Prolonged pig crisis overshadows Masan’s growth fundamentals

Masan Group was named among Vietnam's top 50 listed companies on the Vietnamese stock market by Forbes Vietnam in 2016

Accordingly, Masan Nutri-Science (MNS) continued to weigh down Masan Group’s consolidated results due to the prolonged slump in livestock pig prices.

Excluding MNS’ financial results, MSG’s consolidated net revenue and net profit after tax post minority interest (NPAT post-MI) increased by 7.2 and 61 per cent in the third quarter of 2017.

Similarly, its nine-month consolidated net revenue and NPAT post-MI increased by 2.3 per cent and 7.2 per cent respectively, when excluding MNS financial results.

“Our results are a testament to the bold investments we have made in the first half of 2017 to strengthen our operating platforms, positioning us to extend our market leadership across consumer segments. We are prioritising medium- to long-term consumer and revenue growth, long-term profitability, and market share gain, not short-term financial results. I am confident that we will sustain our consumer growth trajectory and enhance profitability by cutting out the unnecessary costs that do not benefit the end consumer,” said Nguyen Dang Quang, chairman and CEO of Masan Group.

MNS’ nine-month net revenue has been adversely impacted by a historical slump in pig prices during 2017’s first quarter, which has continued longer than anticipated with livestock currently trading below VND30,000 ($1.3) per kilogramme.

As a result, the pig feed market is estimated to have declined from 6.3 to 3.5 million tonnes within a year, contributing to MNS’ net revenue declining by 17 per cent in the first three quarters of 2017 to VND14.5 trillion ($663 million).

However, Masan believes that the fundamental supply and demand trends point to a recovery in 2018 as the pig population has already declined by 45 per cent since the peak and Tet holiday is arriving soon.

More importantly, the decision to support farmers and large dealers with loyalty-based programmes in 2017’s first quarter means that MNS is well positioned to capture a greater market share in 2018, evidenced by MNS’ market share of the external pig feed market increasing from around 30 per cent to a targeted 51 per cent by year-end period.

If MNS’ financial results were included, MSG’s nine-month consolidated net revenue declined by 8.9 per cent to VND27.4 trillion ($112 million) and consolidated NPAT post-MI by 34.4 per cent to VND1.2 trillion ($54.5 million), lowered by the planned first half distributor de-stocking initiative at its food and beverage businesses and one-time investments to consolidate market share in the animal protein business throughout the pig market crisis.

Part of Masan Group, Masan Consumer Holdings (MSH)’ third quarter financial results show signs of recovery with the strong momentum from future growth drivers, such as energy drinks, beer, and processed meat.

In the nine-month period, MCH earned a net revenue of VND8.9 trillion ($406 million), down 8.6 per cent compared to the VND9.7 trillion ($444 million) it posted one year ago.

With the de-stocking initiative completed, 2017’s third quarter is showing promise with net revenue up 0.4 per cent from VND3,425 billion ($155.6 million) to VND3,438 billion ($156.2 million). Estimates for the 2017 fiscal year’s net revenue expect nearly VND13.6 trillion ($618 million), down 8 per cent , mainly due to the aforementioned de-stocking initiative.

Masan Consumer Corporation—the UPCoM-listed subsidiary—achieved net profit after tax post minority interest of VND1.2 trillion ($57 million) in these nine months, a decrease of 23 per cent primarily as a result of the previously discussed increase in selling expenses to support de-stocking.

However, with improving margins in the second half, Masan Consumer’s NPAT post-MI is expected to reach VND2.1 trillion ($95 million) for the 2017 fiscal year.

Part of Masan Group, Masan Resources (MSR) recorded net profit after tax post minority interest of VND98 billion ($4.4 million) in this period, despite lower tungsten chemicals production in 2017’s third quarter.

Its net revenue during the period touched VND3.9 trillion ($178 million), up 39.9 per cent. Revenue was supported by strong sales of fluorspar, copper, and bismuth.

With tungsten prices peaking in September and tungsten chemical production expected to increase in the coming months, MSR expects a strong fourth quarter to finish the year.

The management’s strategic priority is to evolve the MSR business model into an integrated downstream tungsten business of global scale. This will enable MSR to deliver a consistent and strong financial profile across commodity cycles.

Masan Group’s member companies and associates are industry leaders in branded food and beverages, consumer agriculture (meat), value-added chemical processing, and financial services, altogether representing segments of the Vietnamese economy that are experiencing the most transformational growth.

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