FINANCIAL STATEMENT ANALYSIS VIETNAM DAIRY PRODUCTS JSC

DA NANG UNIVERSITY
DA NANG UNIVERSITY OF ECONOMICS
ACCOUNTING FACULTY
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FINANCIAL STATEMENT ANALYSIS:

VIETNAM DAIRY PRODUCTS JSC
Lecturer: Associate Professor Đo n Ng c Phi Anh
GROUP 2:
Lê Thị Thuý Hằng:

42K18.2-CLC

Phạm Hà Lan Chi:

42K18.2-CLC

Hồ Thị Thuý Hà:

42K18.2-CLC

Ho ng Thị Y n Nhi:

KT42K18CT2.1-CLC

Da Nang, 04/2019

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MCLC
I.

General information:.............................................................................................................................. 1

II. Assets structure:...................................................................................................................................... 1
III.

Resource structure:........................................................................................................................... 3

1. Financial autonomy:.......................................................................................................................... 3
2. Fund stability:........................................................................................................................................ 4
3. Financial balance:............................................................................................................................... 5
IV.

The factors affecting the efficiency of using current assets:........................................ 6

V. Operational efficiency:........................................................................................................................... 7
1. Analysis of asset use efficiency:................................................................................................. 7
2. Inventories turnover:......................................................................................................................... 7
3. Customer accounts receivable turnover................................................................................. 8
4. Account payable turnover............................................................................................................... 9
5. Return on sales (ROS).................................................................................................................. 10
6. Return on assets (ROA)............................................................................................................... 10
7. Return on equity (ROE)................................................................................................................ 11
8. DuPont Analysis and factors affect ROE:............................................................................ 11
VI.

Analyzing financial risks and business risks in 3 financing options: ..................... 13

VII.

Analyze insolvency risk of enterprises:................................................................................ 13

1. Short-term liquidity risk:................................................................................................................ 13
2. Long-term solvency risk:.............................................................................................................. 15
VIII. Change depreciation method:..................................................................................................... 16
IX.

Evaluate the performance of enterprises through EVA:.............................................. 17

X. Conclusion:............................................................................................................................................... 19

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Vietnam Dairy Products JSC

Group 2

I. General information:
Vinamilk (Vietnam Dairy Products JSC) is the largest dairy company in
Vietnam. Based on the UNDP 2007 Top 200 largest firms in Vietnam report, it is
also the 15th largest company in Vietnam and the most valuable public company
listed 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 smalland 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 (belonging to a Chinese company), Trường Thọ
(formerly owned by Friesland Foods, best known for its production of condensed milk that
was widely distributed across the South) and Dielac (Nestlé). It was renamed United
Enterprises of Milk Coffee Cookies and Candies in 1978. It became the Vietnam Dairy
Company, formally established in 1993. In 2003, following its IPO to the Ho Chi Minh Stock
Exchange, the company legally changed its name to Vietnam Dairy Products Joint Stock
Company (Vinamilk). The principal activities of the Vinamilk are to produce and distribute
condensed milk, powdered milk, fresh milk, soya milk, yogurts, ice-cream, cheese, fruit
juice, coffee and other products derived from milk.

II. Assets structure:

Criteria

Current
assets
Cash
and
Cash

equivale
nt
Short
term
financial
investm
1


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Vietnam Dairy Products JSC
ents
Short
term
accounts
receivab
le
Inventor
ies
Other
current
assets
Noncurrent
assets
Long
term
accounts
receivab
le
Fixed
assets
Long
term
financial
investm
ents
Other
noncurrent

assets
Total
assets
2016: Expanding four more potential markets in Africa.

2


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Vietnam Dairy Products JSC

Group 2

Contributed 18% share capital of APIS JSC as to expand and broaden
goods supply chain of Vinamilk.
Opened a respresentative office in Thailand.
2017: Cu Chi Raw Milk Center was went under operation.
Invested in sugar industry by acquiring 65% share capital of Vietnam Sugar
JSC (formerly known as Khanh Hoa Sugar JSC) and 25% share capital of Asia
Coconut Processing JSC.
Cash: in 2017, cash significantly increases because thanks to good business
results, the Company always maintained a high level of cash and managed this
cash flow in an effective and safe way. The risk management policy was set up to
ensure that term deposits were always at optimal levels of safety and flexibility in
order to meet the Company's capital needs at all times.
Accounts receivable: accounted for 12.85% of total assets. No significant
bad debts were incurred during the year. The Company maintained a good policy
on receivables management. The amount of accounts receivable in 2017 increases

nearly double compared to the previous year. That because since mid-November
2017, the Company has changed its credit policy for domestic customers, in which
the credit period was increased to support sales better. This change led to an
increase in receivables from customers.
Inventories: There was a significant decrease in the proportion of inventories in
2017 compared to the previous year. Because in 2017, The "Just in time" procurement
strategy has been applied together with the optimization of inventory management and
warehouse planning at the subordinate units that have brought about remarkable
results in the Company’s inventory control, compared to the previous year.

