vietnam agribusiness sector report.pdf
TRANSCRIPT
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Vietnam Agribusiness Sector Report Issue Date: 30 July 2013
Part of StoxPluss Market Research Reports for Vietnam
@ 2013 StoxPlus Corporation.
All rights reserved. All information contained in this publication is copyrighted in the name of StoxPlus, and as such no part of this
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Table of Contents
DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, StoxPlus , its Directors
and employees accept no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and StoxPlus makes no representation of warranty of any kind as to the accuracy or
completeness of any information hereto contained.
Part Content Page
1 Sector Structure and Description 3-4
2 Livestock Sector
Profile of Key Livestock Players
5-11
3 Farming
Profile of Key Farming Players
12-21
Our research contacts for
this report are:
Thuan Nguyen, FCCA
CEO
+84 98 389 0000
Harry Hoan Tran, CFA
Senior Analyst
+75 1597 1532
Huong Thieu, MBA
Research Manager
+84 4 35626962 ext 108
Duy Nguyen, MBA
Research Associate
+84 4 35626962 ext 107
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Sector Overview
Agribusiness is the business of agricultural production. It includes crop production (farming and contract
farming), seed supply, agrichemicals, farm machinery, distribution, processing, marketing, and retail sales.
Sector Structure and Overview
Agriculture
Farming
Seeds
Plantation
Processing
Livestock
Feeds
Raising
Processing
Agriservice Agrichemicals
Agriproduct Retailing
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Market Overview
Vietnam boasts impressive figures in regards to its agricultural
production. It is the worlds second-largest exporter of rice, and one of
the worlds largest exporters of coffee and cashews. It is also a major
producer of various fruits, sugar, rubber and cotton. Food crop
production has more than doubled since the early 1990s, and
industrial crop output has increased by more than 300%, according to
the Vietnamese General Statistics Office. In 2011, agricultures share
of economic output was 20.6%.
This high output is mainly due to Vietnams climate and geography:
while the two major deltas which receive heavy rainfall all year-round
have an ideal climate for fruit and rice, the central highlands are ideal
for the production of coffee and cashews. Even outlying districts of
Ho Chi Minh City, such as the Cu Chi district, feature major rubber
growing operations. Can Tho City, being the main hub of the Mekong
Delta, is a transit point for agricultural goods in the region.
Farming, US$28.1bn,
72.2%
Livestock, US$10.3bn,
26.5%
Agriservice, 0.5US$bn,
1.3%
Farming
Livestock
Agriservice
Sector Structure and Overview
Figure : Breakdown of Vietnamese Agriculture Industry, 2011
Source: GSO
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Livestock sector: pig farming is the most dominant segment
Livestock Sector
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Livestock: Animal feed sector are dominated by foreign players
Vietnam's feed industry is one of the world's fastest growing agribusiness
markets. It is estimated that approximately a third of Vietnam's feed is prepared
in backyard farms from domestic and far yard scraps. However, its commercial
feed output it growing at an extremely rapid pace. The animal feed industry has
been receiving significant - mainly foreign - investment in recent years, given the
attractive prospects of the livestock and aquaculture industries of the country.
Foreign-invested feed companies continue to meet most of the domestic
demand, such as Thailand's Charoen Pokphand Group and US-based Cargill,
according to the Ministry of Industry and Trade.
Demand exceeds supply: Since Charoen Pokphand Group first came to
Vietnam in 1993, the animal feed industry has transformed considerably from
poor-quality manually mixed products towards strictly standardized formula
fodders. Unlike self-made feed, industrial feed provides adequate nutrition and is
free from contaminated ingredients. The government has since placed a high
priority on the development of industrial farming and expects the use of industrial
feed to increase from 56% in 2010 to 70% in 2020 . Currently, the market is still
lucrative as supply only meets 60% of demand, leaving a big slice of the pie
unconsumed.
Local firms are disadvantaged as foreign firms enjoy economies of scale.
The good prospect of the domestic animal feed sector has attracted huge
interest from foreign firms. With newer technology in breeding, feeding, and
housing of livestock, foreign firms typically build large-scale operations that
result in economies of scale and lower production cost. In contrast, local firms
are relatively small in terms of production capacity. Among the seven biggest
animal feed producers, six are foreign firms or foreign-invested enterprises.
In total, 58 joint ventures and foreign-invested enterprises produce about 6.9
million tonnes of industrial feed, controlling 60% of output. The remaining 172
local firms only produce 4.5 million tonnes (the other 40%). While domestic firms
struggle, Cargill, Japfa Comfeed and C.P. Vietnam have all announced
intentions to build more production plants in the next few years. According to Mr.
