Financial Accounting Assignment

Foreign Trade University

Cấp 3:

• Topic: Vinamilk’s financial statement analysis

• Our members: Nguyen Mai Linh – 1911140541: OVERALL

Duong Thi Hang (leader) – 1911140011: HORIZONTAL ANALYSIS
Tran Hanh Trang – 1918140122: VERTICAL ANALYSIS
Nguyen Thi Vy Anh – 1911160704: RATIOS ANALYSIS
Le Thi Ngoc Khanh – 1911140015: RATIO ANALYSIS

Hanoi, 2020
Table of Contents

I. OVERVIEW 4
1. The widespread of Vinamilk in the dairy industry: 4
2. The development situation of Vietnam’s dairy industry: 5
3. Vinamilk’s development strategy: 6

II. HORIZONTAL ANALYSIS: 3-YEAR COMPARISON 9

1. Balance Sheet 9
2. Change in amount of accounts in the Balance Sheet 11
3. Change in percentage of accounts in Balance Sheet 14
4. Horizontal Analysis and Explanation of the Balance Sheet 15
ASSET 15
Trend analysis overview 16
Figure of 2018 16
Explanation for 2018's figure 16
Figure of 2019 17
Explanation for 2019's figure 17
RESOURCES 18
Figure of 2019 18
Explanation for 2019’s figure 18

5. Income Statement 19
6. Change in amount of accounts of Income Statement 21
7. Change in percentage of accounts of Income Statement 23
8. Horizontal Analysis of Income Statement 25
Figure of 2019 25
Analysis of 2019’s figure: 25

III. VERTICAL ANALYSIS 26

1. Balance Sheet in Vertical Analysis 26
2. Vertical Analysis 27
Overall 27
Explainatiom for 2018 and 2019’s figures 27

IV. RATIO ANALYSIS 29

1. 2019 analysis 30
a. Liquidity ratios 30
• Current ratio 30
• Quick ratio 30
 b. Capital structure 31
• Debt to Total Assets Ratio 31
• Debt to Total Equity Ratio 31
c. Operating efficiency 32
d. Profitability 33

2. Ratio Analysis: three-year comparison (2017-2019) 34

a. Liquidity 35
b. Capital structure 36
c. Operating efficiency 37
d. Profitability 38
 I. OVERVIEW
1. The widespread of Vinamilk in the dairy industry:
Vinamilk is the abbreviation for Vietnam Dairy Products Joint Stock Company. This is a
company which produces and trades milk and dairy products as well as related machinery
and equipment in Vietnam. According to the United Nations Development Program, this is
the 15th largest company in Vietnam in 2007.

Vinamilk is currently the leading enterprise in the dairy processing industry, currently
occupying 54.5% market share of liquid milk, 40.6% market share of powdered milk,
33.9% market share of drinking yogurt,
84.5%. yogurt market share and 79.7%
market share of condensed milk
nationwide. In addition to strong
domestic distribution with a network of
more than 220,000 sales points
covering 63 provinces and cities,
Market share of dairy companies by net sales in Vietnam, 2017
Vinamilk products are also exported
to 43 countries around the world such as the US, France, Canada, Poland, Germany, and
Japan. in the Middle East, Southeast Asia ... After more than 40 years of launching
consumers, till now Vinamilk has built 14 production plants, 2 logistics factories, 3
branches of sales office, and a milk factory in Cambodia (Angkormilk) and a
representative office in Thailand.

According to the Brand Footprint chart which is a measure to measure the number of
households in the study choosing to buy a brand (percentage of households buying) and
how often (frequency of purchase). Vinamilk's CRP (Consumers Reach Point) score leads
the rankings and is the most chosen brand in the dairy industry in both urban and rural
areas. Especially, this is the 7th consecutive year Vinamilk ranks first.
The creativity in meeting the increasingly diverse needs of consumers have helped
Vinamilk maintain its leading position in the Vietnamese dairy market for many consecutive
years. According to another market research report, conducted by Nielsen Vietnam,
Vinamilk currently leads the domestic market in both volume and sales of liquid milk and
infant formula, for 12 months consecutively (from March 2018 to February 2019)

As the leading nutrition company in Vietnam, Vinamilk always shows the leading in
innovating and developing new products that meet the highest international standards.
The company constantly introduces new products according to the world's advanced
nutritional trends such as 100% organic fresh milk, 100% A2, and the first European-
standard Vinamilk Organic Gold baby formula and are being well received by consumers.

