Committing itself to leading in quality,

Hoa Phat rose to a new stature

 CONTENT
ANNUAL REPORT 2019
1 Development orientation 09
2 Message from the Chairman of the Board of Management 10
3 10 Impressive milestones of Hoa Phat Group in 2019 12

1 GENERAL INFORMATION
1
2
BASIC INFORMATION
DETAILS OF SHARE
15
15
3 BUSINESS LINES 15
4 ORGANIZATION STRUCTURE 16
5 OPERATING MODEL 16
6 KEY FINANCIAL INDICATORS 17
7 SUBSIDIARIES & THEIR OWNERSHIP PERCENTAGE 18
8 BACKGROUND OF HOA PHAT GROUP 20
9 HISTORY OF DEVELOPMENT 22
10 OPERATIONAL RISKS 24

2 REPORT OF THE BOARD OF DIRECTORS

1
2
LIST OF MEMBERS OF BOD
REPORT OF BOD
29
30
3 OPERATING PERFORMANCE EVALUATION 30
4 FINANCIAL SITUATION 32
5 IMPROVEMENT OF MANAGEMENT STRUCTURE 34
6 BUSINESS PLAN FOR 2020 35

3 PERFORMANCE IN 2019
1 PERFORMANCE OF SUBSIDIARIES
1.1. Iron and Steel
37
37
1.2. Steel pipe & Prepainted hot dipped galvanized steel coils 41
1.3. Agriculture 42
1.4. Other industrial production 43
1.5. Real estate 44
2 HUMAN RESOURCE MANAGEMENT 45
3 POLICIES FOR EMPLOYEES 46
4 INVESTMENT STATUS OF KEY PROJECT 47
5 STRUCTURE OF SHAREHOLDERS 47
6 SHAREHOLDER RELATIONS 52

6
4 CORPORATE GOVERNANCE
1
2
LIST OF MEMBERS OF BOM AND OWNERSHIP RATIO
BOM’S ASSESSMENT OF OPERATION
55
58
3 BOM’S ASSESSMENT OF BOD’S OPERATION 59
4 BOM’S MAIN ACTIVITIES DURING THE YEAR 60
5 PLANS AND DIRECTIONS 61

5 REPORT OF SUPERVISORY BOARD

1
2
LIST OF PERSONNEL AND OWNERSHIP PERCENTAGE
REPORT OF SUPERVISORY BOARD
63
64
3 REPORT OF INTERNAL CONTROL BOARD 65

6 SUSTAINABLE DEVELOPMENT
1
2
SUSTAINABLE DEVELOPMENT STRATEGY WITH RELEVANT PARTIES
RESEARCH & DEVELOPMENT
67
68
3 CIRCULAR ECONOMIC MODEL IN HOA PHAT GROUP 70
4 TECHNICAL INNOVATION 74
5 SOCIAL RESPONSIBILITY 76

7 AUDITED FINANCIAL STATEMENTS

1
2
REPORT OF THE BOD
INDEPENDENT AUDITOR’S REPORT
82
85
3 CONSOLIDATED BALANCE SHEET 87
4 CONSOLIDATED STATEMENT OF INCOME 91
5 CONSOLIDATED STATEMENT OF CASH FLOWS 93
6 NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS 97

7
8
DEVELOPMENT
ORIENTATION
Hoa Phat will become one of the 50 largest steel enterprises in the
world with annual revenue of approximately VND 100,000 billion.

Vision: To become an industrial manufacturer with top quality and core

area of steel.

Mission: To provide leading products, contribute to improving living

conditions and gain customers’ trust.

Position: Hoa Phat – Vietnamese brand, global standard.

Core value:
The core value of Hoa Phat Group is the philosophy of Harmony for
Joint Development. This is reflected in the relationship among the
employees, between the Group and its partners, agents, shareholders
and the social community, ensuring the harmony of interests of
stakeholders on the same boat, towards sustainable development.

