Vietnam Agribusiness Sector Report.pdf

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Vietnam Agribusiness Sector Report Issue Date: 30 July 2013

Part of StoxPluss Market Research Reports for Vietnam

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2

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

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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

[email protected]

+84 98 389 0000

Harry Hoan Tran, CFA

Senior Analyst

[email protected]

+75 1597 1532

Huong Thieu, MBA

Research Manager

[email protected]

+84 4 35626962 ext 108

Duy Nguyen, MBA

Research Associate

[email protected]

+84 4 35626962 ext 107

3

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

4

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

5

Livestock sector: pig farming is the most dominant segment

Livestock Sector

This page is intentionally left blank

6

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

7

Livestock: Animal feed sector are dominated by foreign players

Livestock Sector


8

C.P. Vietnam Livestock Corporation: the dominant in livestock market in Vietnam

Key Livestock Players


9


DABACO JSC


10

Financial Indicators

Company Profile Shareholder Structure


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.

11


Viet Nam Livestock Corporation JSC a SOE just completed IPO


12

Coffee: Vietnam is the largest producer of Robusta coffee with total export value of US$3.7bn in 2012

Farming Sector


13

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.

14

Key Farming Players

VINACAFE BIEN HOA a very profitable business


15


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.

16

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

17

Sugar: Vietnam has 40 mills with annual of 1.3mn tonnes in 2012

Farming Sector


18

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%

19

Key Farming Players

BIEN HOA SUGAR JSC controlled by the Dang Van Thanhs family


20


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

21

Key Farming Players

LAM SON SUGAR JSC Low efficiency and Profit is squeezing due to volatile sugar prices


22

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Documents

Vietnam Agribusiness Sector Report.pdf