Source: https://luxustrash.com/kinh-dos-financial-stategic-report/
Timestamp: 2019-04-24 07:50:15+00:00

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KINH DO CORPORATION STRATEGIC FINANCIAL REPORT 2012 Treasury Team: Tran Minh Thuy Do Thi Hai Ha Dang Huyen Anh Pham Thu Hang Dang Huyen My To Huyen Linh Ha Noi, March 19, 2013 LETTER OF TRANSMITTAL Hanoi, March 19, 2013 Dear Board of Directors – Kinh Do Corporation We have the honor to present to you the strategic financial report of Kinh Do Corporation. This report aims to analyze both internal and external factors that affect the position of the company in present as well as in the future. An overall picture of growing opportunities also contributes to the future development of Kinh Do Corporation by presenting potential projects.
Our report has been prepared in accordance with the Annual Financial Statements of Kinh Do Corporation from 2008 to 2012. As a result of detailed and in-depth research, Overview, Environment Scanning, Financial Analysis and two Project Plans have been incorporated to provide background information concerning current financial status and scenarios for future growth of Kinh Do Corporation. Board of Directors could utilize our report as a source of stimulating ideas to enhance the business operation of the company.
The Vietnamese sweetmeat industry is one which has strong growth and is barely affected by economic changes. Figures show that since 2008, retail sales of confectionery products in US dollars in Vietnam have grown by 114 percent. At the same time, Vietnam’s confectionery market has attracted more local and foreign companies thanks to the country’s large population with high demand for a variety of foods. Recently, it is said that Nabati, a popular brand from Indonesia, planned to build a factory in Vietnam. Meanwhile, foreign confectionery producers around the world have increased exports to Vietnam via local importers.
The main purpose of this report is to evaluate the current financial status of Kinh Do Company with analysis of both internal and external factors that affect the position of Kinh Do Company. This report also brings forward a scenario of growing opportunities for Kinh Do Company by presenting two profitable projects. We hope that this report helps the Board of Directors have a comprehensive insight so as to make wise decisions for the flourishing of the company. III. The content of the report 1. Overview of Kinh Do Corporation 2. Environment scanning 3.
Financial analysis 4. SWOT analysis and two potential projects IV. Data We collect data from financial reports of Kinh Do Company in the 5-year period from 2008 to the fourth quarter of 2012. V. Limitations Due to the lack of information, some data is inadequate, not well-proportioned and difficult to search for or calculate. We also don’t have the sufficient raw data to evaluate the capital investment and profits of the potential projects, nor can we acknowledge all the strengths, weaknesses, threats and opportunities of the potentiality of the projects. VI. Methods 1.
Financial analysis * Financial analysis aims at judging the solvency, sustainability, liquidity and profitability of a business or a project on the basis of financial ratio comparisons. 2. SWOT analysis * First developed by Albert Humphrey, SWOT analysis is a structured planning method for assessing the strengths, weaknesses, opportunities and threats that a project or a business faces. The aim of any SWOT analysis is to identify the key internal (strengths and weaknesses) and external (opportunities and threads) factors that are important to achieving the objective.
The potential projects and direction of development for the company are then inferred from these factors. Lastly, but for our consultants, managers, website owners and the company’s auditor and accountant teams, we would not have been able to complete our report. Thus, we sincerely would like to show our gratitude to all of your magnanimous support in the past few weeks. CHAPTER 1: OVERVIEW I. General Idea Kinh Do was established in 1993 and has gone through 17 years of formation and development.
Up to now, Kinh Do has become a system of corporations in the field of foodstuff including: cake, candy, beverage, ice-cream, and products from milk. The development strategy of Kinh Do is to maintain as one leading foodstuff group in Vietnam and orient to become a multi-sector group including: foodstuff, real estate, finance and retail in order to ensure the sustainable development in the future. From the size of only 70 staffs at the initial establishment, up to now, Kinh Do has total staff of over 7,741 persons. Total charter capital of Kinh Do Corporation is 3,483. 1 billion dong.
Total revenue reaches 3,471. 5 billion dong, in which the revenue from foodstuff accounts for 99. 2%, total profit reaches 756. 1 billion dong. Products under the Kinh Do trademark are selling in all provinces through a diversified distribution system nationwide including 524 distributors, 31 Kinh Do Bakery shops and 200,000 retail outlets as well as franchised distribution systems with a growth rate of 30%/year. The products of Kinh Do have been sold to 35 countries; particularly Kinh Do has conquered the most difficult customers such as Japan, USA, France, Germany and Singapore, etc.
With the strategy of building the foodstuff as the core business for group, during the past years, Kinh Do has continuously invested in modernization of the technologies, execution the strategies of merger ;amp; acquire, joint venture and cooperation such as acquisition of Wall Ice-cream from Unilever, acquisition of Tribeco as well as Vinabico; investment in Nutifood, Eximbank… Especially in 2010, NKD and KIDO companies have been merged into Kinh Do Corporation (KDC).
With M;amp;A strategy, Kinh Do group will quickly enlarge the foodstuff division to become a leading foodstuff group in Vietnam as well as to become one of the leading foodstuff groups in the Southeast-Asian region. With the strategy to become a multi-sector group, Kinh Do has invested in other divisions such as real estate, finance and retails business.
These business divisions will have interrelation to support each other, in which the holding company will maintain the role of specialized financial investment while the subsidiary companies will operate in a particular field with specific industry under the master strategies defined by the Corporation. II. History of Kinh Do 1993 – 1994 * 1993 and 1994 were the success milestone for Kinh Do with the success in production and distribution of flavored snacks (at that time, Thailand-produced snacks were still dominating the Vietnamese market). After conducting the market demand survey, Kinh Do’s Board of Directors decided to increase the charter capital up to VND14 billions and invest more than US$750,000 to buy a modern production line with Japanese technology for the production of snacks. * The company produced and launched Kinh Do Snack with suitable taste and flavor for consumers. 2001 * The year 2001 was regarded as the exporting year of Kinh Do Company. The Company determined to speed up more and more its export to USA, France, Canada, Germany … * To June, 2001, the total investment of Kinh Do Company reached up to US$30 million.
An additional Cracker production line was put into operation with value of US$3 million and capacity of 1. 5ton/hour. * At the beginning of 1999, the Company started to apply its high quality control system according to ISO9002 in production and business. After a period of preparation for application, in May, 2001, the Company was granted by BVQI, an organization of England with Certificate of Quality control System qualified with the International Standard System ISO9002. 2002 * From 1st October 2002, its name changed from Kinh Do Food Processing and Construction Limited Company to Kinh Do Corporation. 003 * In July 2003, Kinh Do officially acquired Wall’s Vietnam Ice-Cream company from Unilever and changed the trademark into KIDO’s Ice-cream. This was a big event in business in Vietnam when a Vietnam private company acquired a company of a global group. KIDO Ice Cream is now growing with annual revenue of 30% increase. 2004 * December 2004, Kinh Do Real Estate Corporation was established in order to manage the investment activities of Kinh Do system into property, simultaneously, to carry out business activities in real-estate division. December 2004, North Kinh Do Corporation is the first issue of shares to the public (stock code: NKD) 2005 * December 2005, Kinh Do first issued shares to the public (stock code: KDC) and was invested by some investment funds. 2007 * December 2007, Kinh Do acquired Vinabico, and directly run this company in order to renovate products to fulfill the various demand of customers. * February 2007, Kinh Do Corporation and Eximbank signed the Strategic Partner Agreement. This cooperation created the comprehensive development for both parties. 2011 Mark a new start Kinh Do Bakery chain grew to 30 outlets with 2 store concepts Kinh Do Bakery and K-DO Bakery ;amp; Cafe. * KDC, NKD, KIDO merged to form the Kinh Do Group. III. Kinh Do’s business domains The year 2010 marked a new decade and Kinh Do is continuing its development strategy as a local leading foodstuff Corporation in Vietnam and to become a multi-business group in fields of: foodstuff, real estate, finance and retail in future. * Foodstuff: is the core business considered as the foundation for Kinh Do. Annually, the revenues from the foodstuff division contribute over 90% of sales of the Corporation.
Kinh Do products are suitable and convenient products including common and essential foods, supplementary and beverage products. We are supplying safety, delicious, nutritional, convenient and unique products for all consumers in order to maintain the leading position in the foodstuff market. Currently, Kinh Do grows in both width and depth aspects, with M;amp;A strategy Kinh Do will quickly become a local leading foodstuff Corporation. * Retails is the new development direction of Kinh Do. At present, Kinh Do is running a chain of Kinh Do Bakery and the new K-Do Bakery ;amp; Cafe chain.