2. The development situation of Vietnam’s dairy industry:

While the business and production situation of many other industries were affected by the
global economic crisis and recession, Vietnam's dairy industry still achieved impressive
growth. According to EMI, revenues from Vietnam's dairy industry in 2015 were estimated
at 92.000 billion VND, rising 23% compared to VND 75 trillion in 2014. Also according to
EMI, the two main products leading to the growth of the industry are liquid milk and
powdered milk with a total market value of about 75%. With the strong investment of
businesses, in 2017, Vietnam's milk export reached $300 million, mainly yogurt, liquid milk.
The revenue growth of the dairy industry in 2017 compared to 2016 is estimated at about
10% with two main and most important products which are liquid milk and powdered milk.
The total market value of these two accounted for nearly three-quarters of the market
value. In which liquid milk reached 1333.4 million liters, increasing 6.6% compared to 2016.
Powdered milk reached 127.4 thousand tons, soaring at 10.4% compared to 2016. Vietnam
Dairy Products Joint Stock Company (Vinamilk) contributed approximately 50% of the total.

The world ended 2010s with many concerns from the US-China trade war and US-Iran
military tensions. This has somewhat affected the global economy as GDP only grew by
2.6% in 2019, the lowest since 2008. The growth of Vietnam’s dairy industry has yet fully
reflected its potential and indicates that there were still some headwinds for this industry
last year. First, the African swine fever has caused much damage to Vietnam’s agricultural
sector during the period of 2018-2019. More than 60% of Vietnam’s population is still living
in the rural areas which has a massive impact on the consumption of FMCG in general and
dairy products in particular. Milk consumption in Vietnam was still low, on an average of
20kg per capita in 2019.

Retail sector in general and dairy industry in particualr have well performed. Dairy products
recorded decent growth in 2019, led by yogurt and liquid milk. Apart from this, products
using natural materials and supporting digestion are getting a lot more popular. Morover,
consumers are raising demand for convenient products. Instant powdered milk has
achived impressive growth. These trends are both opportunities and challenges for dairy
businesses in order to meet diverse consumer demand.

3. Vinamilk’s development strategy:

Throughout more than 30 years of its establishment, Vinamilk has witnessed significant
achievements both nationally and globally.

The company's business activities include: producing and trading milk powder, powdered
milk, nutritious powder and other dairy products; producing and selling sweets, soya milk
and soft drinks; developing marketing in food technology, spare parts, equipment,
chemicals and raw materials; selling in other businesses in accordance with the provisions
of law.

The targetted customers and markets are pretty clear. We can classify the company’s
customers into the following categories: customers who are the consumers of the
company’s products, have the need to use and want to satisfy that need; customers who
are the distributors, wholesalers, retailers, agents of the company helping the company to
distribute products. Their targetted market is the domestic market, however, spreading
internationally is inevitable when it comes to the situation of Vinamilk.

Vinamilk has achieved several milestones. In 2017, Vinamilk officially entered the top 2000
world’s largest listed companies and Top 50 world’s largest dairy companies. Moreover,
the company also acquired 65% share capital of Vietnam Sugar JSC and 25% share capital
of Asia Coconut Processing JSC in the same year. During the period of 2018 to 2019,
Vinamilk issued the Regulation on anti-fraud and anti-corruption and established the
Compliance Committtee. In year 2019 as we are speaking, Vinamilk officially owned 75%
of GTN-Foods Joint Stock Company, and welcomed new members, namely GTNFoods and
Moc Chau Milk.

For the upcoming years, Vinamilk has also planned on some specific strategies to boost
their growth even more.

The long-term development strategy of Vinamilk is to achieve the target revenue of USD 3
billion and become one of the 50 biggest dairy companies in the world in the period of
2012-2017. Within this period, there are 3 important areas that create the driving forces
to help Vinamilk achieve its mission: developing strategic human resource management;
maintaining and managing activities towards sustainable development; planning and
implementing Knowledge, Innovation, and Change management.

Vinamilk’s strategic priorities are tangible. First, they are going to focus on assets
investment plan. They plan to maintain dividend payments to shareholders with an annual
dividend rate of at least 30% on per value.

Secondly, they will pay more attention to customers which is to be an enterprise with high
customer satisfaction on product quality, affordable prices, and the leading distribution
system in Vietnam.
Finally, mentioning corporate governance, they want to be an enterprise with accredited
professional management and structure as well as to be an enterprise where the working
environment enables employees to make out their best capabilities and contribution to
the common goals, thus being one of the best working places for employees.

There is no disputing the fact that Vinamilk is the best company in the dairy field in
Vietnam. In 2020, due to the influence of the global pandemic (Covid-19) and market goes
down, Vinamilk stock price decreases. However, when the market recovers, the price will
soonly go up quickly. Therefore, it is expected that the business’s situation will not
fluctuate significantly as Vietnam is doing its best job to reverse the spread of the disease.