III. Resource structure:
1.

Financial autonomy:

Total liabilities
Total assets
Total liabilities/Total
assets (Debt ratio)
Owner equity
Total assets
Owner equity/Total


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Vietnam Dairy Products JSC

Group 2

assets (Self-funded
ratio)

The debt ratio reflects the level of debt use of the company. In 2017, this
ratio is 28%, means 28% of the company's asset value is financed from debt.
The debt ratio of Vinamilk gradually increases over the years (from 22% to 28%
over the past three years), but still quite low compared to the industry average (Milk
industry’s debt ratio is 68.98%.). Company uses less debt to finance its assets. This has
the positive side of the ability to financial autonomy and the ability to borrow a high debt in
the future. However, the downside is that the company does not take advantage of
financial leverage and loses the opportunity to save the tax from the use of debt.

Healthy financial structure brings significant advantages for the Company in
implementing M&A deals on a large scale.
Debt ratios tend to increase over the years because in recent years, there
are more big competitors such as TH True Milk, Nutifood ... and dozens of liquid
milk brands imported from abroad. This competitive pressure forces Vinamilk to
increase its investment even further in order to keep its market dominance.
Vinamilk has very good cash flow generated from stable business operations, with
high profit growth. This is a platform for flexible implementation of business
strategies, putting pressure on all competitors. Market forces show that only foreign
competitors are competitors that can threaten Vinamilk's position.
Accompanying it is expanding exports to potential markets. Vinamilk has
factories overseas such as the US (owning 100% Driftwood factory in California
state), Cambodia (owning 100% Angkormilk factory in Phnom Penh capital), and
New Zealand (owning 22.8%) with 1 subsidiary in Poland. The company's products
have been exported to 43 countries around the world such as the US, Japan,
Australia, Thailand, Myanmar, Bangladesh, countries in the Middle East region ...
2.

Fund stability:

(1)

Current liabilites

(2)
liabilites

Non-current

(3)

Owner’s equity

(4)
= (2)+(3)

Permanent capital


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Vietnam Dairy Products JSC
(5)
capital = (1)

Temporary

(6)

Total capital

(7)
ratio (%)=(4/(6)

Permanent capital

(8)Temporary capital
ratio (%)=(5)/(6)

2017: Vinamilk's owner’s equity increased significantly because the company
implemented a bonus share issuance policy for existing shareholders at the ratio of 5:
1, meaning each shareholder owns 5 shares will receive 1 additional issue share.

In general, a high permanent capital ratio indicates the greater the stability of
the funding.
3.

Financial balance:
Figures

(1) Current assets
(2) Current liabilities
(3) Net working
capital = (1)+(2)
(4) Inventories
(5)Short-term

receivables
(6)Short-term account
payable (not including
bank loans) = (7)-(8)

(7)Short-term
account payable

(8)
Short-term
borrowings
and
finance lease liabilities
(9)Net working
capital required
= (4)+(5)-(6)
(10) Net fund = (3)-(9)

There was a sharp increase in short-term account payables from 2015, 2016 to
2017 because of a sudden increase in other payables from 574,093,150,299 (2016) to
3,023,434,643,866 (2017). The reason is in 2017, Vinamilk pays a proportion of the
5


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Vietnam Dairy Products JSC

Group 2

profit as a dividend to shareholders and in 2016, they didn’t. This makes net
working capital required significantly increase, so net fund is improved.
Company has sufficient capital to finance current assets. Positive net funds
represent a safe financial balance because businesses do not have to borrow to
offset the shortage of net working capital needs so they do not meet difficulties in
short-term payment.