In the coming time, Kinh Do will focus on establishment and management of chains of supermarkets, convenient stores and shopping centers. We are committed to offer customers the enjoyable, attractive and convenient purchasing experiences for all customers in each market segment. Our retail outlets are prioritized to locate at central or convenient locations in order to maximize its operations at the crowded residential density, quick development and new urban areas. * Real Estate is specially focused by Kinh Do in recent years.
Kinh Do has established some real estate companies specialized in consultant and construction services. Key projects to be focused are those having locations in the center of Ho Chi Minh city, trade centers, offices for lease and luxury apartment, etc. We are also focusing on market segments which have been growing in cities through creation of valuable real estate products and services to satisfy of all individual and organization needs. * Financial investment is one of four strategic business divisions focused by Kinh Do Corporation as stated in the long-term development strategy.
In the future, the funding and investment plays a very important role to support other strategic business divisions such as foodstuff, retails and real estates. The mission of this division is to create sustainable added value for companies of the group, for the partners, business organizations and individuals via banking and investment activities such as fund management and M;amp;A. Our financial solutions and services are always suitable and effective. IV. Kinh Do’s status At present, Kinh Do is dominating the Food market with 28% market share. The annual growth rate remains stable at 20%.
Kinh Do is manufacturing products such as moon cake, biscuits, crackers, sponge cakes occupying 75%, 25%, 34%, 29% of market share relatively. One of the most well-known brand names belongs to Kinh Do. Kinh Do is also one among the best firm appearing in the list of high quality products voted by consumers. The main market of Kinh Do is domestic market, Vietnam, which makes up 90% total revenue. Moreover, the products are exported to other markets like Japan, America, Cambodia and Taiwan. Kinh Do now has more than 524 distributors, 31 Kinh Do Bakery shops and 200,000 all over Vietnam.
These helps allocation much easier and bear less costs, which make Kinh Do products comparable to other products. Kinh Do ranks the 4th after Honda, Omo and Nokia in the survey about most popular brands in Vietnam. CHAPTER 2: ENVIRONMENT SCANNING I. Macro Environment Analysis 1. Political factors (P) As regard to legislation system, policy-makers are gradually completing the rules including enterprise protecting law. For more information, the State is establishing further rules to get control over food safety hygiene problems nowadays. Needless to say, those rules protect the consumers from ingredients doing harm to human health.
On the other hand, they also take into consideration about environmental problems like sewage, air pollution… However, the Vietnamese law code is unchangingly complicated, for example it is visible that there are many leaks in the law system leading to adverse selection and moral hazard causing disadvantages or unfair playing to other good companies. 2. Economical factors (E) Vietnam is known as a fast-growing country with improved facilities and increasing average income. In 2007, Vietnam became the WTO’s 150th member resulting in profound social as well as economic changes along with international economy.
As a result of ongoing economic growth in Vietnam, GDP has lately been on the increase. This does not only provoke the general consumption branches but also confectionery branches including Kinh Do joint stock company, constituting an overwhelming proportion of the market share. Nevertheless, due to the economic crisis in 2007-2008, several repercussions have still been left unsolved causing dramatic influence to the overall economy. Another thing that cannot be forgotten is the economic recession from 2008 throughout 2009 influenced all of the business activities in our country.
In specific words, the power consumption reduced as a result of people with decreasing GDP cannot afford essential consumer goods and Kinh Do was also one of the corporations to suffer net loss that year. In addition, resulting from complicatedly changing domestic exchange rate and domestic currency depreciation the ingredient importation of Kinh Do even faces a lot of more difficulties in business. Vietnam is currently building an open market, stepping out of borders and integrating with other countries in Asia as well as around the world.
After joining AFTA and WTO, Kinh Do has undoubtedly faced new challenges along with the already known advantages. Adding to that, another bonus could be the co-operation between Kinh Do and the famous Cadbury Schweppes confectionery company. On the contrary, as mentioned earlier, Kinh Do obviously has to drastically compete with other sparkling branches in the whole world boosting its competitive level higher above. 3. Social factors (S) In 2009 our population reached over 90 million people ranking the 3rd place within the South East Asian areas.
This country is considered a potential market attracting investors into consumption and retailing products. It is noticeable that with a big scale population consisting of a high percentage of laborers and an increasing number of city-dwellers, Vietnam has become a productive land to cultivate fast-growing plants, one of which is confectionery industry. However, it is problematic that the number of consumers using this kind of product is still apparently low requiring those manufacturers to vary the categories to meet the current high expectation of customers.
Furthermore, the living standard of Vietnamese people is getting extremely higher so that producers necessarily take care of product quality especially food hygiene safety. 4. Technological factors (T) Applying technology and science to production line has recently spread among companies and confectionery corporations are not the exception with the appearance of automated production technology and the quality and food safety hygiene placed first above all. Currently, it is easily seen that there is a mixed variation of industry technologies.
Therefore, entrepreneurs can feel free to choose the requisite ones to upgrade their production line to create faster produced goods, standardized products with great accuracy, diverse models and save production expenditure. Addition to that, information technology also plays a vital role in accurately remote managing, controlling and regulating machine. In other words, thanks to modern media such as online newspapers, online marketing tools that all of the products particularly the new ones can reach the customers’ hands easier and faster.
Adding to that, Kinh Do also produce Moon cake and are in need of the ingredients such as: SPIII Chinese wheat flour, special sugar, salt egg, coconut water, green tea, taro, green pea… 1. 2. Current suppliers The ingredients are regularly bought from: Number| Ingredients| Suppliers| 1| Sugar| Nagajuna international limited company| 2| Wheat flour| Binh Dong wheat flour company| 3| Milk| Vinamilk company| 4| Egg| Sai Gon agricultural company| 5| Oil| Tuong An company| 6| Spices| Vianco company| 7| Carton| Tan A industrial company| 8| Rolling paper| Tan Tien plastic wrapping company| 9| Tray| Dai Dong Tien plastic limited company| 0| Fuel| Region II fuel company| 11| Gas| Industrial Gas company| 1. 3. Advantages of Kinh Do from the suppliers It is visible that Kinh Do has two main advantages including transportation and ingredient expenditure and product quality guarantee. SPIII Chinese powder is necessary in making Moon cake; however, the State has imposed a preferential tax on this kind of ingredient so that the expenditure is also remarkably reduced. 1. 4. Disadvantages of Kinh Do from suppliers Several years ago, a severe epidemic called H5 N1 exploded in many regions in Vietnam correspondingly eggs, the ingredients of Kinh Do have partially also been appreciated.
Kinh Do has got into a lot of troubles balancing the expense and the revenue. From 2007 until now, inflation has unstoppably increased resulting in higher priced ingredients while ingredient expenditure constitutes about 65-75% of the cost of selling. Due to competitive market, Kinh Do cannot possibly change the price of goods upwards. In conclusion, these two factors have reasonably led to the decreasing in the company’s profit. 1. 5. Work force Work force has never stayed at the same position but it exchanges among agriculture, industry and service fields and it consequently influences the stability of human resource.
As mentioned above, the famous brand name Kinh Do has co-operated with both domestic and foreign companies. Kinh Do appreciates the responsible and creative partners and maintains the competitive price in the market to prolong the effective co-operation. 2. Substitutes Along with Kinh Do, many other companies have invested in confectionery industry so that it is evident that Kinh Do has to compete with more and more competitors. Kinh Do has produced a mixed range of biscuits and cakes to meet the requirement of the consumers.
For example, for those caring about nutrition, Crasker AFC (including calcium, vitamin C, DHA) is definitely the best bet; for those who are being on a diet or diabetes, they can still enjoy Yelo instead of other unhealthy biscuits for their health. With regard to beverages, compared to some big brand names like CocaCola, Pepsico…which has constantly attracted an overwhelming stable number of customers, Kinh Do can hardly beat these competitors let alone some people only prefer natural fruit juice to bottled juice.
