverage Association (VBA), there are about 1800 beverage production facilities in the country with an annual growth rate of 6-7% Among them, prominent brands in the market can be listed as Coca Cola, Pepsico, Vinamilk, Vinacafé, Trung Nguyen Coffee, Tan Hiep Phat Group, TRIBECO, Lavie, Vinh Hao, Sanna Khanh Hoa, However, in this report, we choose Sanna Khanh Hoa Beverage JSC (SKN) as a direct competitor based on the following criteria: ● Both Chuong Duong and Sanna Khanh Hoa are Vietnamese companies operating in the field of beverage production ● Sanna's most recent three-year financial statements is clear, audited by FAC and available on the official web ● Sanna has the same level of awareness and satisfaction as Chuong Duong in the Vietnamese beverage market financial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.assignment.report.topic.cdbeco.financial.analysisfinancial.management.group.a ssignment.report.topic.cdbeco.financial.analysis 4.58 VND in current assets for every VND in current liabilities This is affected by various types of transactions within the year, one of which may be due to the large sudden rise in long-term debt of CDBECO: from a total of 720 million VND in 2017 and 2018, to 8,400 million in 2019 (more than 10 times), and 176 billion in 2020 (more 200 times), while total current liabilities just change slightly (see …) CDBECO is a company in the FMCG industry so the quality of inventory is strictly considered In case the beverage products of CDBECO become damaged, obsolete, or lost, the quick ratio is more preferable to evaluate liquidity of a company Quick ratios of CDBECO in 2018 and 2019 experience a quite similar trend with current ratios: rapid rises, but there was much deeper low in percentage change in 2020 (at 3.66, dropped by nearly one-fifth of the previous year) This is perhaps another cause for the high current ratio as already stated The final index in this category is cash ratio It can be seen that in 2018, the index rose by over half of the previous year to 1.2 Then it decreased by about 16.5% before going back to 1.08 in 2020 This was true when the cash of CDBECO was just less than 53 billion in 2018, but it was around 42.5- 43 billion VND in 2017,2019 and 2020 The event showed that there was a great amount of retained earnings from 2017’s operation, but much less in the next consecutive years ● Sanna Khanh Hoa Table a’ shows different liquidity ratios for Sanna Khanh Hoa from 2018 to 2020 Overall, figures for Sanna Khanh Hoa are lower than CDBECO in every corresponding ratio, implying that it’s less capable of dealing with short-term liabilities However, the figures also show a more stable trend of growth for Sanna Khanh Hoa For the current ratio of Sanna Khanh Hoa, the number steadily rose by around 40% each year from 2.13 in 2018 to 4.16 in 2020 Figures for the quick ratio moved in the same pattern, with an increase of 37% each year The cash ratio also increased throughout the years, but it was much less significant in 2020 than in 2019 b) Long-term solvency ratios Table b CDBECO 2017 2018 2019 2020 Total Debt Ratio 0,29 0,25 0,26 1,12 Annual percentage change - -16,21% 5,16% 333% Table b’ 14 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ssignment.report.topic.cdbeco.financial.analysis SKN 2018 2019 2020 Total Debt Ratio 0,3 0,24 0,19 Annual percentage change - -20,43% -21,19% ● CDBECO Looking at the capital structure of Chuong Duong can help give a better understanding of its financial status The total debt ratio for the company in each year from 2017 to 2020 was 0.29, 0.25, 0.26, and 1.12 respectively It is obvious that there was little change during the first years, but a more than fourfold increase in the last year of the period As mentioned, this is attributed to the dramatic rise in long-term debt of the firm, and it can be perceived that CDBECO was trying to restructure its capital ● Sanna Khanh Hoa The capital structure of Sanna Khanh Hoa was similar to that of CDBECO to some extent, except that it had no long-term debt, and that there was a downward trend in debt-equity ratio during the year period (shown in table b’) c) Efficiency ratio Table c CDBECO Efficiency, or AU, or Turnover, Ratios Year Inventory turnover Annual percentage change DSI Annual percentage change TA turnover Annual percentage change 2020 3,36 -71,76% 108,52 254,06% 0,40 -63,27% 2019 11,91 11,44% 30,65 -10,27% 1,08 -8,50% 2018 10,69 6,05% 34,16 -5,70% 1,18 -13,48% 2017 10,08 36,22 1,36 Table c’ SKN Efficiency, or Turnover, Ratios 15 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ssignment.report.topic.cdbeco.financial.analysis Year Inventory turnover Annual percentage change DSI Annual percentage change Annual TA turnover percentage change 2020 6,89 -47,94% 53,01 92,07% 1,39 -34,05% 2019 13,23 -34,14% 