Apart from this, we should also pay attention to the numbers of the year 2019 and analyze
the figures carefully in order to make specific predictions and suggestions in the future.
 II. HORIZONTAL ANALYSIS: 3-YEAR COMPARISON
1. Balance Sheet

Vietnam Dairy Products Joint Stock Company

Balance Sheet
31 December (in millions VND)

2017 2018 2019

ASSET

Current assets 20,307,434,789,529 20,559,756,794,837 24,721,565,376,552

Cash and cash

equivalents 963,335,914,164 1,522,610,167,671 2,665,194,638,452
Short term financial
investments 10,561,714,377,337 8,673,926,951,890 12,435,744,328,964
Accounts Receivable -
Short term 4,591,702,853,157 4,639,447,900,101 4,503,154,728,959
Inventories 4,021,058,976,634 5,525,845,959,354 4,983,044,403,917
Other current assets 169,622,668,237 197,925,815,821 134,427,276,260

Long-term assets 14,359,884,047,968 16,806,351,859,342 19,978,308,009,482

Account receivables -
Long term 53,774,889,824 88,443,241,642 21,169,968,995
Fixed assets 10,609,309,098,847 13,365,353,599,098 14,893,540,216,703
Investment property 95,273,270,528 90,248,200,759 62,018,116,736
Long-term work in
progress 1,928,569,256,697 868,245,878,253 943,845,551,903
Long-term financial
investments 555,497,854,952 1,068,660,695,119 986,676,290,429
Other non-current
assets 1,117,459,677,120 1,325,400,244,471 3,071,057,864,716

TOTAL ASSETS 34,667,318,837,497 37,366,108,654,179 44,699,873,386,034

RESOURCES

LIABILITY 10,794,261,023,636 11,094,739,362,252 14,968,618,181,670

Current liabilities 10,195,562,827,092 10,639,592,009,462 14,442,851,833,360

Long-term liabilities 598,698,196,544 455,147,352,790 525,766,348,310

EQUITY 23,873,057,813,861 26,271,369,291,927 29,731,255,204,364

Owners' equity 23,873,057,813,861 26,271,369,291,927 29,731,255,204,364
TOTAL RESOURCES 34,667,318,837,497 37,366,108,654,179 44,699,873,386,034
2. Change in amount of accounts in the Balance Sheet

Vietnam Dairy Products Joint Stock Company

Three-year comparison
31 December (in millions VND)

Change in amount 2017 2018 2019

ASSET

Current assets NA 252,322,005,308 4,414,130,587,023

Cash and cash equivalents NA 559,274,253,507 1,701,858,724,288

Short term financial investments NA (1,887,787,425,447) 1,874,029,951,627

Accounts Receivable - Short term NA 47,745,046,944 (88,548,124,198)

Inventories NA 1,504,786,982,720 961,985,427,283

Other current assets NA 28,303,147,584 (35,195,391,977)

Long-term assets NA 2,446,467,811,374 5,618,423,961,514

Account receivables - Long term NA 34,668,351,818 (32,604,920,829)

Fixed assets NA 2,756,044,500,251 4,284,231,117,856

Investment property NA (5,025,069,769) (33,255,153,792)

Long-term work in progress NA (1,060,323,378,444) (984,723,704,794)

Long-term financial investments NA 513,162,840,167 431,178,435,477

Other non-current assets NA 207,940,567,351 1,953,598,187,596

TOTAL ASSETS NA 2,698,789,816,682 10,032,554,548,537

RESOURCES

LIABILITY NA 300,478,338,616 4,174,357,158,034

Current liabilities
NA 444,029,182,370 4,247,289,006,268

Long-term liabilities
NA (143,550,843,754) (72,931,848,234)

EQUITY NA 2,398,311,478,066 5,858,197,390,503

Owners' equity NA 2,398,311,478,066 5,858,197,390,503

TOTAL RESOURCES NA 2,698,789,816,682 10,032,554,548,537

3. Change in percentage of accounts in Balance Sheet

Vietnam Dairy Products Joint Stock Company

Three - year comparison
31 December (in millions VND)

2017 2018 2019

ASSET

Current assets NA 1% 22%

Cash and cash equivalents NA 58% 177%

Short term financial investments NA -18% 18%
Accounts Receivable - Short term NA 1% -2%
Inventories NA 37% 24%
Other current assets NA 17% -21%

Long-term assets NA 17% 39%

Account receivables - Long term NA 64% -61%

Fixed assets NA 26% 40%
Investment property NA -5% -35%
Long-term work in progress NA -55% -51%
Long-term financial investments NA 92% 78%
Other non-current assets NA 19% 175%
TOTAL ASSETS NA 8% 29%
RESOURCES

LIABILITY NA 3% 39%

Current liabilities NA 4% 42%

Long-term liabilities NA -24% -12%

EQUITY NA 10% 25%

Owners' equity NA 10% 25%
TOTAL RESOURCES NA 8% 29%

4. Horizontal Analysis and Explanation of the Balance Sheet

ASSET

50,000,000,000,000
45,000,000,000,000
40,000,000,000,000
35,000,000,000,000
30,000,000,000,000
Current assets
25,000,000,000,000
Long-term assets
20,000,000,000,000
TOTAL ASSETS
15,000,000,000,000
10,000,000,000,000
5,000,000,000,000
0
2017 2018 2019
Trend analysis overview
Total assets of Vinamilk experienced an increasing trend over the 3-year period, from 2017
to 2019, with both current assets and long-term assets went up in value. In particular, the
percentage of currents assets in 2019 increased by 22% compared to that of 2017.