Especially, Hoa Phat Group has built a long-term, sustainable and

trusting partnership with the sales agents who have been with the
Group since the beginning of its establishment.

9
 Mr.
TRAN DINH LONG
the Chairman

“HOA PHAT’S
10
INTERNAL STRENGTH”
Dear all shareholders,
The year 2019, as expected, is the time to witness the
unpredictable position of the US-China trade war. A series
of instable developments made the world economy fall
into a state of “losing momentum”, including the largest
economies such as the US, EU, China, Japan ..., which all
dropped clearly. However, Vietnam has proved “flexible
economic vitality” with the second fastest growth rate in
Southeast Asia, reaching 6.8% in 2019, 4 times higher than
the average in the world.
In that context, the Board of Management (BoM) and
Board of Directors (BoD) of Hoa Phat Group correctly and
appropriately assessed the increasing protectionism and
the international commodity market to have appropriate
preparation and responses. With the solid foundation
available, Hoa Phat roller excelled over the profit plan of
VND 7,578 billion, the size of revenue in 2019 tripled after
6 years (from 2013). Hoa Phat Group also contributed over
VND 6,600 billion to the State Budget, equivalent to the
40th province of Vietnam.
FIRMLY STEP FORWARD
In 2019, Hoa Phat Group achieved revenue of VND
64,678 billion, an increase of 14% compared to 2018.
Asset structure is very standard and typical of industrial
production. The Group’s fields of business flourished,
especially in the core field of steel production and trading.
The steel segment plays a key role, accounting for 80% of
the Group’s total revenue. In 2019, total steel consumption
is 3,618,000 tons, up 14% compared to 2018. Hoa Phat
construction steel and steel pipes continue to maintain
the No. 1 market share in the market of 26.2% and 31.5%
respectively.
The Group’s agriculture segment began to enter the
“fruit-harvesting” stage, growing revenue by 72%. The
proportion of Agriculture’s revenue contribution to the
Group increased from 8% (2018) to 12% (2019). Hoa Phat’s
agricultural products such as supplying Australian beef and
clean chicken eggs are at the top of the market.
Other industries have exceeded the after tax profit target
compared to the assigned plan. In Hoa Phat Refrigeration,
Funiki air conditioner output has been boosted with a
total of 260,000 units sold to the market. Freezers and
refrigerators have also grown well. Hoa Phat Furniture
has made a strong impression on the household furniture
products, and continuously led the market share of office
furniture products with a series of large-scale projects. Real
Estate has exceeded revenue and profit targets compared
with the assigned plan. As of the end of 2019, Hoa Phat
industrial parks have subleased more than 43.2 hectares
of land, an increase of 48% over the same period, revenue
increased 56% to over VND 702 billion.
The company is constantly improving technology, saving
energy, applying initiatives to optimize capacity and protect
the environment. In 2019, the Group has saved hundreds
of billion dong by investing in research and development
and encouraging creative labor.
Hoa Phat always implements the corporate social
responsibility in a substantive manner and comes from the
heart with the business philosophy of “Harmony for Joint
Development”. This is clearly reflected in annual action
programs such as “Heartbeat for Love” - sponsoring heart
surgeries for poor children, “Hoa Phat follows children
to school” or “Charity rice – Kind heart” in daily cooking
daily for poor patients, giving Tet gifts to disadvantaged
people ... The Company has been creating jobs for tens
of thousands of workers, making greater and greater
contributions to the State Budget, and well performing
social security.
HOA PHAT’S
INTERNAL STRENGTH
Vietnam’s economy has experienced the first 3 months of
the year with the ups and downs of the market according
to the global pandemic SARS-CoV-2. However, in the
difficulties, Hoa Phat is showing its toughness, maintained
the business momentum, guaranteeing the interests of
shareholders and the lives of the Group’s employees.
In the steel segment, the Group continues to increase
production, dominate the market, in parallel with investment
in expanding production, constantly diversifying types,
grades and optimizing the value chain of steel products.
Hoa Phat aims to complete the plan in 2020 with an output
of 3.5 - 3.6 million tons of construction steel, up 100%
compared to the output achieved in the South in 2019.
The company aims to complete the construction investment
items of Phase 2 of Hoa Phat Dung Quat Steel Integrated
Complex, consume all the produced products, and
continues leading the national market share of construction
steel and steel pipe – prepainted hot dipped galvanized
steel coils in steel production and trading.
In agricultural segment, the company strives to continue to
hold the No. 1 market share of Australian beef supply, with
steady growth in the animal feed, poultry and pig segment;
continues to maintain the achievements of 2019 in the
field of real estate and other industries including furniture,
refrigeration.
Facing the situation of the world and Vietnam economy,
Hoa Phat identifies 2020 as a particularly challenging year,
however, with the determination and unanimity of 22,300
employees, Hoa Phat believes that we will overcome all
difficulties and go ahead in despite of any obstacle.
On behalf of the Board of Management, I would like to
thank the confidence and support of the shareholders,
thank the positive cooperation of customers and partners.
In particular, I would like to express my sincere thanks to all
employees of Hoa Phat Group, who have joined with us in
the hearts and faithfulness to this day.
Yours sincerely,
The Chairman
TRAN DINH LONG
11
10 IMPRESSIVE MILESTONES OF
HOA PHAT GROUP IN 2019

