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Vinh Hoan explains lower VDTG stake to AGM

Released at: 16:43, 18/05/2018

Vinh Hoan explains lower VDTG stake to AGM

Photo from tinnhanhchungkhoan.vn

Reduced holding not due to any stake sale, food corporation's AGM hears.

by Minh Do

The Vinh Hoan Corporation (HSX: VHC) revealed the details of its reduced holding in the Van Duc Tien Giang Food Export JSC (VDTG) at its 2018 annual general meeting (AGM) held on May 12 in the Mekong Delta’s Dong Thap province.

The food corporation’s holding in VDTG was cut from 100 per cent to 35 per cent in late February.

Firstly, this was not a matter of the stake being sold, the AGM heard. Rather, VDTG raised its capital three-fold, from VND305 billion ($13.4 million) to VND872 billion ($38.3 million), which resulted in Vinh Hoan’s stake declining from 100 per cent to 35 per cent.

VDTG’s new partner is an independent private investor and also an existing customer. With experience in distribution channels, especially in Singapore and China, the partner is expected to play an important role in expanding VDTG’s sales network.

Secondly, VDTG paid Vinh Hoan a cash dividend of VND400 billion ($17.5 million) in the first quarter before the capital increase, thus leaving Vinh Hoan in a better financial position to fund its farming and capacity expansion projects, especially the 220-ha Tan Hung farm with total planned capital expenditure of VND220 billion ($9.6 million), and capacity expansion of up to 200MT per day for a new subsidiary - Thanh Binh Dong Thap - by end of 2018.

Thirdly, as at December 31, 2017, VDTG’s net debts totaled VND630 billion ($27.6 million) (over 60 per cent of the consolidated net debts of VND992 billion ($43.5 million)), and interest expenses of VND34 billion ($1.5 million) (approximately 50 per cent of consolidated interest expenses of VND71 billion ($3.1 million)). These debts will not be consolidated into Vinh Hoan’s balance sheet from March 2018 as VDTG is accounted for under the equity method.

Consequentially, Vinh Hoan’s net debts as at March 31, 2018 fell 77 per cent, from VND992 billion ($43.5 million) to VND224 billion ($9.8 million).

Finally, Thanh Binh Dong Thap is expected to replace VDTG as a better profit-generating unit, as it has outdone VDTG in terms of the proximity of its farms and factories to Vinh Hoan’s main manufacturing location in Dong Thap province. With VND100 billion ($4.4 million) capital expenditure appropriated to expand capacity at Thanh Binh by another 100MT per day, to reach 200MT per day by the end of 2018, without consolidating VDTG, Vinh Hoan’s targeted revenue and profit growth is still up.

The corporation’s export value reached $29.8 million in April, up 20 per cent year-on-year, in which the average sales price rose 37 per cent year-on-year while volumes fell 12 per cent. Rocketing sales prices and falling volumes have been driven mainly by raw material shortages and a scarcity of fingerlings supply since August last year.

In addition, the ever-increasing demand from China has also contributed to the upward price trend, as the country opts for premium products and is willing to pay global prices. In the first quarter, pangasius exports to China surged 30 per cent in price and 42 per cent in volume compared to the same period last year. Collagen and gelatine saw the best performance, with four-month export value rising 2.4-fold year-on-year. As the end of April, Vinh Hoan exported collagen and gelatine worth $2.8 million.

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