27,60 51,83% 2,10 -9,79% 2018 20,08 - 18,18 - 2,33 - ● CDBECO Table c shows the main efficiency ratios for CDBECO during the 4-year period Data in the first column express that Inventory Turnover was normally around 10 - 12 in 2017, 2018 and 2019 However, it was only 3.36 in 2020, a nearly 72% plunge If taking 365 (days) divided by figure for each year, Days’ sales in Inventory (DSI) can be obtained as seen in the third column of the table The company took more than 108 days on average to collect sales back from the current inventory in 2020, more than triple that of the previous years’ DSI Total Assets Turnover Index was relatively low in 2020 as well, at 0.4 following a continuous drop from 1.36 in 2017 With this rate in 2020, it would take CDBECO 2.5 years for VND in assets to create VND in sales All of these reveal that CDBECO was witnessing a severe problem in sales performance or inventory management during 2020 {{Note: They should have better-selling models}} ● Sanna Khanh Hoa Looking at figures in table c’, and comparing, in 2019 and especially 2020, it was harder and harder for the company to sell off its inventory DSI, from about 18 in 2018, rose to more than 27 in 2019 and then significantly jumped by 92% to 53 in 2020 Total Assets Turnover for Sanna Khanh Hoa went down from 2,33 in 2018 to 1,39 in 2020 The overall rate was higher than that of CDBECO so it can be said that with this scale of company, Sanna Khanh Hoa had some advantage in managing its assets during the period d) Profitability ratio Table d CDBECO Profitability ratios 16 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ssignment.report.topic.cdbeco.financial.analysis Year PM Annual percentage change ROA Annual percentage change ROE Annual percentage change 2020 2,11% -66,01% 0,84% -87,51% 1,77% -78,99% 2019 6,21% 229,66% 6,70% 201,64% 8,43% 204,72% 2018 1,88% -302,85% 2,22% -275,51% 2,77% -269,07% 2017 -0,93% -1,27% -1,64% Table d’ SKN Profitability ratios Year PM Annual percentage change ROA Annual percentage change ROE Annual percentage change 2020 0,47% -37,02% 0,65% -58,47% 0,77% -60,18% 2019 0,74% -67,83% 1,56% -70,98% 1,94% -72,36% 2018 2,31% - 5,39% - 7,03% - ● CDBECO Profit Margin (PM), Return on Equity (ROE), and Return on Assets (ROA) of CDBECO and its competitor will be examined in this part Thanks to the Dupont Identity, it is known that these indexes are closely related An increase in PM leads to the increase of ROE, for example In 2017, CDBECO’s PM was -0.93%, meaning that , from an accounting perspective, the company lost 0.93 VND for every 100 VND in sales However, it witnessed an over 300% and 229% positive rise in PM consecutively during 2018 and 2019 In the year 2020, the figure dropped by two-thirds to 2,11% ROE and ROA followed a similar pattern (as seen in table) ROE is a more preferred measure of performance to shareholders as benefiting shareholders is the main goal of business 17 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ssignment.report.topic.cdbeco.financial.analysis In CDBECO’s case ROE was always slightly higher than ROA due to the company’s use of financial leverage ● Sanna Khanh Hoa Indexes for Sanna Khanh Hoa were more positive than CDBECO during 2018, but became much lower over the next two years At the end of 2019, CDBECO witnessed a big rise in PM, ROE, and ROA with all rising by more than times that of the previous year; while Sanna Khanh Hoa saw a sharp decline by around 70% for the indexes After that it continued to drop in 2020, but this time with a slightly lower rate of change Both companies experienced significant loss in profit and efficiency in 2020 However, CDBECO witnessed a much more severe fluctuation than Sanna Khanh Hoa e) Market value ratio A company’s EPS is one of the most important tools used to evaluate the business and make investment decisions because it indicates the profitability of a company It seems not meaningful when comparing EPS across companies because the number of shares outstanding for each company is different However, EPS figures can be used to compare one company’s performance over time According to the financial reports, EPS of both Chuong Duong and Sanna Khanh Hoa tend to increase, but due to the negative impact of Covid-19, they declined in 2020 We can see the EPS of CD is overall much higher than that of SKN, except for in 2020 when they seem to converge Specifically, ● Chuong Duong: There was a 2.5 times increase in EPS in 2019 to 1,761 VND, and in 2020, it decreased by 77,06%, back to 404 VND/share ● Sanna Khanh Hoa: In 2019, EPS increased slightly by 8,73% from 584 in 2018 to 635 VND/share However, that number dropped 37,32% to 398 VND/share in 2020 PART IV: CONCLUSION IN EACH OF ASPECTS Liquidity Accounting liquidity measures the ease with which a company can meet