Nearly VND 65,000 2.77 million tons

billion was Hoa Phat of construction steel
Group’s record level of was record output
net income

The Group’s total The first

assets exceeded
2 blast furnaces
VND 100,000 of Hoa Phat Dung Quat Steel
billion for the first time Integrated Complex with a
capacity of 1 million tons /
furnace were put into operation.

3.6 million tons of steel of

all kinds were supplied to the
market (including construction
steel, steel pipes, prepainted
hot dipped galvanized steel
coils of all kinds)
The first 100,000 ton Vietnam’s No. 1
vessel arrived at Hoa Phat market share for construction
Dung Quat port at the end steel and steel pipes,
of 2019 respectively, 26.2% and 31.5%

2.2 million tons is the 172% was the revenue

crude steel output of Hoa achieved by the agricultural
Phat Hai Duong Steel segment compared to 2018
Integrated Complex

VND 6,639 billion

was contributed to the State
Budget by Hoa Phat from 25
provinces and cities
GENERAL INFORMATION
1. BASIC INFORMATION

2. DETAILS OF SHARE

3. BUSINESS LINES

4. ORGANIZATION STRUCTURE

5. OPERATING MODEL

6. KEY FINANCIAL INDICATORS

7. SUBSIDIARIES & THEIR OWNERSHIP PERCENTAGE

8. BACKGROUND OF HOA PHAT GROUP

9. HISTORY OF DEVELOPMENT

10. OPERATIONAL RISKS

14
 1. BASIC INFORMATION
Transaction name: Hoa Phat Group Joint Stock Company
Business Registration Certificate No: 09 0018 9284
Authorized capital: VND 27,610,741,150,000
Head office address: Pho Noi A Industrial Zone, Giai Pham Commune,
Yen My District, Hung Yen Province, Vietnam
Hanoi Office: 66 Nguyen Du, Nguyen Du Ward, Hai Ba Trung District, Hanoi City
Tel: 024 6284 8666 | Fax: 024 6283 3456
Da Nang Branch: 171 Truong Chinh, An Khe Ward, Thanh Khe District, Da Nang City
Tel: 023 637 21 232 | Fax: 023.637 22 833
HCM City Branch: 643 Dien Bien Phu, Ward 25, Binh Thanh District, Ho Chi Minh City
Tel: 028. 629 85 599 | Fax: 028. 629 87 799
Website: www.hoaphat.com.vn