Figure of 2018
There was no significant change in current assets of 2018 compared to the previous year.
It is noticeable that there was a decline in short-term financial investments by 18% whereas
inventories experienced the opposite trend. In particular, held-to maturity investment
declined significantly; this led to a decrease in short-term investments. Cash and
equivalents witnessed an increase. When it comes to long-term assets, account receivable
went up considerably. Fixed assets increased by 26% while long-term work in progress
declined by 55%. Besides, long-term investments doubled its figure of 2017.

Explanation for 2018's figure

Decline in financial imvestments results from a decline in held-to-maturity investments in
2018, meaning that the company gained a large amount of money from short-term
financial investments. The company used this to produce more inventories.
A surge in inventories is also attributed to the challenging and unfavorable factors of the
economic climate in 2018, mainly caused by the US-China trade war breaking out in April.
Tariffs and sanctions introduced by both sides throughout months of 2018 have raised
investors’ concerns about trade instability and the possibility of holding back economic
growth prospects. Moreover, the ongoing Brexit issue between the UK and Europe also
created additional pressures and fears of ongoing instabilities in developed countries.
Hence, both goods in transit and goods on consignment increased significantly.
Cash and cash equivalent increased in 2018 reflected the company's strategies: keep call
deposit in high value.
Fixed assets considerable increase is explained by the company's huge investments in
farmland as well as modern technology and equipment. In fact, in the year 2018, the
company almost finished the construction of Vinamilk Dalat Farmland, with scale of
1,00heads.
Besides, all dairy cow breeding systems are invested and built by the Company based on
modern, world-class design and technology consultancy from countries such as the US,
Sweden and Israel.
Long-term investments increased considerably due to the country movement of investing
in LAO-JAGRO DEVELOPMENT XIENGKHOUANG CO., LTD. Specifically, Vinamilk invested in
a 51% share of Lao-Jagro Development XiengKhouang Co., Ltd to develop a heaven for
cows in Laos.

Figure of 2019
Current assets increased significantly by 22% compared to figure in 2017. Cash and
equivalent marked a great improvement with a surge by 177%. The company continued to
pour money in short-term financial investment. Long-term assets continued its upward
trend, 39% higher than the year 2017. Long-term work in progress decreased. Non-current
assets rocketed to 44,699,873,386,034, going up by 175%.

Explanation for 2019's figure

Cash and equivalent increased as the company reserve more cash in bank.
Increase in short-term financial investment is due to increase in held-to-maturity
investments.
Fixed assets continued to increase as the company enhanced its buildings and structures
as well as investing in machinery and equipment.
Non-current assets increase originated from the company's acquisition of 75%
of equity interest of GTNFoods Joint Stock Company.
RESOURCES

50,000,000,000,000
45,000,000,000,000
40,000,000,000,000
35,000,000,000,000
30,000,000,000,000
LIABILITY
25,000,000,000,000
EQUITY
20,000,000,000,000
TOTAL RESOURCES
15,000,000,000,000
10,000,000,000,000
5,000,000,000,000
0
2017 2018 2019

Figure of 2019
Liabilities and equity of Vinamilk witnessed an upward trend as well. Current liabilites
and equity increased significantly in 2019.

Explanation for 2019’s figure

Current liabilities and equity increased significantly in 2019. However, the current assets
also increased accordingly as time goes by. This suggests little concern as to the
company's financial health.
5. Income Statement

Vietnam Dairy Products Joint Stock Company

Income Statement
31 December (in millions VND)

2017 2018 2019

Revenue from sales of
good and provision of
services 51,134,899,765,079 52,629,230,427,284 56,400,229,726,717