Le Ba Lich, chairman of the Vietnam Animal Feed Association, 30% of domestic
feed producers went bankrupt in 2011.
C.P. Vietnam,
18%
Proconco, 12%
Cargill Vietnam,
8%
East Hope, 10%
Vietnam Green
Feed, 8%
Dabaco, 3%
Other, 41%
56% 67% 70%
14% 13% 12%
18% 20% 18%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2015 2020
Industrial feed Self-made Import
Livestock Sector
Figure : Animal feed players market shares by sale volume 2011
Figure : Breakdown of total feed supply
Source: Vietnam Animal Feed Association
Source: Vietnam Animal Feed Association
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Livestock: Animal feed sector are dominated by foreign players
Livestock Sector
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C.P. Vietnam Livestock Corporation: the dominant in livestock market in Vietnam
Key Livestock Players
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9
Key Livestock Players
DABACO JSC
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Financial Indicators
Company Profile Shareholder Structure
Key Livestock Players
PROCONCO JSC: A local leading animal feed player
Registered name: Proconco Joint Stock Company
Head office: Bien Hoa Industrial Zone 1, Dong Nai province
Year of establishment: 1991
Charter Capital: VND146billion (US$7.3million)
Type of company: Private Company
Principal group businesses: Produce animal feed products
Main products: Con Co bran, Ami bran, France feed
# of employees: n.a.
2011
Owner's Equity (VNDbn) 1,900
Net Profit margin (%) 5.5%
ROA (%) 21.5%
ROE (%) 36.2%
March 10, 2008: Proconco transferred into a model of joint stock company after
17 years operation under the form of joint-venture between Vietnam and SSI
France. The major shareholders of the company includes Donataba,
Seaprodex, Tin Nghia, Huu Nghia, ISA and Prudential. The Vietnamese
shareholders hold 60% of the total charter capital , the 40% left belongs to
Prudential funds.
Oct 2012: Masan Group bought 40% share of Proconco from Prudential
Assurance Private Limited and PCA International Funds SPC (Vietnam
Segregated Portfolio) by cash with the total value of US$96million.
Masans strategy is 3F: Feed, Farm and Food. The groups M&A activities are not only
for horizontal but also for vertical consolidation.
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Key Livestock Players
Viet Nam Livestock Corporation JSC a SOE just completed IPO
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12
Coffee: Vietnam is the largest producer of Robusta coffee with total export value of US$3.7bn in 2012
Farming Sector
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Coffee: list of key players by capacity 2011
Farming Sector
Robusta Export Capacity Volume
(1000 tons/year)
Robusta Production & Processing
Capacity
Volume
(1000 tons/year)
1 Vinacafe Tay Nguyen 186 1 Thai Hoa Group 400
2 Intimex 142 2 Tay Nguyen Investment Company 150
3 Thai Hoa Group 116 3 2/9 Company 50
4 2 - 9 Tay Nguyen Company 70 4 Vinacafe Da Lat 70
5 An Phuc Trading Company 58 5 Intimex 30
6 Truong Ngan Trading Company 40 6 ACOM 40
7 Nothern Foodstuff Company 37 7 OLAM Vietnam Company 40
8 Generalexim 30 8 OLARDAKMAN 25
9 Bac Ha Company 25 9 Netcafe 40
10 Tin Nghia Company 22 10 Amaro 40
11 OLAM Vietnam Company 80
12 ACOM Vietnam 50
13 AMARAZO Vietnam 35
14 OLARDAKMAN 27
15 LUIS Vietnam 25
Arabica Export Capacity Volume
(1000 tons/year)
Instant Coffee Production & Processing
Capacity
Volume
(1000 tons/year)
1 Thai Hoa Group 12 - 15 1 OLAM Vietnam Company 2,500
2 Cong Chinh 3 - 4 2 Thai Hoa Group 2,000
3 OLAM 2 - 3 3 Vinamilk 1,500
4 Vinacafe 1 - 2 4 Vinacafe Bien Hoa 900
5 Cat Que 1 - 1.5 5 Nestea Vietnam 800
6 Trung Nguyen 300
Note:
Thai Hoa Group is technically in default.
Intimex is a SOE, has been equitised already.