All in all, Kinh Do as well as others always aspires to vary all kinds of confectioneries and beverages to bring about the best products. 3. Consumers 3. 1. Market potential The average confectionery consumption in Vietnam is quite low (about 1,7kg/person/year) as opposed to that in the world is pretty high (2. 8/person/year). According to a survey conducted in 2010, approximately 56% of the overall population aged below 30 reveals the same much amount of people mostly consuming confectioneries. Moreover, the percentage of city-dwellers using these products also increases from 20% to 29. %. With a population of more than 90 million people, it is obvious that Vietnam becomes the target site of domestic companies as well as other foreign corporations. Kinh Do capturing 28% of the market share is not an exception. The target site of Kinh Do is divided into two regions: North (NKD) and South (KDC). 3. 2. North Kinh Do joint stock company Based on the support of the parent company, customers lay a lot of their belief on NKD’s products. NKD allocates their main products to about 41 authorized agents and over 20. 00 retailing stores throughout 28 provinces in the North of Vietnam. NKD cater for a broad variety of customers and such the most favorable products to the North is industrial bread that the production line has to work over-capacity to meet the demand. In specific words, for almost children and teenagers and maybe even workers, snack is their favorite food after break. On special occasions like Mid-autumn festival, Moon cake is not only utilized for worshiping, eating but also presenting to acquaintances so that the demand of this seasonal product can possibly soar suddenly.
Clearly realizing this advantage, Kinh Do undoubtedly concentrates on this product to cater for customers in time. Consequently, until recently, the statistics have presented that Kinh Do is included about 30% of North confectionery market. 3. 3. South Kinh Do joint stock company As being known to rank 5th position following Nokia, Sony, Omo, Honda, Kinh Do revenue regularly going up by 20% makes a strong impression to consumers and it can satisfy all kinds of customs in every launched region. As well as NKD, Moon cake still ranks at the top place to Southern customers.
Along with that, due to high quality European technology applied to the production line, Cracker and Cupcake have also successfully got into Southern market and pleasured a large number of people boosting the Cracker output up to 75 tons per day and the Cupcake output up to 6 tons per day. Besides domestic market, Kinh Do has stepped into the outside world and exported goods to 23 foreign countries including the United States ranking 2nd largest confectionery market. Furthermore, this company also co-operate with Pepsico resulting in the appearance of Kinh Do in over 200. 00 retailing stores. 4. Competitors 4. 1. Competitive level The statistics shows that between 2008 and 2012, confectionery retailing turn-over in Vietnam is estimated 114,71%/year compared with 49,09%; 52,35%; 37,3%; 17,13%,… in China, Philippines, Thailand, Malaysia,…respectively. The potential market in Vietnam requires increasing production, modern industry technology, suitable equipment, lower price… This is unquestionably a positive aspect for other foreign companies to penetrate into and narrow the market of Kinh Do.
In general, confectionery market shares are divided among many companies including: Kinh Do, Bibica, Hai Ha, Huu Nghi, Orion Vietnam… along with over 30 foreign enterprises and hundreds of other small companies. It is clearly seen that a wide range of substitutes has led to the increasing competition among external businesses let alone the expanding of big corporation such as Huu Nghi, Bibica… However, food safety hygiene is one fundamental restriction of those companies from Vietnamese target site.
Recently customers have bumped into much information mentioning about harmful ingredients such as melanin in milk, 3MCPD in oil…plus with many prestigious products so that launching a brand-new item into this market is becoming a real problem. 4. 2. Competitor information * Bibica stock company * The original company of Bibica was Bien Hoa, ranking 2nd place after Kinh Do. Currently, Bibica is transferring into high-class market and promoting exportation and the annual output is 15. 000 tons. * Position: Bibica has been consecutively awarded honorable name “High quality Vietnamese goods” for 14 years.
Adding to that, this company also builds up a close knit relationship with Bien Hoa Sugar Company. Moreover, it is allocated to 64 provinces with 91 authorized agents and over 3000 retailing stores. * Disadvantages: Exported production line bears a high risk of getting broken. * Advantages: it is llocated throughout 64 provinces and its exportation value captures 5% of revenue in big markets like: the United States, Taiwan… * Hai Ha stock company * The original company of Hai Ha was a fish sauce supplier. At the moment, Hai Ha ranks the 3rd place with annual output of 20. 00 tons. The main products of this company are: biscuits, Cracker, Chew Haiha candy, Jelly chip Haiha candy, fruit candy, Miniwaf rolling cake, Long-pie, Long-cake, Hi-pie, Lolie… Its target customers are local dwellers so that the competition level is quite low. * Disadvantages: Biscuits and Cracker, two highly competitive products and the ingredient expenditure changeably varying affects the cost of selling. * Advantages: Hai Ha focuses on Northern production so that the target will definitely concentrate. CHAPTER 3: FINANCIAL ANALYSIS I. Overall Analysis of Kinh Do Corporation . Asset Analysis Figure 1: Balance Sheet (2008-2012) Unit VND Million | 2008| 2009| 2010| 2011| 2012 (quarter IV)| ASSET| A. CURRENT ASSETS| 1,474,434| 2,510,074| 2,329,537| 2,558,533| 2,299,063| I. Cash ;amp; Equivalents| 206,808| 984,611| 672,316| 967,330| 829,459| II. Short-term investments | 584,291| 518,183| 161,660| 373,770| 235,480| III. Current accounts receivable | 489,408| 825,183| 1,018,356| 724,911| 890,256| IV. Inventories| 181,656| 162,476| 434,329| 398,032| 319,030| V. Other current assets | 12,271| 19,621| 42,876| 94,490| 24,838| B.
NON-CURRENT ASSETS | 1,508,876| 1,737,527| 2,710,328| 3,250,889| 3,219,202| I. Other long-term receivables | 31,059| 22,553| 612| 345| 267| II. Fixed assets| 787,519| 656,084| 937,725| 1,431,033| 1,457,781| III. Investment property | 0| 0| 29,165| 26,591| 24,018| IV. Long-term investments | 673,385| 994,535| 1,209,978| 1,225,716| 1,620,954| V. Other long-term assets | 17,013| 32,319| 104,720| 143,692| 116,182| VI. Goodwill| | 32,036| 428,128| 393,512| | TOTAL ASSETS | 2,983,410| 4,247,601| 5,039,865| 5,809,421| 5,518,265| RESOURCES | A.
Unit VND Million | 2008-2009| 2009-2010| 2010-2011| 2011-2012| | +/-| %| +/-| %| +/-| %| +/-| %| A. CURRENT ASSETS| 1,035,640| 70. 24| -180,537| -7. 19| 228,996| 9. 83| -259,470| -10. 14| I. Cash ;amp; Equivalents| 777,803| 376. 10| -312,295| -31. 72| 295,014| 43. 88| -137,871| -14. 25| II. Short-term investments | -66,108| -11. 31| -356,523| -68. 80| 212,110| 131. 21| -138,290| -37. 00| III. Current accounts receivable | 335,775| 68. 61| 193,173| 23. 41| -293,445| -28. 82| 165,345| 22. 81| IV. Inventories| -19,180| -10. 56| 271,853| 167. 32| -36,297| -8. 6| -79,002| -19. 85| V. Other current assets | 7,350| 59. 90| 23,255| 118. 52| 51,614| 120. 38| -69,652| -73. 71| B. NON-CURRENT ASSETS | 228,651| 15. 15| 972,801| 55. 99| 540,561| 19. 94| -31,687| -0. 97| I. Other long-term receivables | -8,506| -27. 39| -21,941| -97. 29| -267| -43. 63| -78| -22. 61| II. Fixed assets| -131,435| -16. 69| 281,641| 42. 93| 493,308| 52. 61| 26,748| 1. 87| III. Investment property | 0| | 29,165| | -2,574| -8. 83| -2,573| -9. 68| IV. Long-term investments | 321,150| 47. 69| 215,443| 21. 66| 15,738| 1. 30| 395,238| 32. 25| V.
Other long-term assets | 15,306| 89. 97| 72,401| 224. 02| 38,972| 37. 22| -27,510| -19. 15| VI. Goodwill| | | 396,092| 1236. 40| -34,616| -8. 09| -393,512| -100. 00| TOTAL ASSETS | 1,264,191| 42. 37| 792,264| 18. 65| 769,556| 15. 27| -291,156| -5. 01| Considering the figures calculated above, despite the increasing trend in total assets during the past 4 years (2008-2011), there is a sudden decrease in total assets from 2011 to 2012. Specifically, from 2008 to 2011, total assets rose at different speeds: went up by 42. 37% from 2008 to 2009; 18. 65% (2009-2010) and 15. 7% (2010-2011). It’s clear that the increasing speed tends to slow down due to the changes in varied types of assets: •2008-2009: Total assets increased by 1,264,191 million dong (42. 37%) resulting from 1,035,640 million dong rise in current assets (70. 24%) and 228,651 million dong rise in non-current assets (15. 15%). This data shows the main focus of Kinh Do Corporation during this time was to raise liquidity in the short-run, particularly in forms of cash and equivalents; receivables and long-term investments. •2009-2010: Total assets rose by 792,264 million dong (18. 65%).