their financial obligations with the liquid assets available to them—the ability to pay off debts as they come due In CDBECO’s situation, it has a too high current ratio, current assets are much higher than the current liabilities, which means CDBECO is unable to 18 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ssignment.report.topic.cdbeco.financial.analysis use its current assets effectively Besides that, there are not many companies that have enough cash and equivalents to cover most of the short-term liabilities, CDBECO still has a good handling of short-term liabilities because the cash ratios are around over the years In comparison with SKH, CDBECO has higher abilities to deal with short-term liabilities but has less stability in growth With the aim of improving liquidity, CDBECO should balance operating costs, sell unneeded assets, monitor revenue and expenditure, and monitor profits regularly It is necessary for CDBECO to make a suitable proposal to stabilize the development situation for the company Long-term solvency ratio From a pure risk perspective, CDBECO seems to have a better debt ratio from 2017 to 2019 because the lower the ratio, the lower chance of having too much debt which can affect the entire operation if cash flow dries up In 2020, CDBECO had a record increase in debt ratio, which means borrowing is becoming increasingly difficult, which also indicates that CDBECO may be putting itself at risk of default on its loans if interest rates were to rise suddenly The higher the debt ratio, the more leveraged a company is Therefore, CDBECO should increase the company's profitability, improve inventory management and restructure debt (when current market rates are low) to reduce the debt ratio, reduce financial leverage and financial risk for the company Efficiency ratio In comparison with SHK, CDBECO has a reasonable DSI, which shows that it is more efficient and regularly sells out of inventory, which means fast turnover leads to higher profit potential from 2017 to 2019 Coupling with DSI's explosive growth in 2020, suggests the company may be struggling with large, high-volume inventories Seeing that these problems may be the result of inventory management and poor sales performance, it’s reasonable for CDBECO to use inventory management including: inventory timeline, forecast modeling, various reporting, to improve these problems Profitability ratio Based on the analysis, the PM of CDBECO and SHK is low, but the fluctuation of CDBECO is higher, because the PM of CDBECO increased rapidly from 2017 to 2019, but there was a sudden decrease in 2020 ROA and ROE are not positive, showing that in 2020 CDBECO uses assets and capital inefficiently, leading to investors’ undervaluing shares In that situation, CDBECO should make a general plan to improve profit margin, which can also help improve ROA and ROE, for 19 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ssignment.report.topic.cdbeco.financial.analysis example: improve inventory visibility, streamline operations and reduce operating expenses, identify and eliminate waste,… Market value ratio In the market, EPS of CDBECO and SHK significantly reduced because of the impact of covid-19, in which, the EPS reduction rate of CDBECO was much higher than that of SHK Because CDBECO is not really a prominent business compared to its competitors, there are no preferential policies and rewards for investors, as well as a small market share, gradually going backward, causing significant impacts In this case, CDBECO should conduct regular market research to meet consumers’ taste, review the company’s market position, and form strategies that are suitable for the current market situation IN GENERAL Chuong Duong is battling with obsolete technology from the 2000s, so it has not satisfied the market need for new products matching consumer tastes In 2016, the COGS and product costs increased, making it difficult to compete with similar product lines in the market In addition, Chuong Duong’s strategy has many problems, the company continuously lost market share and distribution channels to competitors Besides that, Chuong Duong Beverage’s current assets, current liabilities and total equity all decreased after the Covid-19 shock Subsequently, the organization's liquidity, as estimated by current assets contrasted with current liabilities, diminished over the year In addition, it is necessary for Chuong Duong to balance and improve each problem showed in each aspects, plan to reposition the company's organizational structure, find out suitable goals in the future based on analysis, research on current market, improve product quality, production machinery, plan strategy product promotion suitable for the target customers 20 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