2. DETAILS OF SHARE
Stock sticker: HPG
Stock exchange: HOSE
Initial offering date: 15/11/2007
Fair value of stock: 10,000 VND/share
Outstanding shares: 2,761,074,115 shares

3. BUSINESS LINES
1. Trading, exporting and importing iron and steel, materials and equipment for refining and rolling steel;
2. Producing rolling steel, roofing steel sheet, galvanized steel coil, galvalum steel sheet and pre-painted
hot dipped galvanized steel coil;
3. Producing non-galvanized and galvanized steel pipes and stainless steel pipes;
4. Producing and trading non-ferrous metal and non-ferrous metal scrap;
5. Refining cast iron and steel; Casting iron and steel;
6. Manufacturing and trading coke coal;
7. Mining for metal ores; trading metals, metal ores and scrap;
8. Manufacturing and trading construction and mining equipment;
9. Producing interior furniture for offices, households and schools;
10. Manufacturing, trading, assembling, installing, repairing, and maintaining electric, electronic,
refrigeration, civil electric products and air conditioners;
11. Investing in and building infrastructure for industrial zones and urban areas;
12. Real estate;
13. Producing and trading animal feed for livestock and poultry, raising livestock, and processing meat
and meat products, etc.

HOA PHAT’S INTERNAL STRENGTH GENERAL INFORMATION Basic information 15

ORGANIZATION STRUCTURE

GENERAL MEETING OF SHAREHOLDERS

SUPERVISORY
BOARD
1. Hoa Phat Hung Yen Steel Co., Ltd
2. Hoa Phat Hai Duong Steel JSC
BOARD OF MANAGEMENT
3. Hoa Phat Dung Quat Steel JSC
4. Hoa Phat Metal Producing Co., Ltd
5. An Thong Mineral Investment JSC
6. Hoa Phat Steel Pipe Co., Ltd
7. Hoa Phat Steel Sheet Co., Ltd
SUBSIDIARIES
8. Hoa Phat Agriculture Development JSC
9. Hoa Phat Furniture JSC
10. Hoa Phat Refrigeration Engineering Co., Ltd
11. Hoa Phat Urban Development and
BOARD OF DIRECTORS Construction JSC

1. Internal control board

2. Financial department
3. IT department
HEAD OFFICE 4. Legal department
5. PR department
6. Administration department
7. R&D department

OPERATING MODEL
Hoa Phat Hung Yen Steel Co., Ltd
Hoa Phat Hai Duong Steel JSC
Hoa Phat Dung Quat Steel JSC
IRON AND STEEL Hoa Phat Metal Producing Co., Ltd
An Thong Mineral Investment JSC

STEEL PIPE -
Hoa Phat Steel Pipe Co., Ltd
PREPAINTED HOT
Hoa Phat Steel Sheet Co., Ltd
DIPPED GALVANIZED
STEEL SHEET

HOA PHAT GROUP AGRICULTURE Hoa Phat Agriculture Development JSC

OTHER INDUSTRIAL Hoa Phat Furniture JSC

PRODUCTION Hoa Phat Refrigeration Engineering Co., Ltd

Hoa Phat Urban Development and

REAL ESTATE Construction JSC

16 GENERAL INFORMATION Organization structure & Operating model

KEY FINANCIAL INDICATORS

Indicator (Unit: VND billion) 2017 2018 2019

INCOME STATEMENT

Revenue from sales of goods and provision of services 46,855 56,580 64,678
Net revenue 46,162 55,836 63,658
Gross profit 10,626 11,671 11,185
Net financial expenses (370) (478) (711)
Selling expenses 595 677 873
General and administration expenses 409 444 569
Other income 36 (1) 66
Profit before tax 9,288 10,071 9,097
Corporate income tax 1,274 1,471 1,518
Profit after tax 8,015 8,601 7,578
Profit of shareholder as holding company 8,007 8,573 7,527
Depreciation and amortization 2,005 2,286 2,639
BALANCE SHEET