This increase was mainly attributable to a substantial expansion in non-current assets, particularly fixed assets, long-term investments and goodwill and as a result, it compensated for a slight drop in current assets to keep total assets growing. •2010-2011: Assets increased by 769,556 million dong in total (15. 27%) which was much slower than the rising speed of the last two periods. During this period, both current and non-current assets contributed to the gradual growth in total assets such as: short-term investments and fixed assets… However, from 2011 to 2012, total assets slightly reduced by 291,156 million dong equivalent to 5. 1% which was caused by a fall in both current and non-current assets: 259,470 million (10. 14%) and 31,687 million (0. 97%) respectively. Although long-term investments expanded substantially: 395,238 million higher than the previous year (32. 25%) promising to bring high profits to the corporation in the future, it couldn’t offset the marked decline in other assets. 1. 2. Structural Analysis Figure 3: Composition of Assets (2008-2012) Unit % | 2008| 2009| 2010| 2011| 2012| A. CURRENT ASSETS| 49. 42%| 59. 09%| 46. 22%| 44. 04%| 41. 66%| I. Cash ;amp; Equivalents| 6. 93%| 23. 18%| 13. 34%| 16. 5%| 15. 03%| II. Short-term investments| 19. 58%| 12. 20%| 3. 21%| 6. 43%| 4. 27%| III. Current accounts receivable| 16. 40%| 19. 43%| 20. 21%| 12. 48%| 16. 13%| IV. Inventories| 6. 09%| 3. 83%| 8. 62%| 6. 85%| 5. 78%| V. Other current assets| 0. 41%| 0. 46%| 0. 85%| 1. 63%| 0. 45%| B. NON-CURRENT ASSETS| 50. 58%| 40. 91%| 53. 78%| 55. 96%| 58. 34%| I. Other long-term receivables| 1. 04%| 0. 53%| 0. 01%| 0. 01%| 0. 00%| II. Fixed assets| 26. 40%| 15. 45%| 18. 61%| 24. 63%| 26. 42%| III. Investment property| 0. 00%| 0. 00%| 0. 58%| 0. 46%| 0. 44%| IV. Long-term investments| 22. 7%| 23. 41%| 24. 01%| 21. 10%| 29. 37%| V. Other long-term assets| 0. 57%| 0. 76%| 2. 08%| 2. 47%| 2. 11%| VI. Goodwill| | 0. 75%| 8. 49%| 6. 77%| | TOTAL ASSETS| 100. 00%| 100. 00%| 100. 00%| 100. 00%| 100. 00%| It can be seen from the figure and graph relating to the asset composition of Kinh Do that our corporation has a quite balanced division between current and non-current assets; each group makes up about 40 to 50 percent. The main trend during 2008-2012 is to gradually boost non-current assets while steadily reduce current assets but still keep the asset structure stable.
To be more specific, current assets have fallen from 49. 42% in 2008 to 41. 66% while non-current assets have risen from 50. 58% in 2008 to 58. 34% in 2012. However, from 2008 to 2009, current assets sharply increased from 49. 42% to 59. 09% resulting in a considerable decline in non-current assets from 50. 58% down to 40. 91%. This change was mainly due to a dramatic surge in cash and equivalents, from 6. 93% to 23. 18% (about 16. 25% higher) and also accounts receivable, which went up by 3. 03%. The increase of non-current assets indicates that Kinh Do Corporation is expanding its production scale.
In order to reach that goal, our corporation may have to invest more in purchasing modern capital equipment, plants , machines and structures… resulting in a moderate rise in fixed assets. Actually, not only is this change appropriate and suitable for the present conditions of our corporation but it also promises to satisfy the increasing demand for our products. Furthermore, this is also an essential step towards the strategic plan of Kinh Do – to become both Vietnam’s and Asia Pacific region’s leading company in the food and beverage category.
RESOURCES| 2008| 2009| 2010| 2011| 2012 (quarter IV)| | | | | | | A. LIABILITIES| 28%| 42%| 24%| 34%| 26%| I. Current liabilities | 22%| 39%| 21%| 31%| 25%| II. Non-current liabilities | 6%| 3%| 3%| 3%| 2%| B. OWNERS’ EQUITY| 70%| 57%| 74%| 66%| 73%| I. Capital| 70%| 57%| 74%| 66%| 73%| II. Other budget sources| 0%| 0%| 0%| 0%| 0%| C. MINORITY INTERESTS| 2%| 1%| 2%| 1%| 1%| TOTAL| 100%| 100%| 100%| 100%| 100%| From the statistics in the figures and chart above, it can be seen that each year of positive changes in liabilities was followed by a year of negative ones.
For instance, a surge of liabilities, which happened in 2009 with the highest increase of 973,689 million dong, preceded an enormous plunge of 586,880 million dong in 2010. It is due to the maturity of Kinh Do’s short-term and long-term loans. In the period from 2008 to 2011, Kinh Do’s overall scale developed significantly; however, the fact that the proportion of owner’s equity in total capital decreases shows a downward trend of its ability to self-sponsor its business. This is not a good sign because the ability to guarantee loans in the business capital has a tendency to decrease.
In 2012, Kinh Do has made an improvement with the rearrangement of the company’s capital structure by both reducing the amount of loans and increasing the proportion of equity in total capital. Kinh Do should attach to this plan in the future years to balance its capital structure so as to avoid dependence on loans and lack of capital to operate. 2. 2. Structural analysis Debt ratio Debt ratio indicates what the proportion of debt a company has relative to its debt, while reflecting the financial risk that the company has to take as well as its leverage.
Figure 6: Kinh Do’s debt ratio analysis (2008-2012) Unit: VND million Source of capital| 2008| 2009| 2010| 2011| 2012 (quarter IV)| A. LIABILITIES| 28. 02| 41. 73| 23. 52| 33. 73| 26. 45| I. Current liabilities| 22. 25| 38. 55| 20. 52| 30. 70| 24. 59| II. Non-current liabilities| 5. 77| 3. 17| 3. 01| 3. 03| 1. 86| B. OWNERS’ EQUITY| 69. 58| 56. 81| 74. 17| 65. 66| 72. 86| I. Capital| 69. 58| 56. 81| 74. 17| 65. 66| 72. 86| II. Other budget sources| 0. 00| 0. 00| 0. 00| 0. 00| 0. 00| C. MINORITY INTERESTS| 2. 40| 1. 46| 2. 31| 0. 61| 0. 69| Total assets and liabilities| 100. 0| 100. 00| 100. 00| 100. 00| 100. 00| From the analysis, it can be seen that each year of high debt ratio was followed by a year of lower debt ratio. Except for 2 periods, which are 2009-2010 and 2011-2012, the debt ratio was always below 30%. The most remarkable upward trend was in 2009, when the debt ratio was half as much again as that of the previous year, soaring from 28. 02% to 41. 73%. High level of current liabilities could be mainly attributed for the escalation of debt compared to the rather slow growing speed of total assets and liabilities.
Equity ratio indicates the relative proportion of equity used to finance a company’s assets. One thing that can be drawn from the analysis is that every year of high percentage of owner’s equity is followed by a lower one. Also, equity ratio has a reverse effect on debt ratio; when the equity ratio is high, the debt ratio is low and vice versa. The reason for a high equity ratio is that the growth rate of owner’s equity is higher than that of total assets and liabilities. Although the equity ratio fluctuated in the last five years, the trend was upward.
Still, Kinh Do needs to enhance its ability to self-sponsor its business so as to avoid insolvency, dependence and lack of capital to operate. 3. Business Operation Analysis Figure 7: Income Statement Analysis (2008-2012) Unit: VND million | 2008| 2009| 2010| 2011| 2012| Sales| 1,466,192| 1,539,223| 1,942,808| 4,278,052| 4,318,330| Deductions| 10,424| 9,867| 9,174,| 31,166| 29,536| Net sales| 1,455,768| 1,529,355| 1,933,634| 4,246,886| 4,288,794| Cost of goods sold| 1,085,980| 1,023,963| 1,248,244| 2,573,746| ,403,941| Gross profit| 369,788| 505,392| 685,390| 1,673,140| 1,884,852| Financial income| 118,538| 63,854| 663,953| 127,493| 150,393| Financial expense| 313,379| (8,807)| 242,453| 180,680| 210,888| Including interest expenses| 52,364| 43,758| 42,458| 117,213| 93,038| Selling expenses| 133,178| 164,175| 347,589| 943,674| 967,225| General and administrative expenses| 121,882| 112,090| 141,635| 331,706| 343,912| Other profit| 19,566| 257,840| 21,364| (2,286)| 12,577| Profit from associate or joint-venture companies| (1,143)| 12,680| 34,962| 6,894| -| Profit before tax| (61,690)| 572,308| 673,992| 349,181| 500,636| Current corporate tax expenses| -| 60,919| 110,883| 87,310| 128,592| Benefit from deferred corporate tax expenses| (1,087)| (11,553)| (15,502)| (16,765)| 9,121| Profit after tax| (60,603)| 522,942| 578,611| 278,636| 362,922| Minority interest| 24,714| 42,419| 56,040| 5,083| 5,706| Profit after tax of the parent company’s shareholders| (85,317)| 480,523| 522,571| 272,553| 357,215| EPS (VND/share)| (0. 001522)| 0. 00612| 0. 005189| 0. 002312| 0. 001983| 3. 1. Cost of goods sold analysis 2008-2009: According to the table, from 2008 to 2009, the cost of goods sold decreased and net sales increased. This decreasing amount was insignificant and was the result of a drop in cost of inputs. 2009-2010: According to the table, from the year 2009 to the year 2010, the cost of goods sold and net sales both grew up.
