Vinamilk proposes to reduce State ownership at enterprises

A dairy farm of Vinamilk in Nghe An province. The company has proposed to reduce the rate of State ownership at joint stock companies to increase their self-management and competitiveness. Photo www.vinamilk.com.vn

This was one of the measures proposed by Vinamilk during a working session between the company and a National Assembly delegation led by Vice Chairwoman Nguyen Thi Kim Ngan on June 29.

Vinamilk CEO and Director General Mai Kieu Lien said it is necessary to clarify the role of State ownership representatives and the board of directors at joint stock companies to help tackle existing obstacles.

Some 45.06 per cent of Vinamilk's shares are currently held by the State through State Capital Investment Corporation (SCIC).

It has been pointed out that the SCIC's rights of operation of the company have reduced the command of the board of directors over the management of the operations of the company, she said.

She cited the commercial transaction to buy Dalat Milk as an example. Vinamilk could not buy Dalat Milk due to a delay caused by presenting a proposal and seeking the SCIC's permission.

Each year, Vinamilk loses estimated profits worth VND50 billion (US$2.3 million) thanks to the failure of that deal, Lien noted.

"It often take time for businesses, particularly those in which the State holds a large proportion of capital, to make decisions on important issues as they have to wait for opinions from the representatives of the State ownership," she was quoted as saying by national broadcaster Vietnam Television.

"Therefore, it affects the operational efficiency of businesses, particularly when they have to face fierce competition from others," she added.

NA Vice Chairwoman Ngan remarked that all recommendations from businesses will be carefully considered. Any regulation that caused difficulties for businesses will be amended, she stressed.

"The State is just like any other shareholder at enterprises, and all shareholders are treated equally in the eyes of law. Hence, it is not necessary to seek the State's opinion whenever a decision should be made in connection with the development policies of enterprises," she pointed out.

Vinamilk CEO Lien said the company wishes to have a capital management mechanism, which can be operated in line with the Enterprise Law and the Law on Securities, as well as the company's regulations.

"We just want to have more power to make decisions on important issues relating to the operation of the company," she noted.

"It is also necessary to reconsider the extent of the State ownership in a joint stock company to harmonise the interests of related parties, particularly in companies operating in the fields of diary and food, in which the State should not hold a large share of capital," she observed.

In the 10 years since it was equitised, Vinamilk saw revenues grow by 22 per cent a year on average. Last year its revenues were nearly VND35 trillion ($1.61 billion) , or 8.3 times up from the 2004 figure.

This year the target approved by shareholders is VND38.4 trillion ($1.76 billion).

The company's capital and assets have also increased many times since 2004. For instance, its charter capital has risen from VND1.569 trillion ($72 million) to over VND10 trillion ($458 million).

Vinamilk's market cap is over $5 billion, making it the second largest company in the Vietnamese stock market.

Vinamilk is the largest dairy firm in Viet Nam with a 53 per cent market share in the liquid milk segment, 84 per cent in yogurt, and 80 per cent in condensed milk.

Furthermore, the company has been successful in developing its export markets, shipping over $200 million worth of products to 31 countries and territories. Average export growth in the last 10 years has been 17 per cent a year.

The key export markets are in the Middle East and Asia, and the company seeks to expand into Europe, Africa, and South America.

Exports have accounted for 8-24 per cent of revenues in the last decade.