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Key Farming Players
VINACAFE BIEN HOA a very profitable business
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Financial Indicators
Company Profile Income results
Key Farming Players
THAI HOA GROUP is the largest caf processing player but in bankruptcy
2008 2009 2010 2011 2012
Total Asset (VNDbn) 1,631 2,458 3,025 2,315 2,032
Owner's Equity (VNDbn) 245 361 601 378 (14)
Revenue (VNDbn) 1,284 3,232 2,227 1,289 281
Operating Profit (VNDbn) (35) (1) 59 (287) (410)
Net Profit (VNDbn) (21) 1 35 (210) (393)
Net Profit margin (%) -2.7% 0.0% 1.9% -21.7% -140.0%
ROA (%) -1.3% 0.0% 1.3% -7.9% -18.1%
ROE (%) -8.7% 0.2% 7.2% -42.9% -215.7%
EPS (VND) (986) 19 633 (3,641) (6,803)
EV (VNDbn) 1,173 1,765 2,023 1,586 1,546
BVPS (VND) 11,308 10,274 10,934 6,547 (240)
1,284
3,232
2,227
1,289
281
(21) 1 35
(210)
(393)
2.7% 5.0%
14.9%
4.2%
-47.7%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
(1,000)
(500)
-
500
1,000
1,500
2,000
2,500
3,000
3,500
2008 2009 2010 2011 2012
VN
Db
n
Net sales Net Profit/(loss) % Gross margin Registered name: Thai Hoa Viet Nam Group JSC
Head office: 352 Giai Phong, Phuong Liet, Thanh Xuan, Ha Noi
Year of establishment: 1996 . Charter Capital: VND577bn (US$28mn)
Type of company: Listed Company
Principal group businesses: Processing of agricultural products; Trade in food,
food; Purchase of machinery, equipment and materials for production; Sales and
lease warehouses, workshops, coffee planting, perennial plantations; Growing of
rubber trees; Processing of forest products, wood, wood; Production of fertilizer:
fertilizer, NPK fertilizer, agricultural products from industrial waste; Transport of
goods by automobiles; Business hotels, motels; A number of other professions
licensed under the business registration.
Main products: Coffee beans and coffee products
# of employees: 308 by Dec 2012
Thai Hoa Caf has total coffee processing of 400.000 tons per year.
Prior to 2011, Thai Hoa was in the top 10 Vietnam leading coffee export
companies. In the 2009/2010 season (from Oct 2009 to Sep 2010), Thai Hoa
exported 83,000 tons of coffee with the total value of US$125million, became the
3rd coffee exporter and accounted 8% total coffee export value of Vietnam.
On 4/7/2012, share of Thai Hoa had been delisted from Hanoi Stock Exchange
(HNX) due to the accumulated loss as of 31/12/2012 up to VND622.543billion,
higher than the charter capital of VND577.499billion.
Reason for making lost:
The company borrowed large amount to invest in manufacturing machinery.
Because of financial crisis, interest rates have been too high in recent years,
while profit could be realized in years later, so it gets financial trouble and is
technically in default now.
The company has been trading coffee without hedging thus getting lost from
the decrease of global coffee price.
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Rice: Vietnam is the largest rice exporter by volume yielding US$3.7bn value in 2012
Overview
Rice is the main food staple for Vietnamese. Vietnam currently has about 4
million ha rice farming with total production volume of about 26.9 million
tonnes in 2012. Of which, 19.7 million tonnes are for domestic consumption
and the remaining 7.5 million tonnes are for export.
Vietnam becomes the largest exporter of rice recently with total export
volume of 7.5mn tonnes in 2012 or US$3.7bn export value. However rice
export prices are normally 20-25% discount comparing to peers such as
Thailand and India. Average Vietnamese rice export price (25% broken rice)
in April 2013 is approximately US$300 per ton, while Thailand and Indias
price rice are US$560 per ton and US$430 per ton, respectively.
Rice production is made by farmers and sales made to local sole traders.
Local sole traders then sells to rice trading companies including Vinafood 1,
Vinafood 2 etc.
In fact, there are 264 rice export companies by 2012 in Vietnam. However,
there will be a consolidation because the government has mandated that all
rice exporters are required to have at least one rice storage warehouse with
a minimum capacity of 5,000 tonnes of paddy and a rice processing facility
with a minimum processing capacity of 10 tonnes per hour. All rice exporters
had until September 2012 to take the necessary actions and adapt to these
changes.
Foreign restriction removed
After 2011, foreign traders are allowed to directly undertake rice trading in
the country. Previously, foreign companies were required to enter into joint
ventures with local players. In an effort to improve the capabilities of local
rice exporters.
Under WTO commitments, the Vietnamese rice market opening up to foreign
traders from 2011.