In 2009, the COGS accounted for 66. 95% of net sales. In 2010, it took 64. 55% net sales. Moreover, the increasing rate of COGS was 21. 9%, which was lower than that of net sales, 26. 43%. This amount was insignificant and was result by the increasing input cost. 2010-2011: According to the table, from the year 2010 to the year 2011, the cost of goods sold and net sales both climbed. In 2010, the COGS accounted for 64. 55% of net sales. In 2011, it took 60. 60% net sales. Furthermore, the increasing rate of COGS was 106. 19%, which was higher than that of net sales, 119. 63%. This amount was insignificant and was result by an increase in input cost. 011-2012: According to the table, from the year 2011 to the year 2012, there was a fall in the cost of goods sold and net sales. In 2011, the COGS took 60. 60% of net sales. In 2012, it accounted for only 55. 67% net sales. In conclusion, for a period of 5 years, the COGS of the Kinh Do Corporation shot up with the effect of inflation. This amount was insignificant and didn’t affect the growth rate of that company because of the effort in curbing inflation. However, the COGS over sales were still high, therefore, in the next years, the Corporation needs to lower the COGS, hence, increase the profit. 3. 2. Selling expenses Selling expenses rises with a rate higher than that of revenue.
To be more specific, the increasing rate of selling expenses was 171. 49% while revenue increasing rate was only 119. 63% (2011-2012). Selling expenses accounted for 64. 36% and 22. 39% in 2011 and 2012 respectively. The advertising expenses, utility bill for brands, delivery expenses contributed mostly to the selling expenses. 3. 3. General and administrative expenses General and administrative expenses rose almost all years, except for 2009. This increasing rate was relatively high. It took 7. 81% revenue in 2011 and 7. 96% in 2012. General and administrative expenses grew up mostly as the result of rising in web-design expenses and training expenses.
Although these expenses went up, they were reasonable, which proved that Kinh Do Corporation has made a great effort in improving services and product quality as well as promoting their images in the eyes of customers. All in all, over a period of 5 years, cost of goods sold, selling expenses as well as general and administrative expenses of that firm slightly increased. However, the amount was not too high and reasonable. This showed that the company had an effective management on these expenses and should keep on with these to raise the firm’s profit. II. Financial Ratios Analysis 1. Liquidity Ratios Figure 8: Liquidity Ratios (2008-2012) | 2008| 2009| 2010| 2011| 2012| 1. Inventories| 181,656| 162,476| 434,329| 398,032| 319,030| 2.
Current assets| 1,474,434| 2,510,074| 2,329,537| 2,558,533| 2,299,063| 3. Current liabilities | 663,885| 1,637,574| 1,033,997| 1,783,559| 1,357,106| Current ratio| 2. 22| 1. 53| 2. 25| 1. 43| 1. 69| Quick ratio| 1. 95| 1. 43| 1. 83| 1. 21| 1. 46| 1. 1. Current ratio The current ratio indicates a company’s ability to meet short-term debt obligations. This ratio measures whether or not a firm has enough resources to pay its debts over the next 12 months. Potential creditors use this ratio in determining whether or not to make short-term loans. The current ratio can also give a sense of the efficiency of a company’s operating cycle or its ability to turn its product into cash.
The current ratio is also known as the working capital ratio. Current ratio = Current Assets Current Liabilities By applying this formula, we have come out with the figures above. Over the period from 2008 to 2012, the current ratio of Kinh Do fluctuated; however, it was always higher than 1. 5 – an acceptable current ratio for most enterprises, except for year 2011 which was 1. 43. The highest current ratio – 2. 25 was reached in 2010 which means the business has current assets of 2. 25 dong for every 1 dong of current liabilities. It then decreased in the next year, from 2. 25 to 1. 43 but slightly recovered in 2012 which was approximately 1. 69.
All other things being equal, creditors would consider a high current ratio to be better than a low current ratio, because a high current ratio means that the company is more likely to meet its liabilities which are due over the next 12 months. However, as long as the current ratio is greater than 1x (actually approaching 2x), the firm’s current assets are capable of paying its short-term debt obligations. 1. 2. Quick ratio The quick ratio is a measure of a company’s ability to meet its short-term obligations using its most liquid assets (near cash or quick assets). Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. Inventory is the most notable exclusion, because it is not as rapidly convertible to cash and is often sold on credit so in the quick ratio’s formula, we eliminates inventories.
Quick ratio is viewed as a sign of a company’s financial strength or weakness; it gives information about a company’s short term liquidity. The ratio tells creditors how much of the company’s short term debt can be met by selling all the company’s liquid assets at very short notice. The quick ratio is also known as the acid-test ratio or quick assets ratio. Quick ratio = (Current Assets – Inventories) Current Liabilities Like current ratio, quick ratio shares the same pattern: fluctuated during the period 2008-2012. The quick ratios of all 5 years were above 1x implying that current liabilities can be met from current assets without the need to sell inventories.
Liabilities| 835,926| 1,772,331| 1,185,451| 1,959,475| 1,459,586| Total assets| 2,983,410| 4,247,601| 5,039,865| 5,809,421| 5,518,265| Profit before tax| -61,690| 572,308| 673,992| 349,181| 500,636| Including interest expenses| 52,364| 43,758| 42,458| 117,213| 93,040| EBIT| -9,326| 616,066| 716,450| 466,394| 593,676| Debt ratio (times)| 0. 28| 0. 42| 0. 24| 0. 34| 0. 26| Time interest earned ratio (times)| -0. 18| 14. 08| 16. 87| 3. 98| 6. 38| 2. 1. Debt ratio Debt ratio indicates the proportion of a company’s debt to its total assets. It shows how much the company relies on debt to finance assets. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets.
The higher the ratio, the greater the risk associated with the firm’s operation. A low debt ratio indicates conservative financing with an opportunity to borrow in the future at no significant risk. Debt ratio = Total Liabilities Total Assets As can be seen from the table above, all the debt ratios calculated from 2008 to 2012 are less than 0. 5 which means most of the company’s assets are financed through equity. The equity-oriented capital structure of Kinh Do is not prone to substantial change, except in 2009 when Kinh Do had a gigantic surge in payable account (related to the down payment of the Kim Cuong project) which make the debt ratio unexpectedly high, roughly 0. 42. 2. 2.
Times interest earned ratio Times interest earned ratio measures a company’s ability to continue to service its debt. It is an indicator to tell if a company is running into financial trouble. A high ratio means that a company is able to meet its interest obligations because earnings are significantly greater than annual interest obligations. However, a high ratio can also mean that a company has an undesirably low level of leverage or pays down too much debt with earnings that could be used for other investment opportunities to get higher rate of return. Meanwhile, a lower times interest earned ratio means fewer earnings are available to meet interest payments.
