Financial statement analysis (FSA) of vinamilk

In recent years, dairy has become one of the fastest growing sectors in the food industry of Vietnam. Along with the common trend of developing countries, Vietnam dairys demand is significantly increasing as a crucial supplementary nutrition source. One of the most leading dairy companies in Vietnam, Vietnam Dairy Product Jointstock Company (Vinamilk), has operated over 30 years and gained noticeable successes in the Vietnamese fresh milk market.

GROUP ASSIGNMENT

GROUP 1 -Course : Business Finance.

Class : International Business K56 (High-Quality Educational Program)

Topic: Financial statement analysis (FSA) of Vinamilk

(Vietnam Dairy Product Joint-stock Company)

Group Members:

5.

1 Overview of Vietnam Dairy Product Joint-stock Company (Vinamilk) :

1.1 Introduction

In recent years, dairy has become one of the fastest growing sectors in the food industry of Vietnam Along with the common trend of developing countries,

Vietnam dairy's demand is significantly increasing as a crucial supplementary nutrition source One of the most leading dairy companies in Vietnam, Vietnam Dairy Product Joint-stock Company (Vinamilk), has operated over 30 years and gained noticeable successes in the Vietnamese fresh milk market

1.2 Company profile:

Vietnam Dairy Product Joint-stock Company (Vinamilk) is a manufacturer and trading of milk and dairy products as well as related equipment in Vietnam Based

on the UNDP 2007 Top 200 largest firms in Vietnam report, it is also the 15th largest company in Vietnam In 2010, it is the first company in Vietnam to be included in the Forbes Asia's 200 Best Under A Billion list that highlights 200 top-performing small- and mid-sized companies with annual revenue under US$1 billion

The company was established in 1976 as the state-owned Southern Coffee-Dairy Company, to nationalize and take over the operations of three previously private dairy factories in South Vietnam: Thống Nhất, Trường Thọ, and Dielac In 2003, follows its IPO to the Ho Chi Minh Stock Exchange, the company legally changed its name to Vietnam Dairy Products Joint Stock Company (Vinamilk)

1.3 Products:

The principal activities of the Vinamilk are produce and distribute condensed milk, powdered milk, fresh milk, soya milk, yogurts, ice-cream, cheese, fruit juice, coffee and other products derived from milk

1.4 Market:

VNM has been maintaining the leading role on the domestic market and

competting effectively with foreign milk brands VNM occupies about 30-80% market share in the domestic product Over 90% of the export turnover of VNM is the Middle East market To reduce risk, VNM is expanding to other markets such

as Australia, the USA, Canada, Thailand In addition, VNM are making an efforts

to break intothe cafe and beer market

- The domestic market :Vinamilk is the leading enterprises in Vietnam

which specializes in production of dairy products At present, Vinamilk accounts for about 39% of the market Their product are sold through all the supermarkets nationwide

- Overseas market : VNK focus mainly on Vietnamese market which

accounts for about 80% of the revenue in the past fiscal years The products

of VNM are exported to many country such as: Australia, Cambodia, Iraq, Kuwait, The Maldives, The Philippines, Suriname, the UNITED ARAB EMIRATES and United States of America

1.5 The opponents

The milk market in Vietnam has a high level of competition Beside other milk producers in countries such as Longthanhmilk, Hanoimilk, TH Truemilk

Vinamilk has to compete with the very famous imported products such as Abbott, Mead Johnson, Nestle, Dutch Lady Even so, last year, Vinamilk continued to hold the lead with the market share properties for all dairy products to about 37%

2 Analysis of Vinamilk financial statements :

XBalance Sheet:

Assets

Total CA 11,110,610,188,964 13,018,930,127,438

Income statement

EBITDA 9,076,743,932,776 11,182,808,446,832 Deprec & amort 2,143,961,077,724 3,172,447,563,065

EBIT 6,932,782,855,052 8,010,360,883,767

Liabilities and Equity

Accts payable Notes payable Accruals

Total CL 4,144,990,303,291 4,956,397,594,108 Long-term debt

Common stock Retained earnings

Total Equity 15,493,096,595,858 17,545,489,315,423 Total L & E

4,204,771,824,521 5,307,060,807,329

2.1 Finance ratios (Using Horizontal analysis methods) :

Data table( 2012 – 2015)

Total revenue

(VND) 27,101,683,739,278 31,586,007,133,622 35,703,776,176,355 40,222,599,525,948

 Revenue

(VND) - 4,484,323,394,344 4,117,769,042,733 4,518,823,349,593

 Revenue(%)

Total Expense 20,406,987,987,824 23,744,271,632,880 28,241,656,668,012 31,471,038,874,623

 Expense

(VND) - 3,337,283,645,056 4,497,385,035,132 3,229,382,206,611

Earning after

tax (VND) 5,819,454,717,083 6,534,107,315,627 6,068,202,966,308 7,769,558,751,697