Revenue deductions 93,823,879,970 67,280,456,692 82,106,963,973

Net revenue 51,041,075,885,109 52,561,949,970,592 56,318,122,762,744

Cost of sales 26,806,931,066,476 27,950,543,501,501 29,745,906,112,117

Gross profit 24,234,144,818,633 24,611,406,469,091 26,572,216,650,627

Financial income 816,316,778,535 759,917,391,001 807,316,707,483
Financial expenses 87,037,548,276 118,007,001,674 186,969,681,828
In which: interest
expense 29,438,568,563 51,367,418,852 108,824,893,987
Share of profit in
associates 67,133,981,642 22,433,720,557 -5,716,591,103
Selling expenses 11,536,533,571,799 12,265,936,906,433 12,993,454,552,852
General and
administration expenses 1,267,606,271,090 1,133,300,231,790 1,396,302,416,955
Net operating profit 12,226,418,187,645 11,876,513,440,752 12,797,090,115,372
Other income 213,080,586,430 450,247,329,980 249,446,259,179
Other expense 210,553,389,939 275,064,504,609 250,826,735,994

Results of other activities 2,527,196,491 175,182,825,371 -1,380,476,815

Profit before tax 12,228,945,384,136 12,051,696,266,123 12,795,709,638,557

Income tax expense -

current 1,967,066,705,229 1,874,905,225,483 2,238,365,796,113

Income tax benefit -

deferred -16,295,874,259 -28,838,670,599 3,011,961,553

Net profit after tax 10,278,174,553,166 10,205,629,711,239 10,554,331,880,891

Attributable to:
Equity holders of the
company 10,295,665,148,846 10,227,281,151,464 10,581,175,671,989
Non-controlling interest -17,490,595,680 -21,651,440,225 -26,843,791,098

Basic earnings per share 5,296 5,295 5,478

6. Change in amount of accounts of Income Statement

Vietnam Dairy Products Joint Stock Company

Income Statement: 3-year comparison
31 December (in millions VND)

Change in amount 2017 2018 2019

Renevue from sales of good and
provision of services NA 1,494,330,662,205 5,265,329,961,638
Revenue deductions NA (26,543,423,278) (11,716,915,997)

Net revenue NA 1,520,874,085,483 5,277,046,877,635

Cost of sales NA 1,143,612,435,025 2,938,975,045,641

Gross profit NA 377,261,650,458 2,338,071,831,994

Financial income NA (56,399,387,534) (9,000,071,052)
Financial expenses NA 30,969,453,398 99,932,133,552
In which: interest expense NA 21,928,850,289 79,386,325,424
Share of profit in associates NA (44,700,261,085) (72,850,572,745)
Selling expenses NA 729,403,334,634 1,456,920,981,053

General and administration expenses NA (134,306,039,300) 128,696,145,865

Net operating profit NA (349,904,746,893) 570,671,927,727

Other income NA 237,166,743,550 36,365,672,749
Other expense NA 64,511,114,670 40,273,346,055

Results of other activities NA 172,655,628,880 (3,907,673,306)

Profit before tax NA (177,249,118,013) 566,764,254,421

Income tax expense - current NA (92,161,479,746) 271,299,090,884

Income tax benefit - deferred NA (12,542,796,340) 19,307,835,812

Net profit after tax NA (72,544,841,927) 276,157,327,725

Attributable to:
Equity holders of the company NA (68,383,997,382) 285,510,523,143
Non-controlling interest NA (4,160,844,545) (9,353,195,418)

Basic earnings per share NA (1) 182

7. Change in percentage of accounts of Income Statement

Vietnam Dairy Products Joint Stock Company

Income Statement: 3-year comparison
31 December (in millions VND)

Change in percentage 2017 2018 2019

Revenue from sales of good and
provision of services NA 3% 10%
Revenue deductions NA -28% -12%

Net revenue NA 3% 10%

Cost of sales NA 4% 11%

Gross profit NA 2% 10%

Financial income NA -7% -1%
Financial expenses NA 36% 115%
In which: interest expense NA 74% 270%
Share of profit in associates NA -67% -109%
Selling expenses NA 6% 13%
General and administration
expenses NA -11% 10%

Net operating profit NA -3% 5%

Other income NA 111% 17%
Other expense NA 31% 19%
Results of other activities NA 6832% -155%

Profit before tax NA -1% 5%

Income tax expense - current NA -5% 14%

Income tax benefit - deferred NA 77% -118%

Net profit after tax NA -1% 3%

Attributable to:
Equity holders of the company NA -1% 3%
Non-controlling interest NA 24% 53%

Basic earnings per share NA 0% 3%

 8. Horizontal Analysis of Income Statement

60,000,000,000,000

50,000,000,000,000

40,000,000,000,000 Net revenue

Cost of sales
30,000,000,000,000 Cost of sales
Net operating profit
20,000,000,000,000 Results of other activities
Profit before tax

10,000,000,000,000 Net profit after tax

0
1 2 3

-10,000,000,000,000

Figure of 2019
Horizontal analysis of the income statements shows the following changes. Net sales increased
by 10%. Cost of goods sold increased by 11% . Financial expenses increased significantly by
115%. Share of profit in associates was negative in 2019, declining sharply from the year 2017.
Overall, gross profit increased 10% and net profit after tax increased 3%.