Failing to meet these obligations could force a company into bankruptcy. It is used by both lenders and borrowers in determining a company’s debt capacity. Times interest earned ratio = Earnings before interest and taxesInterest expense The figures show that in 2008, as Kinh Do suffered a huge loss resulting from the wasted resources putting into real estate and financial investment, its TIE ratio is only -0. 18 times. This negative ratio indicates its inability to meet interest payments. Nonetheless, during 2009-2010, its TIE ratio increased significantly to 14. 08 times in 2009 and 16. 87 times in 2010 pointing out two periods of successful growth and high profits. In 2011, espite some challenges it had to face, especially undergoing a drastic transformation over the last few years through its investment in building a strong foundation for the future, Kinh Do remained profitable; however, the profits it gained weren’t as high as the 2 preceding years which resulted in a lower TIE ratio, only 3. 98 times. This ratio was recovered to 6. 38 times in 2012 as Kinh Do did operate its business better. 3. Activity Ratios Figure 10: Activity Ratios Analysis (2008-2012) Unit: VND million | 2008| 2009| 2010| 2011| 2012| Sales| 1,466,192| 1,539,223| 1,942,808| 4,278,052| 4,318,330| Net sales| 1,455,768| 1,529,355| 1,933,634| 4,246,886| 4,288,794| Cost of goods sold| 1,085,980| 1,023,963| 1,248,244| 2,573,746| 2,403,941| Inventory| 181,656| 162,476| 434,329| 398,032| 319,030| Total assets| 2,983,410| 4,247,601| 5,039,865| 5,809,421| 5,518,265| Inventory turnover| 5. 98| 6. 30| 2. 87| 6. 47| 7. 54| Total assets turnover| 0. 49| 0. 6| 0. 39| 0. 74| 0. 78| 3. 1. Inventory Turnover Inventory turnover = Cost of goods soldinventory This ratio measures the activity, or liquidity of a firm’s inventory. The higher the ratio, the faster the company can sell their products and the inventory is not stagnant. This means that the firm can reduce their risks when the inventory value decreases over the years. However, it’s not good if this ratio is too high. Too high an inventory turnover that is out of proportion to industry norms may suggest losses due to shortages or in another way: the inventory is easily out of stock; hence the firm may lose their customers to their competitors.
In contrast, a relatively low inventory turnover may be the result of ineffective inventory management (that is, carrying too large an inventory) and poor sales or carrying out-of-date inventory to avoid writing off inventory losses against income. Therefore, the inventory turnover should be high enough to guarantee that the manufacturing rate can serves the demand of consumers. The net inventory increases over the years except for 2010 when it suddenly reduced to 2. 87. This drop in inventory turnover was attributable to the improper inventory management. However, in 2011, the ratio was up to 6. 47, which meant the firm sold well this year and there weren’t many inventories. Continuing this trend, the inventory turnover gradually increased to 7. 54 in the next year. In general, the inventory turnover ratio is relatively high compared to the industry average.
During the past five years, it has experienced an upward trend showing an improvement in product quality; hence, making a good sale, enhance the company to expand its scale. 3. 2. Total assets turnover Asset turnover (total asset turnover) is a financial ratio that measures the efficiency of a company’s use of its assets to product sales. It is a measure of how efficiently management is using the assets at its disposal to promote sales. The ratio helps to measure the number of dollars of revenue generated by one dollar of the company’s assets. Total assets turnover = salestotal assets There is no set number that represents a good total asset turnover value because every industry has varying business models.
It also depends on the proportion of labor costs in relation to the capital required, i. e. whether the process is labor intensive or capital intensive. The higher the number is considered the better. If there is a low turnover, it may be an indication that the business should either utilize its assets in a more efficient manner or sell them. But it also indicates pricing strategy: companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. From 2008 to 2009, net sales rose to 73,588 million dong while total assets crept up to 1. 264. 190, which resulted in a fall in the number of turnovers by 0. 13.
ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company’s annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as “return on investment”. ROA tells you what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. This is why when using ROA as a comparative measure, it is best to compare it against a company’s previous ROA numbers or the ROA of a similar company. In year 2008, Kinh Do experienced a huge loss as it had wasted resources invested in real estate, financial investment, which caused the ROA dropped to -2%.
Return on Equity measures the return earned on the ordinary shareholder’s investment in the firm. For that reason, it measures the effectiveness of capital of the owner of the company, which is the percentage of profit the shareholders can earn based on their common stock. The benefit comes from the earnings reinvested in the company at a high ROE rate, which in turn gives the company a high growth rate. The benefit can also come as a dividend on common shares or as a combination of dividends and reinvestment in the company. ROE is presumably irrelevant if the earnings are not reinvested. According to the chart, Kinh Do’s ROE fluctuated for a period of 5 years.
It reached its highest peak in year 2009 and 2010, at 22% and 15% respectively. This was the result of changing in financial and management strategy after suffering a huge loss in 2008, which caused the ROE was a negative one, -3%. In 2011, it slightly decreased to 7% but then recovered in 2012, which was approximately 13%. 4. 3. Return on Sales (ROS) A ratio widely used to evaluate a company’s operational efficiency. ROS is also known as a firm’s “operating profit margin”. It is calculated using this formula: ROS = Net incomeSales This measure is helpful to management, providing insight into how much profit is being produced per dollar of sales.
As with many ratios, it is best to compare a company’s ROS over time to look for trends, and compare it to other companies in the industry. An increasing ROS indicates the company is growing more efficient, while a decreasing ROS could signal looming financial troubles. Though, in some instances, a low return on sales can be offset by increased sales. Like ROA and ROE, ROS shares the same growing pattern: fluctuating over time. Due to the its huge loss by wasting money in real estate and financial investment, in 2008, Kinh Do had to experience a negative ROS, which was approximately -4%. However, it was followed by two successive years of considerably high ROS and the peak was reached in 2009 at 34%.
The P/E ratio tells how much the market is willing to pay for a company’s earnings. A higher P/E ratio means that the market is more willing to pay for the earnings of the company. Higher price to earnings ratio indicates that the market has high hopes for the future of the share and therefore it has bid up the price. On the other hand, a lower price to earnings ratio indicates the market does not have much confidence in the future of the share. Figure 12: Price to earnings ratio (2008-2012) | 2008| 2009| 2010| 2011| 2012| P/E ratio| -26. 24| 6. 49| 8. 97| 17. 13| 14. 37| Based on the statistics above, it’s apparent that the P/E ratio of Kinh Do has experienced an upward trend during the past five years.
Figure 13: Market to book ratio (2008-2012) | 2008| 2009| 2010| 2011| 2012| M/B ratio| 1. 1| 1. 3| 1. 3| 1. 2| 1. 24| The market to book ratio, also called the price to book ratio, is an investment valuation ratio used by investors or finance providers to compare market value of a company’s shares to its book value (Shareholder Equity). This ratio indicates how much shareholders are contributing/ paying for a company’s net assets. The market value of the company is its value at any point in time as determined by the financial marketplace. The book value, or historical value, is almost always lower than the market value since some assets may be off-balance sheet items.
Market/book ratio = market price per sharebook value per share Book value per share = ordinary share equitynumber of share issued According to the chart, the Kinh Do Corporation’s market value fluctuated over the past five years, from 2008 to 2012. In 2008, the M/B ratio hit the the lowest point – only 1. 1 times which supports for the huge loss of KDC in that year. It reached the peak of 1. 3 for a period of 2 years, from 2009 to 2010, which reflected that investors are ready to pay 1. 3 times book value for a share. Then it slightly fell to 1. 2 in the year 2011 and went up to 1. 24 in 2012. Overall, there were fluctuations on the market to book ratio of the firm.
However, this ratio was always higher than 1, which meant the market value per share of Kinh Do was higher than the book value per share, implying a greater expected future gains. CHAPTER 4: DEVELOPING A SCENARIO FOR FUTURE GROWTH I. Some existing advantages and disadvantages of the confectionary industry and SWOT analysis of Kinh Do 1. SWOT analysis Production Today, Kinh Do is the corporation with the most modern confectionary production lines in Vietnam. All machinery is completely newly equipped. Each production line is designed for a particular category of goods and is the optimal conglomeration of state-of-the-art devices whose origins derive from various countries. The qualitative guarantee system of Kinh Do follows the ISO 9001:2000 standard.
Kinh Do expands its market research activities under various forms, including surveying and collecting consumers’ feedbacks through marketing teams, distributive shops and agents. This positively affects production and sale strategies of Kinh Do. 2. Pricing policy Kinh Do implements the appropriate pricing policy for each individual market segment. The corporation manages price stability well, thus providing relatively high discount rate for distributors compared to other competitors. Therefore, the distributive network expansion hardly meets any difficulties. 3. Advertisement and public relations Kinh Do develops effective advertising plans with the aim of maintaining reasonable cost so as not to increase the total cost of production, especially seasonal advertising strategies.
Carry out sales promotion campaigns. Participate in many international trade fairs and high quality Vietnamese commodity fairs so as to promote the company’s new products and create positive image in the eye of potential consumers. Participate in kermises and donates and sponsors for charity events, polishing Kinh Do’s image in the mind of customers. Distribution Kinh Do products are mainly distributed through three channels: agent system, supermarket system and bakery system. More noticeably, KinhDoCo has close cooperation with the dealers from all over the country. This is an important factor to facilitate the launch of new products to the market.