 EAT(VND) - 714,652,598,544 -465,904,349,319 1,701,355,785,389

2012 2013 2014 2015 0

5,000,000,000,000

10,000,000,000,000

15,000,000,000,000

20,000,000,000,000

25,000,000,000,000

30,000,000,000,000

35,000,000,000,000

40,000,000,000,000

45,000,000,000,000

27,101,683,739,278

31,586,007,133,622

35,703,776,176,355

40,222,599,525,948

20,406,987,987,824

23,744,271,632,880

28,241,656,668,012

31,471,038,874,623

5,819,454,717,083 6,534,107,315,627 6,068,202,966,308

7,769,558,751,697

Total Revenue, Total cost & Earning After Tax Of Vinamilk

( 2012 - 2015)

Total Revenue Total Cost Earning After Tax

YEAR

The bar chart and the table above illustrate the number of total revenue, total cost and earnings after tax of Vinamilk in three years’ time starting 2012 In general, it

is of apparent that the number of total revenue, total expense together with net profit have an increase

More particularly, the revenue of Vinamilk upsurge by thirteen thousand billion dong from 2012 to 2013 Although Vinamilk’s revenue has achieved an impressive increased, approximately 15% per year on average, its growth rates has a

descending trend In details, the growth percentages of the total revenue 2013,

2014 and 2015 are 16.5%, 13% and 12.6% respectively

At the same time, total expense witnessed a rise of eleven thousand billion dong

In two years 2013 and 2014, total expenses has go up by 15% and 20% each year Nevertheless, in 2015, it has plummet by 10% which was less than a half that number of 2014 Therefore, it can be seen that Vinamilk has get the best out of resources

In addition, in the last four years, the number of earnings after tax of Vinamilk is also amazing Generally speaking, net profit has an upward trend and reaches a peak almost 7.7 thousand billion in 2015 In 2014, despite what Vinamilk ‘s after-tax profit fell down 6 thousand billion dong which was less 500 billion than 2013,

it had an excellent recovery after one year More specifically, net profit has risen 28% in 2015

On the whole, Vinamilk has achieved great growth rates every year

2.2 Finance ratios (Using Vertical methods)

2012 2013 2014 2015 Total REVENUE(VND) 27,101,683,739,278 31,586,007,133,622 35,703,776,176,355 40,222,599,525,948

Operating income/ Total

Financial income/ Total

Other income/Total revenue

COGS/ Net Revenue(%) 64% 64% 65% 59%

Total Expense(VND) 20,406,987,987,824 23,744,271,632,880 28,241,656,668,012 31,471,038,874,623

COGS/Total Expense(%) 85.7% 83.2% 80.3% 75.7%

Selling,administrative & general

expense/Total Expense (%) 14% 16.4% 19.4% 23.8%

Financial expenses/ Total

Earning after tax(VND) 5,819,454,717,083 6,534,107,315,627 6,068,202,966,308 7,769,558,751,697

EAT/TR (%) 21.5% 20,7% 17% 19.3%

Total Assets)(VND) 19,697,868,420,379 22,875,414,056,636 25,770,138,060,957 27,478,175,944,352

Tài sản cố định ( Fixed Assets)

(VND) 8,042,300,548,493 8,918,416,535,379 8,890,084,022,717 8,214,134,749,497

LIABILITIES (VND) 6,554,260,196,767 5,969,901,577,449 5,307,060,807,329 4,204,771,824,521

Long-term liabilities (VND) 59,781,521,230 350,663,213,221 516,638,646,418 549,943,361,554

Equity (VNĐ) 15,493,096,595,858 17,545,489,315,423 19,680,282,615,855 20,923,915,747,585

Long-term liabilities/Equity (%) 0.4% 2% 3% 3%

As can be seen, Vinamilk has a significant rise in total revenue by 13 thousand billion VND from 2012 to 2015 Nevertheless, growth rates of Vinamilk remained constant of 13% in the last two years

Operating income of Vinamilk is always excellent More particularly, in 2015 operating income of Vinamilk is almost 39.8 thousand billion VND which was uplifted by 25.6% than that number in 2013 During last 4 years, the percentage of operating income divided total revenue is unfailingly more than 98% In addition, financial income and other income made up 1.6% and 1% respectively, especially the percentage of other income fell down 0.5% in 2015 These numbers shows that Vinamilk’s revenue is mostly on dairy industry

The table data also gives information on the percentage of COGS-cost of goods sold divided net revenue from 2012 to 2015 This percentage remains the same nearly 64% in the first three years but it has plummeted at 59% in 2015 Vinamilk has invested its money in new automatic systems which applied on manufacture is one of the most reasons made ratio of COGS reduce In addition, the percentage of COGS dropped also made the net profit of Vinamilk climb More particularly, the EAT (earning after tax) has soared approximately 7.7 thousand billion VND in 2015