Total assets 53,022 78,223 101,776

Current assets 33,068 25,309 30,437
Non-current assets 19,954 52,914 71,339
Liabilities 20,625 37,600 53,989
Owner’s equity 32,398 40,623 47,787
Authorized capital 15,171 21,239 27,611
CASH FLOW STATEMENT

Net cash from business activities 6,058 7,642 7,715

Net cash from investment activities 17,926 (20,533) (18,064)
Net cash from financial activities 11,574 11,143 12,378
Net cash flow during the period (294) (1,748) 2,029
Cash and equivalents at the beginning of the period 4,559 4,265 2,516
Cash and equivalents at the end of the period 4,265 2,516 4,545
KEY FINANCIAL INDICATORS

Gross profit/Net sales rate 23% 21% 18%

Net income/Net sales rate 17% 15% 12%
ROA 15% 11% 7%
ROE 25% 21% 16%
EBIT 9,658 10,549 10,278
EBITDA 11,663 12,835 12,918

HOA PHAT’S INTERNAL STRENGTH GENERAL INFORMATION Key financial indicators 17

SUBSIDIARIES AND THEIR
OWNERSHIP PERCENTAGES AS AT 31/12/2019

No. SUBSIDIARY ADDRESS

1 HOA PHAT HUNG YEN STEEL CO., Pho Noi A Industrial Zone, Giai Pham Commune, Yen
LTD. My District, Hung Yen Province, Vietnam

2 HOA PHAT HAI DUONG STEEL JSC Hiep Son Ward, Kinh Mon Town,
Hai Duong Province, Vietnam

3 HOA PHAT DUNG QUAT STEEL JSC Dung Quat Economic Zone, Binh Dong Commune,
Binh Son District, Quang Ngai Province, Vietnam

4 HOA PHAT METAL PRODUCING CO., 39 Nguyen Dinh Chieu, Le Dai Hanh Ward, Hai Ba
LTD. Trung District, Hanoi City, Vietnam

5 AN THONG MINERAL INVESTMENT 415 Tran Phu, Tran Phu Ward, Ha Giang City, Ha Gi-
JSC ang Province, Vietnam

6 HOA PHAT STEEL PIPE CO., LTD. 39 Nguyen Dinh Chieu, Le Dai Hanh Ward, Hai Ba
Trung District, Hanoi City, Vietnam

7 HOA PHAT STEEL Road E1, Area E, Pho Noi A Industrial Zone, Lac Dao
SHEET CO., LTD Commune, Van Lam District, Hung Yen Province,
Vietnam

8 HOA PHAT AGRICULTURE Pho Noi A Industrial Zone, Giai Pham Commune, Yen
DEVELOPMENT JSC My District, Hung Yen Province, Vietnam

9 HOA PHAT FURNITURE JSC Road B4, Area B, Pho Noi A Industrial Zone, Lac
Hong Commune, Van Lam District, Hung Yen Prov-
ince, Vietnam

10 HOA PHAT REFRIGERATION Pho Noi A Industrial Zone, Giai Pham Commune, Yen
ENGINEERING CO., LTD. My District, Hung Yen Province, Vietnam

11 HOA PHAT URBAN DEVELOPMENT 39 Nguyen Dinh Chieu, Le Dai Hanh Ward, Hai Ba
AND CONSTRUCTION JSC Trung District, Hanoi City, Vietnam

18 GENERAL INFORMATION ANNUAL REPORT 2019

 CONTRIBUTED OWNERSHIP
PRINCIPAL BUSINESS AUTHORIZED PERCENTAGE
ACTIVITIES CAPITAL (VND BILLION) BY HPG
Producing steel, iron, wholesaling metals and metal ores
1,000 100%
Producing steel and cast iron, exploiting iron ores,
exploiting and collecting lignite; wholesale of metals and 7,000 99.998%
metal ores; producing and trading coke coal.