IV. The factors affecting the efficiency of using current assets:
Figures
Average
current
assets
Net sales
Current
assets use
efficiency
Average
day of
current
asset
turnover

144.3

138.15

139.45

Average current assets all increased over 3 years, specific in 2016 increased

10.53% compared to 2015, although still increases but in 2017 compared to in
2016 (9.46%) less than in 2016 compared to 2015.
Net sales also increased each year, specific in 2016, it increased by 15.55%
compared to 2015, although it still increased but in 2017 compared to 2016 (8.44%)
less than in 2016 compared to 2015.
Current assets use efficiency in 2017 was 2.58 and 2016 was 2.61 to show each
short-term asset of the company in turn generated 2.58 and 2.61 dong of revenue.

We can see that Average day of current asset turnover in 2017 has
decreased compared to 2016 because the change of net sales percentage is less
than the percentage of Current Assets. But overall, still larger than Average day of
current asset turnover the industry average.

6

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Vietnam Dairy Products JSC

Group 2

V. Operational efficiency:
1.

Analysis of asset use efficiency:
% change

Figures
Average

total
assets
Total
sales and
revenues
Assets
use
efficiency

In 2016: There is a significant revenue growth because keep up with market
demand and technological progress, offers many products with featured and
benefits meet the customer's diverse need. For foreign market, the presence in 43
countries and territories also brings a significant revenue.
In 2017: Each property of the company generated 1.61 dong of revenue, this
suggests that efficiency of assets use of company as well. However, have a slight
decrease compared to 2016.
The market share: 5 main categories liquid milk, Powdered milk, Eating
Yogurt, Drinking Yogurt and condensed milk all increased their market share
compared to 2015. Specifically: milk increased 1.5% to 54.5%, eating yogurt
increased 0.4% to 84.7% and drinking yogurt increases abruptly 1.9% to 33.9%.
Total asset turn over of the industry average 1.27, this suggests that
efficiency of assets use of company as well.
2.

Inventories turnover:
Difference

Targets
Cost of
goods sold

(COGS)
Average
inventories
Inventories
turnover


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Vietnam Dairy Products JSC
Inventories
period

Cost of goods sold increased over the years, especially in 2017 increased to 7.64%
compared to 2016, leading to an increase in average inventories.
Despite the fluctuation of inventories turnover index, it is still in a reasonable and
stable level, consistent with the inventory management policy of the Company. The
company does not allow any significant slowdown in inventory.
3.

Customer accounts receivable turnover

Targets
Net sales

VAT
Average
Customer
accounts

receivable
Customer
accounts
receivable
turnover
Account
receivable
period

The customer accounts receivable turnover of 2017 is 13.8, in 2016 it is
16.656. The number of customer receivables receivable in 2017 is lower than in
2016, proving that the company's debt recovery rate in the year is slower than in
2016, this is generally not good.
The reason is that the growth rate of revenue (7.78%) is lower than the growth
rate of the average customer accounts receivable from customers (97.23%) in 2017
compared to 2016. Since mid-November 2017, the company debt policy changes for
domestic customers. Accordingly, customer payment time is increased to support better
sales. This change has increased the customer accounts receivable and reduced the
customer accounts receivable turnover. The company considers this policy change to
have a positive impact on the company and its receivables policies are effectively
managed, creating a certain competitive advantage in the domestic market.

8


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Vietnam Dairy Products JSC
4.

Group 2

Account payable turnover

2015

Figures
COGS
The beginning
account payable
The endning
account payable
The average
account payable
Account payable
turnover

2016

2017

22.470.518.366.089

22.522.706.121.326

24.244.098.117.020

1.647.920.447.124

2.118.962.866.700

2.568.934.375.909

2.118.962.866.700

2.568.934.375.909

3.608.952.910.564

1.883.441.656.912

2.343.948.621.305

3.088.943.643.237

11,93

9,61

7,85

Account payable turnover decreases over 3 years.
The company is appropriating the seller's capital.

The account receivables turnover is quite good and larger than the account
payables turnover.
The company is appropriating the capital of sellers rather than being
appropriated by customers. This means that the company's short-term solvency is
good, earning customers' money before having to pay suppliers. The company is

able to secure money for production and payment for sellers.
9

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Vietnam Dairy Products JSC

Group 2

Return on sales (ROS)

5.

Figures

Profit
before
tax
Total
sales
and
revenu
es
Return
on
sales
Over the years, the ROS index has increased due to the increase in revenue and profit
before tax over the years, in which the profit before tax increased a lot of revenue.

The company's revenue in 2017 increased significantly over 2 years from
38,796,950,031,012 to 48,943,156,735,159. It can be seen that this significant
change is due to the company changing sales policy resulting in a change in ROE
index, every 100 dong of revenue, 26 dong profits will be generated in 2017.
6.