Human Resource Management A team of high quality staff is a strong point for the company to be able to compete in the market. However, human resource management is not attractive enough to prevent professional employees from resigning. Therefore, Kinh Do needs to pay more attention to special treatments, salary and bonus payments policy for workers to stick with the company in long-term period to create new success. All in all, below is the SWOT matrix of Kinh Do Corporation: Strengths 1. The distributive system of Kinh Do is nationally widespread 2. Marketing strategies are deeply concerned 3. Kinh Do is a powerful brand name, with a vast market share 4.
Facilities, machinery and equipments are modernized and productive 5. The company has a huge financial capability 6. Kinh Do has established a potential supplying chain, facilitating the stable development of the company as well as keeping a competitive price level 7. Competitive price with seasonal and occasional sales promotions 8. Products are diverse in kinds, serving probably all groups of customers and tastes 9. High quality products that are well-packaged, hygiene, delicious and competitive to exported equivalents Weaknesses 1. Most Vietnamese enterprises are not fully trained about basic knowledge of the competitive market economy and global integration.
Due to the new situation of an open and integrating Vietnam, Kinh Do Company still lacks experience in the market, especially handling the global opportunities and risks in business, having a limited understanding of the rules and laws relating to international business and so on. 2. A family management style still exists. There are few improvements in the structure of staffing and employment. Personnel management is not professional, high rate of staff quit, remuneration is not satisfactory. Personnel are cumbersome and inflexible. Therefore, Kinh Do Company still lacks management experience, especially in the business activities which spread over many countries. 3.
Personnel management is not professional, high rate of staff quit, remuneration is not satisfactory. Personnel are cumbersome and inflexible. 4. The export of products is only in the form of outsourcing for foreign partners. KinhDo brand is not well-known to foreign partners. 5. Few product lines meet the needs of high-end segment of the market. Most of the products just satisfy the demand from consumers of the average segment. 6. KinhDo brand is very popular due to the success of a few lines of products like mid-autumn and fresh bread. However, the branding for each product line is not successful. 7. Employees’ sense of competition is not high Opportunities 1. The growing trend toward economic integration and exportation 2.
The development of science facilitates the application of advanced technology into production, with the aim of increasing productivity and product quality, thus satisfying the rising demand of high quality goods in both domestic and foreign markets. 3. The increase in customers’ income proves a highly potential domestic market 4. The export market bears numerous promises since the trade barrier is gradually eliminated 5. Domestic competitors are still small-scale companies 6. Seasonal and traditional occasions unique to Asian culture, particularly Vietnamese. 7. Product information transmitted more easily and broadly to customers through means of Internet, television and other media-based commercials 8.
Vietnamese high quality product fairs held regularly, promoting the company’s new products and increasing brand name awareness among potential customers. Threads 1. More competitors emerge, especially when Vietnam officially joined the world trade organization WTO. The competitiveness of enterprises in the sector becomes higher. 2. Due to the increasing scientific developments, technological life is shorter; product life is also cut short. 3. Many substitute products appear. 4. Export markets are getting increasingly difficult to enter due to more standardized management for food. 5. High rate of inflation in Vietnam leads to higher COGS, directly escalating product price and lowering Kinh Do’s profitability. 2.
The advantages and disadvantages posing to Kinh Do in the industry of confectionary Advantages 1. Kinh Do occupies 35% of the domestic confectionary market share. 2. The distributive system works effectively. The company’s retail chain spreads all over Vietnam with nearly 40 Kinh Do Bakeries, more than 200 distributors and 70000 retail outlets of confectionary, 355 distributors and 104000 retail outlets of beverage, 70 distributors and 15000 retail outlets of ice cream and other cold foods. 3. The value of Kinh Do’s brand name has been accumulated for over a decade, with very high level of brand name awareness. What’s more, Kinh do has been in the “High quality Vietnamese commodities” for 13 years.
Having been ranked 4th in top ten most renowned trade name in Vietnam, Kinh Do’s trademark has been inherent in Vietnamese people’s mind as having various and high quality products and competent management, research and development capability. 4. Kinh Do has powerful human resources, with experienced and visionary leaders, profuse and professionally competent workforce, highly educated staff who are used to working for multinational corporations. Another feature is the mutual trust and solidarity developed between co-workers. 5. The economic rehabilitation is a significant incentive in the expansion of Kinh Do, hastening project developments and creating favourable conditions for Kinh Do to reach a higher position. 6.
Besides, Kinh Do has been enlarging its markets with many more new market segments since Vietnam became an official member of WTO. Kinh Do has applied first-rate technology in Asia with the inauguration of the new factory in the Vietnam-Singapore industry complex. 7. The upcoming merging between KDC, NKD and Kido will help Kinh Do foster its position on the market and enhance its business management quality. Disadvantages Besides the advantages of Kinh Do listed above, there are still difficulties as follows: 1. Low professional skills of the staff departments. 2. Some product groups are experiencing slow growth, even loss of market share. . Some common skills such as project management skills, leadership skills, supervisory skills, problem-solving skills and decision-making skills need to be improved. 4. Inflationary factors and the fluctuation of foreign exchange rates adversely affect imported input materials. 5. Domestic financial markets are always complicated, especially the stock market. 6. Price situation in the country today is very complex; the price of gold and gas fluctuates constantly. II. Two potential projects for Kinh Do Corporation 1. Project A: Plantation of stevia in Laos The increasing demand of healthy products is an opportunity that Kinh Do cannot overlook.
While Kinh Do has already developed a sugar-free line of products for diabetes and hypertensives, which are Yelo, and the initial movements have shown promising results, it still needs a thorough renovation. By leading the trend of natural and organic products that are good for health, not only will Kinh Do be more competitive in the battle of market segment expansion, but this approach will also create a revolution in the Vietnamese confectionery and beverage industry. Stevia rebaudiana, or sweetleaf, is a herb in the same plant family as sunflowers and daisies that has long been known as a natural sweetener. However, it is not until recently that large confectionery and beverage corporations in the world start using the extracts of this species as alternatives for saccharose and glucose.
One prime example can be drawn from the case of Coca-Cola and Cargill, who jointly developed a stevia-based sugar-substitute called Truvia, achieving huge commercial success. The reason behind the magic of stevia is that it only contains a minimal amount of carbohydrate. Therefore, it can be used as both a sweetener and dietary supplement for treating blood glucose levels and alleviating high blood pressure. Apart from being the best choice for diabetics and hypertensives, stevia-based products are also often included in low-carbohydrate diets, designed specifically for people with obesity and people who want to keep a fit and healthy body. What’s more, it actually kills germs that cause tooth decay. It means children can enjoy sweet lollipops and soft drinks every day without worrying about their teeth.
In terms of marketing strategy, a natural and organic ingredient would definitely be a competitive edge. On the other hand, stevia is approximately 300 times sweeter than sugar. This amazing property would allow for sparing usage. This means a huge expenditure is saved and products’ price is lowered in the time when inflation elevates cost of ingredients and shrinks KinhDo’s profits by remarkable amounts. Additionally, Kinh Do would gain the initiative in production by self-producing one of its major ingredients. All these features would contribute to the acceleration of Kinh Do’s sales. Everything considered, a promising project for Kinh Do would be to establish a plantation area of Stevia rebaudiana species along with a factory in Laos.
Apart from producing stevia-based confectioneries and beverages, the factory would also specialize in processing stevia extracts, mostly for rebiana, the sweetest portion in the leaf, to sell this sweetener alone as an end-product. The reason for the choice of location is that Laos is a potential market for Vietnamese investors. Firstly, the present political commitments between the two governments make way for a sustainable co-operation between firms. Secondly, labour cost in Laos is much cheaper than that of Vietnam. Since stevia processing is quite demanding, the lower labour costs should ensure profitability. Last but not least, while stevia is already rather easy to cultivate, the tropical climate in Laos would make work even easier because it can simulate stevia’s habitats in South America with little difficulty. 1. 1. Initial investment Stevia would produce around 8-10 crops with 8 tonnes of dried leaves/ha per year. Assume that it would take an initial investment of $13,000,000 to plant up 5,000 ha of stevia and establish a factory in Laos. In 2012, the free cash flow of Kinh Do was approximately 382. 5 billion dong (approx $17. 8 million) and the shareholder’s equity was over 4000 billion dong, which is about $186 million. Hence, this investment is reasonable, in that the risk of solvency is rather low. * Apart from hiring intensive labour in both the fields and the factory, doing researches to take the full advantage of stevia and produce high quality products, we also need to spend a lot on modern equipment and machinery.