Producing steel and iron. Generating, transmitting and

distributing electricity. Trading solid, liquid and gas fuel
30,000 100%
and related products. Transporting goods by coastal, by
sea and inland waterways

Producing construction equipment, trading construction

machinery and equipment, exploiting small and medium- 400 99.875%
sized minerals.

500 99.960%
Exploring, exploiting, preparing and making, processing,
exporting and importing minerals, mainly iron ores.

1,500 99.967%
Producing and trading steel pipes.

Producing roof coverings of galvanized steel, galvanized

aluminum alloy, painting and metal plating; producing 2,000 100%
iron, steel, cast iron.

Producing fertilizers and nitrogen compounds.

Pig farming, poultry breeding, and livestock services. 3,100 99.999%
Processing and preserving meat and meat products.
Production of animal feed, poultry and fisheries.

Producing and trading various kind of furniture.

400 99.600%

150 99.667%
Producing and trading various kinds of refrigerant
equipment

Civil and industrial construction, real estate business,

investing in and building technical infrastructure. 1,300 99.846%

HOA PHAT’S INTERNAL STRENGTH GENERAL INFORMATION 19

BACKGROUND OF HOA PHAT GROUP
Hoa Phat is the leading industrial manufacturing groups
in Vietnam. Starting up as a construction machine and
equipment trading company in August 1992, Hoa Phat
gradually expanded its business to trading and production
of Furniture (1995), Steel Pipe (1996), Steel (2000),
Refrigeration (2001), Real Estate (2001), Agriculture (2016).
In 2007, Hoa Phat was reorganized into a group structure,
with Hoa Phat Group Joint Stock Company restructured as
the Parent Company of its subsidiaries. Since November
15, 2007, Hoa Phat has been officially listed on the Stock
Exchange under the stock ticker ‘HPG’.
Currently, Hoa Phat Group has 11 subsidiaries and many
affiliated companies, which are operating in the five key
areas of iron and steel; steel pipe and prepainted hot
dipped galvanized steel coils; agriculture; other industrial
production such as furniture, refrigeration; and real
estate. Iron and steel production is the core with over
80% revenue and profit of the Group. Capacity of Hoa
Phat construction steel is 4.4 million tons per year with
two closed Steel Integrated Complexes in Hai Duong and
Quang Ngai provinces.
Currently, Hoa Phat is the largest manufacturer of
construction steel and steel pipes in Vietnam with market
share of 26.2% and 31.5%, respectively. In agricultural
field, the Group holds the largest market share of
20 GENERAL INFORMATION Background of Hoa Phat Group
Australian beef supply with percentage of 50%, leading
position in the North in the production of clean chicken
eggs. Hoa Phat Furniture leads the market share for office
furniture. From the year of 2020, the Group officially adds
a new strategic product as hot rolled coils (HRC), with a
capacity of 2.5-3 million tons per year for completion of
the value chain of steel products from iron ore, to steel
billets, construction steels, high quality steels, hot rolled
coils, steel pipes, prepainted hot dipped galvanized steel
coils and pre-stressed concrete steels.
For years, Hoa Phat has been recognized as National
Brand, becomes one of Vietnam’s 50 largest and most
efficient enterprises; one of Vietnam’s 10 largest private
enterprises, etc.
In parallel with business and production development, Hoa
Phat allocates an annual budget of dozens of billion dongs
in order to exercise corporate social responsibilities to the
community through various charity and social programs
in different parts of the country where the Group and its
subsidiaries are located.
ANNUAL REPORT 2019
21
HISTORY OF DEVELOPMENT

August 1992 Establishing Hoa Phat Equipment &

Accessories Co., Ltd – the first company
that bore the brand of Hoa Phat.

November 1995 Establishing Hoa Phat Furniture JSC.