Return on assets (ROA)
% change
Figures
Profit
before
tax
Average
total
assets
ROA

Vinamilk's return on assets increased gradually over the years in the period
of 2015-2017, every 100 dong of assets, 41.26 dong profits will be generated in
2017. Despite a positive change, the rate of increase has decreased over the years
from 4.27% to 0.33%. The reason for this decline is that the growth rate of pre-tax
profit is significantly lower than the average growth rate of total assets.
10


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Vietnam Dairy Products JSC

Group 2

Since ROA is affected by interest, so that comparisons are more accurate,
we make RE comparisons.
The table below shows the economic return on assets (RE):
Figures
Total
accounting
profit
tax
Loan
expenses

before
interest

EBIT
Average total
assets
RE

After deducting interest, it can be seen that the profitability ratio of the
company's assets is still high, indicating that the company is still profitable.
7.

Return on equity (ROE)

Figures

Profit after

tax
Average
shareholder
equity
ROE

ROE increased sharply over the years, from 38.57% in 2015 to 43.87% in
2016 and continued in 2017 to 46.77%. Therefore, it can be seen that enterprises
have efficiently used their capital and the resources brought to shareholders are
increasing. The financial performance of the business also increased.
8.

DuPont Analysis and factors affect ROE:

11


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Vietnam Dairy Products JSC

Group 2

ROE is nearly twice as high as the industry average, in which the business
performance of the company is nearly twice as high as that of the industry due to a
significant increase in ROS compared to the industry.
ROS is 26% is a huge profit / Sales ratio shows that the company is doing well
and tends to dominate the market.
Asset turnover of 1.6 is a little higher than the industry average; it is effective to

use the company's assets in production and business activities. In which inventories
turnover approximates the industry average, the ability to manage goods is relatively
good while the company's debt recovery rate is slightly lower than the industry average
because the company is changing its selling policy. Therefore, asset turnover
increased due to fixed asset turnover likely higher than the industry average.
The debt ratio of the company is double that of the industry average, showing that the
company is using less debt instruments to finance its assets. This has the positive side of
the ability to financial autonomy and the ability to borrow a high debt of the company,

12

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Vietnam Dairy Products JSC

Group 2

however, the downside is that the company does not take advantage of financial
leverage and lose the opportunity tax from the use of debt.
With RE is 41.26% compared to loan interest rate that is less than 10%, the
company should use more debt to amplify ROE.
Conclusion:
In order to increase ROE efficiency, the company often focuses on increasing
the efficiency of asset use to generate revenue (asset turnover) and ROS. Asset
turnover decreased slightly but this ratio is still higher than the average industry.
However, thanks to the cost control, ROS increased sharply compared with to the
industry which helped ROE rise dramatically.
The company maintains the use of leverage at a safe level, hardly use loan capital.
From focuses on to high safety, the company pushed the tax burdens rise.

VI. Analyzing financial risks and business risks in 3 financing options:
ROE=(RE+(RE-i)*D/E)*(1-T).
RE
Option 1
Option 2
Option 3

In case of RE = i, (RE-i) * D/ E=0 leads to capital structure without affecting
ROE.
In case of RE> i, the financial leverage will affect the ROE amplification so in
the case of RE = 10, 12%, option 3 will be the optimal option.
In case of RE company so in case of RE = 4.6%, option 1 will be the optimal option.
Business risk is not affected by the capital structure, so the company's
business risk in all three options is the same.

VII. Analyze insolvency risk of enterprises:
1.

Short-term liquidity risk:
Figures

Current assets
Current liabilities

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Vietnam Dairy Products JSC

Inventories
Other current assets
Current ratio
Quick ratio
Cash & Cash equivalents
Cash ratio

3
2,5
2
Current ratio
1,5

Quick ratio

Cash ratio

1

0,5
0
2015

2016

2017

The short-term solvency of the company is developing
positively. a. Current ratio:
From the chart above, the current ratio is always greater than 1 over the years =>

Current assets> Short-term liabilities. The short-term assets available are larger than the
short-term demand, so the financial position of the company is healthy at least in the short
term. On the other hand, because of current assets> Short-term debt should be fixed
assets finance the fixed assets but also balance to finance the current assets. Specifically:

This ratio of 2017 is more than 2016 which proves that liquidity problem has
been improved.

14

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