(Vnfinancebusiness) In Q2 2023, Gross Profit (GP) from the livestock sector applying the 3F model (FEED-FARM-FOOD) recorded growth of 82%, with a gross profit margin from the livestock sector reaching 26%. Continue to expand the scale of barns, feed mills and distribution chains toward sustainable development.
BAF Vietnam Agricultural Joint Stock Company (BAF, Company) released its Consolidated Financial Report for Q2 2023, showing stable growth in business operations. Consolidated Net Revenue in Q2 2023 reached VND1,638 billion, a 14% increase compared to the same period. Gross Profit in Q2 2023 reached VND102 billion, a 54% increase compared to the same period, with a gross profit of VND63 billion from the livestock sector, an 82% increase. The gross profit margin from the livestock sector was 26%.
Cumulatively for the first 6 months of 2023, Consolidated Net Revenue reached VND2,455 billion, slightly lower than the same period, mainly due to decreased Revenue from agricultural merchandise and livestock business operations. Net Revenue from agricultural merchandise decreased by 21% due to a strategic reduction in this activity, which had a low gross profit margin and was subject to significant risks influenced by the Russia-Ukraine war. Besides, the company retained Feeder Pig for meat production, resulting in pork sales not matching the overall herd scale. Therefore, Livestock Revenue reached nearly VND600 billion.
Due to proactive sourcing of livestock feed from 3 “vegetarian” feed mills meeting GLOBAL GAP and FSSC 21000 standards, the cost of goods sold reached VND2,289 billion, a 17% decrease compared to the same period. GP reached VN166 billion, with a gross profit margin of 7%, a one percentage point increase compared to the same period. Enterprise Management Costs, Sales Costs, and Interest Expenses increased during the farm scale and distribution chain expansion. Pre-tax profit reached nearly VND18 billion.
As of the end of June 2023, the company’s Total Assets reached VND6,380 billion, a 35% increase compared to the beginning of the year. Short-term and long-term assets increased by 38% and 31%, respectively. Inventory was recorded at VND1,216 billion, a 38% increase, including pigs expected to be released to the market when pork prices were trading around 62,000 – 65,000 VND/kg from Q3 2023 onwards. Long-term assets in progress reached nearly VND1,000 billion, a 174% increase as the company rapidly put additional farms into operation in the year’s final months. Short-term and long-term loans amounted to VND1,603 billion, including convertible bonds issued to the International Finance Corporation (IFC) with an interest rate of 5.25% per annum for a 7-year term. BAF’s financial indicators reflect a state of stable finances, with a current ratio and quick ratio of 1.1 and 0.8 times, respectively.
The financial indicators of BAF reflect a stable financial condition, with a current ratio and quick ratio reaching 1.1 and 0.8 times respectively.
From 2020 to the present, BAF has implemented a closed livestock chain model under the 3F framework (FEED-FARM-FOOD) and has observed rapid growth in scale. The operation of 3 animal feed plants has achieved FSSC22000 and GLOBAL GAP standards. The number of modern farms has tripled to 23. The distribution chain has expanded to 60 Sibafoods and over 400 MeatShops. After a period of scaling up, the company has reviewed and adjusted its business operations toward sustainable development for the next phase. It has strengthened control activities, reduced expenses, and optimized the livestock process in line with the strategy to become one of the top 3 leading livestock companies in Vietnam.
As a result, business operations have not met expectations in the first 6 months of 2023. The company’s total herd has reached over 230,000 pigs, corresponding to about 570,000 market-ready pigs expected to sell from Q3 2023 onwards. Given the context of pork prices fluctuating around 62,000-65,000 VND/kg at present and projected to increase to 70,000 VND/kg in the final months of the year, the business results of BAF are anticipated to show positive outcomes in the upcoming period.
Expected Sustained High Pork Prices
In the past 3 months, pork prices have witnessed a 21% increase, rising from 51,000 VND/kg to 62,000 VND/kg due to reduced supply due to disease outbreaks and farmers not restocking.
Former Deputy Director of the Livestock Department (Ministry of Agriculture and Rural Development), predicts that pork prices are expected to stabilize around the lunar month of July (mid-August to mid-September in the Gregorian calendar). Demand could recover as schools reopen for the new academic year, increasing demand for institutional kitchens.
KBSV Securities Company anticipates that in the second half of 2023, pork prices will continue to recover and fluctuate around 65,000 – 68,000 VND/kg, nearly an 8% increase compared to the same period, driven by the removal of pork from stabilization goods and the ongoing downward trend in supply since the beginning of the year.
This favorable condition is expected to greatly benefit BAF, which currently holds a significant inventory of pigs, enabling it to make a breakthrough and achieve positive business results in the coming months.