Analysis of 2019’s figure:

The company expansion in the market enabled it to reach broader range of customers. Hence,
although there is an unexpected decline in demand for dairy products in recent years (partly
caused by a decrease in birthrate of Vietnam), the company still managed to diverse its market
by exporting to China, Singapore, etc.

Share of profit in associates plunged as a result of poor performance of GTNFoods Joint Stock
Company, leading to a decline in the share of profit.
 III. VERTICAL ANALYSIS
1. Balance Sheet in Vertical Analysis

2017 2018 2019

ASSET
Amount Percent Amount Percent Amount Percent
Current assets 20,307,434,789,529 58.58% 20,559,756,794,837 55.02% 24,721,565,376,552 55.31%

Cash and cash

equivalents 963,335,914,164 2.78% 1,522,610,167,671 4.07% 2,665,194,638,452 5.96%
Short term
financial
investments 10,561,714,377,337 30.47% 8,673,926,951,890 23.21% 12,435,744,328,964 27.82%
Accounts
Receivable -
Short term 4,591,702,853,157 13.25% 4,639,447,900,101 12.42% 4,503,154,728,959 10.07%
Inventories 4,021,058,976,634 11.60% 5,525,845,959,354 14.79% 4,983,044,403,917 11.15%
Other current
assets 169,622,668,237 0.48% 197,925,815,821 0.53% 134,427,276,260 0.31%

Long-term
assets 14,359,884,047,968 41.42% 16,806,351,859,342 44.98% 19,978,308,009,482 44.69%

Account
receivables -
Long term 53,774,889,824 0.16% 88,443,241,642 0.24% 21,169,968,995 0.05%
Fixed assets 10,609,309,098,847 30.60% 13,365,353,599,098 35.77% 14,893,540,216,703 33.32%
Investment
property 95,273,270,528 0.27% 90,248,200,759 0.24% 62,018,116,736 0.14%
Long-term work
in progress 1,928,569,256,697 5.56% 868,245,878,253 2.32% 943,845,551,903 2.11%
Long-term
financial
investments 555,497,854,952 1.60% 1,068,660,695,119 2.86% 986,676,290,429 2.21%
Other non-
current assets 1,117,459,677,120 2.81% 1,325,400,244,471 3.55% 3,071,057,864,716 6.86%

TOTAL
ASSETS 34,667,318,837,497 100% 37,366,108,654,179 100% 44,699,873,386,034 100%

RESOURCES
LIABILITY 10,794,261,023,636 31.14% 11,094,739,362,252 29.69% 14,968,618,181,670 33.49%

Current
liabilities 10,195,562,827,092 29.41% 10,639,592,009,462 28.47% 14,442,851,833,360 32.31%
Long-term
liabilities 598,698,196,544 1.73% 455,147,352,790 1.22% 525,766,348,310 1.18%

EQUITY 23,873,057,813,861 68.86% 26,271,369,291,927 70.31% 29,731,255,204,364 66.51%

Owners' equity 23,873,057,813,861 68.86% 26,271,369,291,927 70.31% 29,731,255,204,364 66.51%

TOTAL
RESOURCES 34,667,318,837,497 100% 37,366,108,654,179 100% 44,699,873,386,034 100%

2. Vertical Analysis
Overall
The amount of total assets increased over time. However, after a slight increase in total
assets from 34,667 billion VND to 37,366 billion VND between 2017 and 2018, Vinamilk
observed a sharp growth in their total assets in 2019. This is attributed to the increase in
both current assets and long-term assets.

Explaination for 2018 and 2019’s figures

In 2018, Vinamilk's total assets reached VND 37,366 billion - an increase of 8% compared
to 2017, notably the inventory increased by more than VND 1,500 billion (37.42%), fixed
assets increased by VND 2,756 billion (25.98%). In addition, short-term receivables, long-
term and long-term financial investments also increased over the previous year. Short-
term financial investments decreased by VND 1,887 billion (-17.87%), long-term unfinished
assets decreased by VND 1,060 billion (-54.98%) and investment properties decreased by
5.27% compared to 2017. Besides , equity at the end of 2018 reached VND 26,271 billion
(up 10%), short-term debt reached VND 10,639 billion (up 4%) and long-term debt was
reduced, only VND 455 billion, down 24% compared to 2017. So with the increase in equity
and the share of short-term financial investments, the company spends most of its
inventory on fixed assets and assets.

