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Vinamilk seeks further overseas investment

Released at: 14:23, 27/01/2015

Vinamilk seeks further overseas investment

Dairy giant's existing overseas investments contributed handsomely to revenue in 2014.

by Son Ho

Vinamilk is to focus on investing in foreign markets with potential to improve its growth, starting with Europe.

One country that it has its eyes on is France, where it is planning an investment project producing high quality milk powder to serve the local market or even export to Vietnam.

Vinamilk is already operating in Poland, where it has invested $3 million, specializing in the wholesale sale of agricultural raw materials (live animals and raw materials for the production of milk, food and drinks), as well as the wholesale and retail sale of milk and dairy products.

It is expected that when operations at the factory in Poland become stable that it will focus on France and then elsewhere in Europe. Mrs. Bui Thi Huong, Executive Director of Public Relations, confirmed that foreign investment with strategic product lines, increasing supply capacity, and diversified products is Vinamilk’s major tasks for 2015 and following years.

Vinamilk aims to achieve a revenue target of $3 billion and become among the Top 50 largest dairy companies in the world by 2017, according to its development roadmap. To achieve this goal the company will continue to accelerate M&A and accumulate capital for foreign investment projects to speed up its supply capacity.

It has also invested in a $23-million factory in Cambodia, after purchasing 51 per cent of Angkor Dairy Products, which is its distributor in the country. The factory has a capacity of 19 million liters of milk, 64 million cups of yogurt, and 80 million bags of condensed milk. Expected revenue in the first year is $35 million and this will increase in subsequent years. The project broke ground in 2014 and will be put into operation this year.

Mrs. Huong confirmed that investing abroad and increasing M&A activities is an opportunity for rapid growth but it will be very cautious in seeking business partners.

Vinamilk’s revenue in 2014 was VND36 trillion ($1.686 billion), a 14 per cent increase compared to 2013 but short of the target of VND38 trillion ($1.78 billion). At 14 per cent higher than the revenue in 2013 and with a similar profit level recorded despite internal and external difficulties, the figure is considered a major success. State budget contributions were VND3.5 trillion ($163.94 million).

According to Mrs. Huong, 2014 was extremely difficult for Vinamilk. The company struggled to achieve its revenue targets primarily because of reduced purchasing power in the market. The ceiling price on milk powder products instigated from June 2014 also saw five Vinamilk products cut their price by 21 per cent.

Driftwood, a Vinamilk partner in the US, is one of the largest milk producers in California and a milk supplier for the “School Milk Program” in Los Angeles. Seventy per cent of the plants’ output is milk for schools, with the remaining 30 per cent going to hotels and supermarkets.

Vinamilk’s revenue was greatly assisted by its foreign investments. The major contribution came from Driftwood, with VND2.6 trillion ($121.784 million), and Miraka Limited in New Zealand.

“We have used the power of our overseas companies to compensate for the decline in revenue and profit generated domestically,” Mrs. Huong said. This implies that investments by Vinamilk in previous years were smart moves and saved the company in a tough 2014.

Timely responses to the market also served Vinamilk’s revenue well. It launched a new product line, Dielac Grow, to compete in a higher product market. This created an additional product that can compete with foreign milk products and added to its revenue.

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