Farming Sector
Large scale rice farming program
The Cultivation Department of the Ministry of Agriculture and Rural
Development of Vietnam is endeavoring to develop a large-scale rice farming
model whereby neighboring farmers work with businesses and government
officials to increase rice yields. In this model, businesses provide capital for
farmers to increase farm inputs such as fertiliser and machinery. They also
provide a ready consumer network for farmers. In return, they reserve the
exclusive right to purchase after the harvest. Currently, large-scale rice farms
cover 10,000ha of total rice area harvested. The plan aims to expand this to
1mn ha in 2015, or approximately 10% of total area harvested for rice.
22,922 24,375 24,393 24,993
26,300 26,900
18,775 19,400 19,000 19,150 19,400 19,788
0
5,000
10,000
15,000
20,000
25,000
30,000
2007 2008 2009 2010 2011 2012E
'000 t
on
ne
s
Rice Production Rice Consumption
Source: Ministry of Agriculture and Rural Development of Vietnam
Figure : Vietnam Rice Production & Consumption, 2007-2012
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Sugar: Vietnam has 40 mills with annual of 1.3mn tonnes in 2012
Farming Sector
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Dang Van Thanhs family plays an important role in sugar business of Vietnam
Farming Sector
Figure : Cross-holding of Thanh Thanh Cong Jsc and its affilicates
Source: StoxPlus, the Company financial statements
Dang Van
Thanhs
family
Dang Thanh Co.,
Ltd
Thanh Thanh
Cong Jsc Sacombank
Thien Son
Logistics
BourBon Tay Ninh (SBT) Bien Hoa Sugar (BHS)
Bentrimex Sontin-STE
Gia Lai Electric (GEC)
Phan Rang Sugar 333 Sugar (S33) Sacombank Securities Jsc
(SBS)
La Nga Sugar Ninh Hoa Sugar (NHS) Gia Lai Sugar &
Thermoelectric (SEC)
27.6% 27.5% 33.7% 9.8% 13.3% 13.3%
23% 9.5%
24.9% 9.8% 19.4% 9.8%
6.1% 64.6%
11.5%
42% 42% 10.3%
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Key Farming Players
BIEN HOA SUGAR JSC controlled by the Dang Van Thanhs family
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Financial Indicators
Company Profile Breakdown of Revenue 2012
Ownership Structure
Key Farming Players
BOUBON TAY NINH JSC the most profitable sugar player
2008 2009 2010 2011 2012
Total Asset (VNDbn) 1,766 1,846 1,957 2,306 2,634
Owner's Equity (VNDbn) 1,446 1,649 1,790 1,794 1,696
Revenue (VNDbn) 563 771 1,104 2,050 1,961
Operating Profit (VNDbn) 84 223 370 569 414
Net Profit (VNDbn) 82 210 345 553 370
Net Profit margin (%) 14.5% 27.3% 31.3% 27.0% 18.9%
ROA (%) 4.7% 11.6% 18.2% 25.9% 15.0%
ROE (%) 5.3% 13.6% 20.1% 30.9% 21.2%
EPS (VND) 574 1,480 2,432 3,896 2,608
EV (VNDbn) 1,869 2,049 1,869 2,230 2,625
BVPS (VND) 10,181 11,614 12,609 12,642 11,948
87%
4% 2%
5%
2%
Sugar
Molasses
Electricity
Fertilizer
Other revenues
25%
25%
6% 5%
5%
34%
Thanh Thanh Cong TradingProduction JSC
Dang Thanh Co., Ltd.
Gia Lai Electricity Joint StockCompany
Kinh o Ltd., Co.
Vietnam Dairy Products JSC.
Others
Registered name: Societe De Bourbon Tay Ninh JSC
Head office: Tan Hung commune, Tan Chau, Tay Ninh
Year of establishment: 2007. Charter Capital: VND1419bn (US$70mn)
Type of company: Listed Company
Principal group businesses: To produce sugar and related products; To
produce and merchandise sugar-using products and related products; To
produce electricity for using and trading; To manufacture and merchandise
fertilizers and agricultural materials; To grow sugar-cane and t help farmers to
grow and improve the productivity; To build and merchandise infrastructure for
industrial parks and civil projects; To build and operate in restaurants and hotels;
To build supermarkets.
Main products: Refined sugar, Molasses
# of employees: 516 by Dec 2012
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Key Farming Players
LAM SON SUGAR JSC Low efficiency and Profit is squeezing due to volatile sugar prices
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