Although total expense of Vinamilk rises every year, the growth rates of expense has a reduction from by 7.5% from 2014 to 2015 Furthermore, the percentage of COGS divided total expense has a downward trend throughout the period This percentage in 2012, 2013, 2014 and 2015 is 85.7%, 83.2%, 80.3% and 75.7% respectively These figures showed that COGS is mainly on total expenses On the other hand, the percentage of selling and administrative expense divided total expense has a ceiling trend nearly 9.8% from 2012 to 2015 Financial expense is the lowest and the percentage of it divided total expense just about 0.4% each year

Structure of assets

According the data table, total asset of Vinamilk has significant increased

approximately 8 thousand billion VND in four years’ time starting 2012 More particularly, Vinamilk’s fixed assets fluctuated throughout the last five years They hit the bottom at about 8 thousand billion VND in 2012 and reached the peak at nearly 8.9 thousand billion VND after two years Otherwise, the percentage of fixed assets divided total assets has a downward tendency In two first years, fixed assets made up more 40% and they are largest in total assets However, after two years, they declined just about 30%

During the last five years, liabilities of Vinamilk and the percentage of liabilities divided total assets reduced sharply roughly 2.3 thousand billion VND and 18% respectively In addition, long-term liabilities rose dramatically by 487% in 2012, for Vinamilk has an international bank loan Vinamlik’s long-term liabilities culminated approximately 550 thousand billion VND in 2015 Nevertheless, Vinamilk ‘s equity rocketed about 19.6 thousand billion VND in 2014 and

increased slow by 1.3 thousand billion VND after one year More specitically, the percentage of long-term liabilities divided equity soared by 2.6% from 2012 to

2014

2.3 Financial ratios analysis

2.3.1. Current ratio & Quick ratio

2012 2013 2014 2015 Industry

Current ratio 2,68 2,63 2,85 2,79 1,64

Current ratio

The current ratio illustrates the ability to pay for the short-term liabilities from the company's short-term assets In account analysis from 2012 to 2015, the ratio which expresscurrent liquidity of the company are very high, at a level of almost 3 times Specifically, this ratio had increased from 2.68 times in 2012 to 2.85 times in 2014 Though it decreased in 2015, about 2.79 times, the current liquidity ratios of the company is always high When compared with the average food production industry in 2015 which is 1.64 times, Vinamilk also expressed their superior in ability to pay short-term liability

Quick ratio

Quick ratio expresses theability to pay for the short-term liability of the company from the short term assets with high liquidity Quick ratio of Vinamilk in late 2012 is 1.84 times, so even if the inventory is removed , the ability to pay short-term liability of Vinamilk is still very good This ratios of the company are above 1 throughout the period analysed from 2012 to 2015, and the lowest ratio is

in 2012 which hit 1.84 times Quick ratio of Vinamilk has remarkably increased If compared with theaverage of the industry, liquidity of Vinamilk is also in the top

of Vietnam and tend to be a long-term stability

Conclusion:

Overall, compared with the market, the ratios of VNM are very good and with the company's current liability(current liquidity ratios are always above 2, quick liquidity ratios are always above 1) so that the liquidity of the company is guaranteed well The company's financial situation is quite good

2.3.2 Inventory turnover&Total asset turnover

2012 2013 2014 2015 Ind.

Inventory turnover

Inventory turnover of Vinamilk 2015 increased than that of 2012 The ratio shows that commodity consumption rate of Vinamilk higher than the production rate This shows the rising business efficiency and capital, the market conditions and consumer product are favorable The frequent changes of inventory turnover over the years also shows goodsales management

Total asset turnover

Total asset turnover system used to evaluate the effectiveness of the usage of the assets in the company Through the analysisresults, we see that vinamilk use the assets of the company in the production and business operation is very efficient This shows that Vinamilk manage and invest their fixed assets very closely, they can calculate the benefits that brought to the company when making investments Compared with the industry average is 8.2, Vinamilk expresses the efficiency of investment which are very good compared to other companies

2.3.3 Debt/ Asset

This ratio indicates how many percentage of the company’s assetsfrom borrowers

is The ratio from 2012-2015 is around 21% to 24%.Vinamilk's liability ratio over the years tend to stabilize at a level below 30% This represents that the company

has advocatedto use the debt in a reasonable and stable level over time This ratio

is lower than the industry average This shows the ability of the financial autonomy

of the company is very good

Conclusion:

Vinamilk strategically used its own capital in the investment rather than borrowing from banks The short-term debt of the company is mainly theaccounts payable Vinamilk's financial ability is very good and their risk of debt distress is low But

by using too much stockholder’s equity will affect the ability to increase the company profits and dividends for shareholders Granting credit to Vinamilk is very safe

2.3.4 Profit margin, ROA, ROE& TIE

Earning ratios 2012 2013 2014 2015 Ind.

Profit margin

The profit margin of vinamilk's shows that they managed their resources effectively Profit margin reduced because the profit was lower than revenue growth; this was due to the rise in the cost of recent years However the higher co-efficientnet profit margins shows that vinamilk is an enterprise that has potentialityin the period of inflation

ROA

ROA of Vinamilk from 2012-2015 are above 14% and 30% in the year

2012 This is avery impressive number not only in Vietnam but also around the