Vinatex considered buying more businesses

3 min read

Lower targets

On the afternoon of June 29, Vietnam National Textile and Garment Group (Vinatex, code VGT) will hold the Annual General Meeting of Shareholders in Hanoi in 2020. According to documents expected to be published at the event, the Covid-19 pandemic has directly impacted the production and business of this export industry of more than US $ 40 billion. Therefore, making a prudent business plan in the context of difficult output, reduced orders are inevitable textile enterprises must do.

Specifically, in 2020, a series of business targets, from revenue to profits built by Vinatex, are far behind those implemented in 2019. Specifically, the group aims to achieve consolidated revenue of VND 14,641 billion, down 27%; Consolidated profit before tax decreased by nearly 50% compared to that in 2019, to VND 382 billion. This is also the lowest interest rate of the last 4 years of the group.

It is known that Vinatex’s consolidated revenue in 2019 reached 20,139 billion Dong, as 90.8% of the plan; Consolidated profit increased by 0.5% compared to 2018, reaching VND 765 billion, but only 91.2% of the plan. 2019 is a difficult year for the textile industry, especially the fiber industry due to the impact of the US-China trade war, causing the market to narrow, the cotton prices to fluctuate abnormally, sometimes at a higher price than the selling price.

Mr. Tran Quang Nghi, Chairman of Vinatex’s Board of Directors, said that the Group’s revenue and profit in 2020 all dropped sharply because the revenue from dividends of member businesses decreased by 42% compared to the previous year. In addition, divestment or transfer of operations in 2019 will result in no longer consolidating the business results of these entities.

Notably, the parent company’s goal for 2020 was also lowered, when revenue was VND 1,327 billion, equaling 95% compared to 2019 (reaching VND 1,397 billion), profit before tax was VND 130.4 billion, only equal to 44.4% compared to 2019.

According to Vinatex’s management, in the period of 2020-2025, the world becomes more uncertain with the trend of globalization intertwined with domestic protection. However, for Vietnam’s textile and apparel industry, the Vietnam – European Union Free Trade Agreement (EVFTA) takes effect in the long run (in 5-7 years, tariffs will be reduced to 0%) for radical growth, including investment in manufacturing materials. For Vinatex alone, new investment projects in the coming period will continue to focus on the upstream stage, aiming to be proactive in raw materials at the highest level, taking advantage of opportunities to reduce taxes from trade agreements.

Planning to buy more businesses

In the course of action for the period 2020-2025, Vinatex will purchase, restructure the business. Realizing that, with the characteristics of the new situation, the current production and business model will not have opportunities to continue promoting, Vinatex decided to change the management model, business, technology and products according to more creative direction.

In terms of system restructuring, the corporation not only divests its capital, but also buys more capital, buys more businesses, invests in the missing stages in its development strategy. “The list of restructuring will have to be determined from the strategic standards of units that need to be divested, sectors that need to buy capital, buy more businesses or invest in forming new businesses,” Mr. Tran Quang Nghi informed. .

In a period of market changes, Vinatex also has to improvise and convert in accordance with this trend. In fact, since 2019, new projects have been invested, but have to pause to preserve capital, because the group realized the market fluctuations. For example, a new investment project for fiber factory II at Nam Dinh yarn branch is being halted due to the decline in consumption market from the impact of the US-China trade war.

Vinatex’s view is that investment in the coming period must include research and development activities. This will be a breakthrough to make a difference and a strategic adjustment, from taking the garment industry as a center to taking technology as the center, moving from ordinary capital ownership to a corporation that owns production technology, management technology, market.