Vinamilk remains upbeat about future growth

 

HCM City (VNS/VNA) - Vietnam Dairy Products JSC (Vinamilk) is optimistic about its future development as the sector still has room to grow, the company’s general director Mai Kieu Lien told an investor meeting on November 6.

“The dairy market has not reached equilibrium yet,” Lien said. “There will be slower growth in the short term, but the market is still developing.”

She said the company’s profit margin is 22 percent, above the sector average of 18 to 20 percent, thanks to its large-scale production, big market share and stable investment policy.

“Winning a greater market share would solve all problems,” she said. It would raise profit margins, but competition would also grow as more players enter the profitable sector.

Lien said Vinamilk would try to win more of the domestic market – of which it currents holds 58 to 59 percent – to compete with local and foreign companies.

In the first nine months of the year, Vinamilk’s market share grew by 0.8 percent, meaning the company is well on its way to meeting its goal of one percent market share growth this year.

The company has reported its combined third quarter revenue rose 3.3 percent over the same period last year to 13.73 trillion VND (610.4 million USD), but its pre-tax profit for the last quarter fell 5.9 percent year on year to 3 trillion VND.

The profit reduction was due to higher selling costs, which increased by 14 percent to 3.41 trillion VND.

In the first nine months of the year, Vinamilk recorded 39.5 trillion VND in revenue, a yearly increase of two percent, and 9.37 trillion VND in pre-tax profit, down 7.8 percent from last year.

The company estimated its profit in 2018 would be equal to last year’s figure of nearly 10.3 trillion VND, boosted by lower input material and operation costs.

The lower numbers for 2018 are due to a decline in market demand for dairy products, not only in Vietam, but also around the world.

Lien said that a decrease in the size of the distribution network affected Vinamilk’s performance.

Seven to eight years ago, the company sold 80-90 percent of its products via distributors, she said. But now, the rate had fallen to just 10-20 percent.

The company now focuses more on retail channels, which account for 80-90 percent of its sales, according to Lien.

Vinamilk would not curb its prices, Lien said, warning that such an act would pull average market prices lower and dampen corporate earning. She also said it could lead to lower spending on advertising, marketing and promotion.

The company would try to keep its stockpiles stable and increase its sales volume, she said.

Vinamilk has recorded good growth rates in exports to overseas markets, especially within Southeast Asia.

Revenues in Cambodia jumped 121 percent over last year in the first nine months of the year and profits grew sevenfold.

The company has plans to double its investment in Cambodia in five years from the current 25 million USD.

ASEAN is the main focus of Vinamilk, and the company’s revenue from selling products in the region is expected to increase 15 percent each year.-VNS/VNA