Vinamilk has built a long-term strategy for Moc Chau Milk

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Vinamilk has a long-term plan to develop Moc Chau Milk, including a plan to raise capital and list HoSE. Source: Moc Chau Milk

At the end of 2019, Vinamilk (HoSE: VNM) completed the purchase of 75% stake in GTN foods (HoSE: GTN), which indirectly owns Moc Chau Dairy Cow Breeding Company (Moc Chau Milk). After taking over GTN foods, Vinamilk restructured and divested outside the industry and focused only on Moc Chau Milk’s business.

At the meeting with online analysts on the afternoon of August 6, Vinamilk’s representative shared that he had developed a specific long-term development strategy for Moc Chau Milk.

Specifically, in the present time, Vinamilk focuses on pushing Moc Chau Milk in terms of effective operation: reducing costs, improving product quality and distribution system. The products this company is developing are mainly fresh milk, followed by yogurt, drinking yogurt. In the future, the unit will research to launch new fresh dairy products and change packaging.

In terms of market, Moc Chau Milk is still concentrated in the North due to its huge space. Once thriving in the North, the business will encroach on the Central and South regions with a vision for the next few years.

Regarding farm development, Vinamilk’s representative said that he had planned to build a new farm with a scale of 4,000 heads for Moc Chau Milk, which is expected to take about 2 years to complete. At the same time, the company upgraded the old farm from 1,500 to 2,000 animals, the completion time was faster than building a new farm.

The expectation of the “big man” of the Vietnamese dairy industry for this project is to increase the brand identity of Moc Chau Milk, not only in the North but also in the Central and South, as a premise for the development of the Moc Chau brand to accompany the brand Vinamilk. Vinamilk’s representative assessed that when two farms are built and upgraded to Global GAP standards, put into operation, Moc Chau Milk will greatly increase competitive advantage.

Currently, the highland dairy enterprise has 3 concentrated farms with 548 farming households raising dairy cows, with a total herd of more than 25,500 cows, the average milk output of about 100,000 tons / year.

In addition, in the next 3 to 5 years strategy, Vinamilk also considers building a new factory for Moc Chau Milk because the current factory is quite small and already runs 80-90%.

Moc Chau Milk’s profit margin improved sharply after 7 months of taking over by Vinamilk

After 7 months, Vinamilk took over, the gross profit margin of Moc Chau Milk has improved significantly. In the semi-annual financial report of 2020, Moc Chau Milk recorded gross profit margin at 28.9%, a sharp improvement compared to around 18-19% in the past years.

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Revenue increased slightly by 7.7% to 1,366 billion dong but COGS dropped by 7% to 971 billion dong. The representative of Vinamilk explained that the sharp decline in COGS was mainly due to the good control of production costs and input material costs. Previously, a small company should sign a contract for raw materials and high cost of packaging. After taking over, with the advantage of a large enterprise, Vinamilk has renegotiated the price and quality, the suppliers who can guarantee the quality and the reasonable price will sign the contract. As a result, Moc Chau Milk is optimized for COGS while the quality of raw materials is better.

At an online meeting with analysts in May, Ms. Mai Kieu Lien – General Director of Vinamilk revealed that the goal set within 3 to 5 years is to bring the profit margin of GTN foods (Moc Chau Milk) to equal Vinamilk, which is around 47%.

Although corporate gross profit increased by 75% to VND 395 billion, selling expenses also increased sharply from VND 149 billion to VND 281 billion due to the promotion of advertising and promotion programs. Therefore, the company’s net profit reached 106 billion, up 41% over the same period last year and completed 67.5% of the year plan.

Recently, shareholder Moc Chau Milk has approved the plan to issue 43.2 million new shares to existing shareholders, strategic investors and ESOP, the charter capital is expected to increase to 1,100 billion dong.

Specifically, the enterprise will sell 3.34 million shares to existing shareholders at the price of 20,000 VND / share. If the existing shareholders do not buy all of them, they will sell them to strategic investors.

For strategic investors, the issue volume is nearly 39.2 million shares, plus the volume not sold out to existing shareholders, if any.

Issuing price for strategic shareholders is 30,000 VND / share, 50% higher than offered to existing shareholders. The list of strategic investors includes Vinamilk and GTNFoods.

Representatives of Vinamilk said that they are still in the process of finalizing their documents, the buying ratio between two strategic investors GTN foods and Vinamilk has not been disclosed.

The raised funds will be used to invest in a new 4,000-head dairy farm in combination with eco-tourism, upgrade the existing dairy farm to 2,000 heads, invest in a liquid milk production line and build building a new production factory.

At the same time, Moc Chau Milk is also finalizing the application to list shares on the Ho Chi Minh City Stock Exchange (HoSE).

Source: ndh.vn