Short-term financial investments increased sharply from VND 8,673 billion to VND 12,436
billion between 2018 and 2019 (approximately 43%, compared to -15,05% in 2017) while
cash, accounts receivable and inventories were stable. Vinamilk's fixed assets had more
than VND 14,893 billion, accounting for over 33.32% of total assets. This abundant money
also helped Vinamilk had more room for M&A companies to improve the value chain in the
beverage industry, besides the dairy segment. In 2019, Vinamilk bought 40.53% of the
equity of GTNFoods, which owns Moc Chau Milk.
Despite abundant sources of money, Vinamilk still stepped up borrowing in 2019, current
liabilities are about VND 14,442 billion while in 2018 only borrowed more than 10,639
billion. However, if compared to the total assets of over 40,000 billion, this liabilities level
was still under control.
IV. RATIO ANALYSIS
1. 2019 analysis
a. Liquidity ratios
Liquidity reflects Vinamilk's willingness to meet its short-term commitments by
investments that are more easily converted into cash. Assets that can be turned into cash
in a limited period of time are referred to as liquid assets; they are listed as current assets
in financial statements. Current assets are also referred to as working capital as these
assets are the resources required for the day-to-day activities of the long-term capital
projects of the investment. Current assets or existing liabilities are used to satisfy short-
term obligations, or current liabilities.
Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety
through the calculation of metrics including the current ratio, quick ratio, and operating
cash flow ratio. There are three commonly used liquidity ratios:
• Current ratio
The current ratio measures the ability of a company to pay off its current liabilities
(payable within one year) with its current assets such as cash, receivable accounts,
and inventories. The higher the ratio, the greater the liquidity status of the
company:
Current ratio = Current assets/ Current liabilities
• Quick ratio
The quick ratio is the ratio of quick assets (generally current assets less inventory)
to current liabilities; Indicates the company's ability to satisfy current liabilities with
its most liquid assets

Quick ratio = (Current assets – Inventory) / Current liabilities

 Current ratio 1.71

Quick ratio 1.36

Explanation: Both current and quick ratio were higher than 1 therefore current assets were
big and the liabilities were small. It proved that Vinamilk had a good liquidity position,
which means the company can easily pay off its current liabilities.

b. Capital structure
The capital structure is the particular combination of debt and equity used by a company
to finance its overall operations and growth. Debt comes in the form of bond issues or
loans, while equity may come in the form of common stock, preferred stock, or retained
earnings. Short-term debt such as working capital requirements is also considered to be
part of the capital structure.
Measuring capital structure:
• Debt to Total Assets Ratio
The debt to total assets ratio is an indicator of a company's financial leverage. It tells
you the percentage of a company's total assets that were financed by creditors. In
other words, it is the total amount of a company's liabilities divided by the total
amount of the company's assets.
Total assets ratio = (Short-term + long-term debt) / total assets
• Debt to Total Equity Ratio
The ratio is used to evaluate a company's financial leverage. The D/E ratio is an
important metric used in corporate finance. It is a measure of the degree to which
a company is financing its operations through debt versus wholly-owned funds.
More specifically, it reflects the ability of shareholder equity to cover all outstanding
debts in the event of a business downturn.
 Total Equity Ratio = Total Liabilities / Total Shareholders’ Equity

Debt to Total Assets Ratio 33%

Debt to Total Equity Ratio 50%

Explanation: Vinamilk had the total asset ratio equal ⅓, total equity ratio was ½ which was
< 1 - the medium number. This meant the majority of the assets of the company were
invested by stockholders’ equity, therefore the company had low risk businesses. As a
result, the financial flexibility of Vinamilk was higher.

c. Operating efficiency
The operating ratios measure company sales per another asset account the most common
asset accounts used are accounts receivable, inventory, and total assets. Operating ratios
measure the efficiency of the company in using its resources. Since most companies invest
heavily in accounts receivable or inventory, these accounts are used in the denominator of
the most popular operating ratios.
Operating ratios include inventory turnover, receivable turnover, payable turnover, asset
turnover.

Inventory turnover 5.6

Receivable turnover 16.4

Payable turnover 7.6

Asset turnover 1.37

Explanation: Vinamilk had the inventory turnover ratio pretty high (5.6) which meant the
company operated efficiently, fast sales, less inventory goods, administration ability with
inventory goods was efficient. The receivable turnover was high (16.4) proves that the
ability to recover receivables and debts from customers was highly effective. This could be
a sign that the company was mainly operating by cash and was careful in providing credit
to customers. Thirdly, the payable turnover was shown a good sign, the company didn’t
take much time in paying off those liabilities. Finally, the asset turnover was higher than 1
(1.37), meaning that 1 unit of assets does 1.37 units of revenue, it proves that the company
had profits. Moreover, Vinamilk was also showing their excellent ability in effectively using
equity.

d. Profitability
Profitability ratios measure the company’s ability to generate earnings relative to sales,
assets and equity. These ratios assess the ability of the company to generate earnings,
profits and cash flows relative to some metric, often the amount of money invested. They
highlight how effectively the profitability of the company is being managed.
There are 4 main types of profits: profits after taxes: net revenue, equity, total assets,
operating profits.