Hence, the project should be implemented at least in 10 years’ time in order to offset the high capital expenditures. * Straight line method is applied to compute depreciation. If we spent $3,000,000 on fixed assets with the depreciation rate of 9% each year in a period of 10 years, the salvage value would be $300,000. * Debt ratio: It is likely that debt ratio and current liabilities of Kinh Do Company would increase because of this large investment. However, with a huge financing potential, Kinh Do is capable of keeping the debt ratio at around 30%. * The opportunity cost of this project is $17,775,728, which is the sum of money we would have if we deposited the principle in the bank in 10 years from now. 1. 2. Working Capital We assume that the proportion of working capital per revenue is 25% and the initial investment in working capital is USD 5,000,000 (Working Capital = Current Assets – Current Liabilities) 1. 3. Cash Flow Details * In the first year, Kinh Do has to invest a huge amount of fixed expenses (USD 3,700,000), including cost of construction and equipment (for the factory), land, labor and fertilizer cost (for growing and taking care of stevia), marketing and advertising cost for new line of stevia-based products… * As a result of enormous investment, revenue in the first year is also substantial (USD 5,800,000). These exceptional features of stevia-based products as mentioned above would attract a large number of loyal customers, thus adding to the acceleration of Kinh Do’s sales.
New line of products shows a great renovation in the development of Kinh Do Corporation. * The percentage of variable expenses is 25% (of revenue) because they include selling and administrative costs, production cost… * According to Enterprise Income Tax Law, tax rate applied for Kinh Do Corporation is 25% of net income. 1. 4. Growth Rate * The first year is the time for planning and setting the facilities. From that time onwards, the plantation project will be going to the exploitation stage. It can be seen that from year 1 to year 5, the revenue and fixed expense growth rate is considerable, respectively 280%, 400%, 380% and 200%. It is the flourishing period of the growth rate.
Effective marketing plans and outstanding characteristics of stevia-based products contributes to the soaring revenue growth rate of 400% in the third year before falling gradually in the final stage of this project since the popularity of using stevia-based products declines. It remains stable approximately at 40% in the period of last 3 years. 1. 5. NPV and IRR Using functions of Excel, we can calculate NPV and IRR of this project NPV =| $940,118,900| IRR =| 11. 65%| As you can see from the table, NPV and IRR are positive. So this project is profitable. 2. Project B: Building a factory to produce instant noodles The change in lifestyles and living pace makes fast food take an important role in our daily life.
Therefore, the demand for such cheap and convenient food as porridge and instant noodles is dramatically increasing year by year. Vietnam consumed an estimated 4. 3 billion cups of instant noodles in 2011, the fourth highest in the world after China, Indonesia and Japan, according to some researchers. Demographically, the market is promising, with citizens aged 30 or under comprising about 60% of the population. For this reason, investing on producing noodles is an opportunity that Kinh Do cannot overlook. Vietnam’s instant noodles market is extremely competitive, with the steady introduction of brands providing consumers with a wide variety of choices.
To compete with other competitors, Kinh Do should consider buying a modern production line with Korean technology in order to clearly differentiate their products from the market, hence making this project a good growth path. 2. 1. Initial investment * Assume that the initial investment for this project is $7,000,000 (equivalent to 20 billion dong) because to produce instant noodles Kinh Do should invest a large amount of capital to buy technology as well as production line, which is, in this case, imported from Korea. As long as that, Kinh Do should spend a lot on packaging and opening outlets. Also, this amount of money is appropriate and will not put Kinh Do into bad debt considering its capital of more than 4 thousand billion dong. Implement the length of this project is 7 years as it often takes 1-2 years to set up factory, do researches on the consumer’s taste and flavor, invent special ingredients before settling down the manufacturing process. Furthermore, the promoting products period and boosting revenue usually takes for 6-7 years. * The opportunity cost of this project is $5,796,274 – which is the difference in return between this investment and another decision that we choose not to make. In this case, we have given up the annual interest rate of 9% if we put all this amount of money into a bank’s saving account. * Depreciation is calculated by using Straight-line method.
Considering all the advantages of the 1st project over the 2nd project and also the NPV and IRR estimated, it’s no doubt that the 1st project allegedly brings about higher profits for Kinh Do correspondingly it will constantly far outweigh the 2nd one in the future. CONCLUSION As a matter of the current industrial momentum and multination integrating trend, effective business transaction is basically considered a long-term target to fulfill of all enterprises. With regard to each business, it is obvious that financial business is one of the indispensable factors playing a vital role in production activities. Consequently, entrepreneurs can barely pick the best bet for their business transactions via setting up financial analysis.
In specific words, Kinh Do Corporation has undoubtedly proposed their weak and strong aspects to unfold the serious effects in the not so distant future. Based on statistics analysis of owner’s equity, assets and liabilities and liquidity to name but a few, we certainly realize that Kinh Do has run the business fairly effectively contributing to production sustainability in Vietnam. Nevertheless, immediate liquidity, resource mobilization are cited as the main culprit of going worse financial condition. Therefore, Kinh Do still has to try hard to remedy the situation. It is not a short-term matter that production and finance activities can be resolved.
Hence, Kinh Do Corporation as well as many other companies is currently taking subsequent steps to inquire and accumulate experiences boosting the general economy sustainable development. In order to get these goals, we have come up with two new projects and analyzed them to find out the most potential project for Kinh Do in the future, which is the plantation of stevia in Laos. REFERENCES 1. Official website: http://kinhdo. vn/ 2. Ratios Analysis: http://www. readyratios. com/reference/market/ 3. Instant noodles consumption, http://www. masangroup. com/masanconsumer/en/vietnam-food-beverage/food/convenience-foods/instant-noodles 4. Ng? t d? g M;amp;A Kinh Do, Phuong Trinh, http://vnbrand. net/Nhuong-quyen-thuong-hieu/ngot-dang-maa-kinh-do. html 5. http://www. bvsc. com. vn/Baoviet/website/Uploaded/Congtyphantich/BVSC%20-%20Cap%20nhat%20nhanh%20KDC%20Q3. 2012. pdf 6. Tham v? ng va thach th? c – t? p doan Kinh Do, http://banhkinhdo. com/trung-thu-tinh-yeu/tham-vong-va-thach-thuc-tap-doan-kinh-do. htm 7. http://finance. vietstock. vn/KDC/tai-chinh. htm 8. Company Report – Kinh Do Corporation, ThangLong Express, 2009 9. Sugar Substitutes on the Glycemic Index, Anglee Jacob, Mar 2011 10. Cu? c cach m? ng c? a du? ng va cac ch? t t? o v? ng? t, stevia, http://www. diepluc. com/portal/index. hp/thong-tin/286-cuc-cach-mng-ca-ng-va-cac-cht-to-v-ngt-stevia 11. http://tailieu. vn/xem-tai-lieu/cac-yeu-to-pest-trong-hoat-dong-marketing. 156444. html 12. http://www. marketingpro. com. vn/mo-hinh-pest-trong-nghien-cuu-moi-truong-vi-mo-phan-1_p1_1-1_2-1_3-828_4-895_9-2_11-10_12-5_13-52. html 13. Cac y? u t? c? a moi tru? ng vi mo c? a doanh nghi? p, http://www. voer. edu. vn/module/kinh-te/cac-yeu-to-cua-moi-truong-vi-mo-cua-doanh-nghiep. html CONTENTS LETTER OF TRANSMITTAL1 INTRODUCTION2 CHAPTER 1: OVERVIEW4 I. General Idea4 II. History of Kinh Do5 III. Kinh Do’s business domains7 IV. Kinh Do’s status8 CHAPTER 2: ENVIRONMENT SCANNING10 I. Macro Environment Analysis10 1.
Political factors (P)10 2. Economical factors (E)10 3. Social factors (S)11 4. Technological factors (T)12 II. Micro Environment Analysis13 1. Suppliers13 1. 1. Ingredients13 1. 2. Current suppliers13 1. 3. Advantages of Kinh Do from the suppliers14 1. 4. Disadvantages of Kinh Do from suppliers14 1. 5. Work force15 1. 6. Kinh Do to the suppliers15 2. Substitutes15 3. Consumers16 3. 1. Market potential16 3. 2. North Kinh Do joint stock company16 3. 3. South Kinh Do joint stock company17 4. Competitors17 4. 1. Competitive level17 4. 2. Competitor information18 I. Overall Analysis of Kinh Do Corporation19 1. Asset Analysis19 2. Capital Analysis25 3.

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