Profits after taxes (net revenue) 19%

Profits after taxes (equity ROE) 38%

Profits after taxes (total assets) 26%

Operating profits (net revenue) 23%

Explanation: All the ratios are positive, which means the company had gained interests and
profits and they were operating successfully. The ROE percentage = 38% proves that
Vinamilk activated effectively and 1 unit of equity does 0.38 unit of profits which is quite
high compared to other companies. The operating profits ratio shows that Vinamilk was
managed well and its level of solving risks was quite effective.

2. Ratio Analysis: three-year comparison (2017-2019)

Targets 2017 2018 2019 Note

Liquidity

Current ratio 2.0 1.9 1.71 Times

Quick ratio 1.6 1.4 1.36 Times

Capital structure

Debt to asset ratio 31% 30% 33%

Debt to equity ratio 45% 42% 50%

Operating efficiency

Inventory turnover 6.3 5.8 5.6 Times

Receivables turnover 17.6 15.0 16.4 Times

Payables turnover 8.1 7.4 7.6 Times

 Asset turnover 1.6 1.5 1.37 Times

Profitability

Profit after tax / Net revenue 20% 19% 19%

Profit after tax / Equity (ROE) 44% 41% 38%

Profit after tax / Total assets (ROA) 32% 28% 26%

Operating profit / Net revenue 24% 23% 23%

a. Liquidity

The current has had a steady decrease from 2.0 in 2017 to 1.9 in 2018, and finally
to 1.71 in 2019. This means that Vinamilk’s current liabilities are increasing in relation to
its current assets. Its quick ratio has also had a gradual decrease from 1.6 in 2017 to 1.4 in
2018 to 1.36 in 2019. This further supports the notion of a decrease in current assets in
relation with its current liability. It also means that Vinamilk’s ability to pay short-term
creditors has decreased. However, both of these trends are steady and slight, with both of
the ratios still above 1, which indicates that Vinamilk is still in a good position considering
liquidity. Vinamilk’s ability to pay off debt obligations are still high, but its margin of safety
is decreasing over time.

b. Capital structure

The debt to asset ratio has maintained a stable level with a 1% decrease from 31%
in 2017 to 30% in 2018, before climbing minimally to 33% in 2019. This indicates that
Vinamilk is maintaining a healthy level of financial leverage, and its paying off creditors
steadily at a constant rate. The company’s level of self-sufficiency has remained the same
over the years. Similarly, Vinamilk’s debt to equity ratio also had a slight decrease from
45% in 2017 to 42% one year later, however, this ratio had a sharp 8% increase to 50% in
2019. This means the company is actually owing more money to creditors in relations to
previous years. Although, this also means that they have more financial flexibility since its
capital is more concentrated in equity.

c. Operating efficiency

Targets 2017 2018 2019

Inventory turnover 6.3 5.8 5.6

Receivables turnover 17.6 15.0 16.4

Payables turnover 8.1 7.4 7.6

Asset turnover 1.6 1.5 1.37

The trend for inventory turnover is a gradual decrease from 6.3 in 2017 to 5.8 in
2018 to 5.6 in 2019. This means that the company has become less efficient in operation
but the diminishing value of decrease, from a reduction of 0.5 to a reduction of 0.2, also
means that this is leveling off. In contrast, its receivables turnover had a rapid drop in 2018
with 15.0, compared to 17.6 in the previous year, before having a considerable recovery,
going back up to 16.4. This indicates that Vinamilk has increased their ability to recover
receivables and debts from creditors, but remains to be lower than their value in 2017.
Similarly, payables turnover has also dropped from 8.1 to 7.4, from 2017 to 2018, with a
slight recovery to 7.6 in 2019. Vinamilk has somewhat remained a short amount of time to
pay off debts. Finally, asset turnover also observed a similar minimal decrease to inventory
turnover from 1.6 to 1.5 to 1.37 over the three years. Although decreasing, Vinamilk’s
ability to use equity effectively and generate profit remains to be steadily high.
d. Profitability

Although all the ratios remain to be positive over the three years, there seems to
be a drop in varying degrees throughout all of the ratios. Both the ROE and ROA
percentages both saw gradual decreases with ROE lowering from 44% to 41% to 38%, and
ROA dropping from 32% to 28% to 26%. This implies that Vinamilk’s ability to generate
profit has been decreasing in comparison with its equity and assets. However, the decrease
in profit over tax (net revenue) and operating profit (net revenue) are minimal; both only
saw a 1% decrease in 2018, and have had no change since. From this, we can conclude that
Vinamilk’s profitability has remained the same from sales to sales throughout the years.