August 1996 Establishing Hoa Phat Steel Pipe Co., Ltd

2001 Establishing Hoa Phat Steel JSC, now Hoa Phat

Hung Yen Steel Co., Ltd; Hoa Phat Refrigeration
Engineering Co., Ltd. and Hoa Phat Urban
Development and Construction JSC.

January 2017 Restructuring as a group with Hoa Phat

Group Joint Stock Company being the
Parent Company of its subsidiaries

August 2007 Establishing Hoa Phat Hai Duong Steel JSC to

initiate the Hoa Phat Steel Integrated Complex
in Kinh Mon District, Hai Duong Province.

November 15, 2007 Listing HPG shares on the

Vietnam Stock Market

June 2009 An Thong Mineral Investment JSC became

a member of the Hoa Phat Group.

December 2009 Finishing the first phase of Hoa Phat Steel

Integrated Complex.

January 2011 Structuring of operation model of the Parent Company by

separating the steel production and trading segment.

22 GENERAL INFORMATION History of development ANNUAL REPORT 2019

 August 2012 20th anniversary of Hoa Phat development,
Third Class Labour Order awarded by the
President.

October 2013 Finishing the second phase of the Hoa Phat Steel
Integrated Complex, raising the total capacity of Hoa Phat
to 1.15 million tons per year.

March 2015 Hoa Phat officially launched Hoa Phat Hung Yen Feeds
Limited Liability Company, marking a new step in the Group’s
development history by penetrating the agricultural segment.

February 2016 Establishing Hoa Phat Agriculture Development JSC,

which manages and coordinates the operations of
all subsidiaries in the agriculture segment (including
animal feed and breeding).

February 2016 Finishing the third phase of Hoa Phat Hai Duong
Steel Integrated Complex, raising the total
capacity of Hoa Phat to 2 million tons per year.

April 2016 Establishing Hoa Phat Steel Sheet Co., Ltd, starting the
project of prepainted hot dipped galvanized steel coil,
galvanized steel coil and galvalum steel sheet with the
capacity of 400,000 tons per year.

February 2017 Establishing Hoa Phat Dung Quat Steel JSC,

initiating Hoa Phat Dung Quat Steel Integrated
Complex in Quang Ngai Province with the
capacity of 4 million tons per year and the total
investment of VND 52,000 billion, marking a
turning point in Hoa Phat Group’s development.

2019 The first two blast furnaces of the Hoa Phat Dung
Quat Steel Integrated Complex Project were officially
put into operation, bringing the total construction
steel capacity of Hoa Phat to 4.4 million tons per year.

HOA PHAT’S INTERNAL STRENGTH GENERAL INFORMATION History of development 23


OPERATIONAL RISKS
Hoa Phat is a multidisciplinary manufacturing Group,
operating nationwide. On the other hand, in the
socio-economic conditions in Vietnam that are easily
influenced by outside, Hoa Phat Group’s activities
cannot avoid risks, both objective and subjective. In
order to effectively prevent risks that may arise in the
course of production and business, the Group sets out
specific solutions for each key risk group, especially in
preventing legal and policy risks.
Policy risk:
Legal and by-law documents are being finalized with
regular adjustments. Any change in policy has some
impact on the Group’s business activities.
Solutions:
Coordinating with departments to perform the expertise at
the subsidiaries, the Group builds specialized departments
such as the Legal Department, the Internal Control Board
and the Finance Board under the Group’s office. These
departments take charge of collecting information and
regularly updating and guiding the affiliated companies
regarding to changes in laws and legal effects, if any,
on the business activities of the Group. The Group also
timely advises the Board of Management and the Board
of Directors to make the most reasonable decision when
necessary. In addition, these departments are also directly
involved in reviewing documents and contracts in the
Group’s daily transactions to minimize any related policy
risks.
Risks of trade remedies of countries:
The escalation of the US-China trade war and a series of
investigations and imposition of trade remedy taxes of
countries around the world have had and will have certain
impacts and influences on domestic industries. According
to the Vietnam Steel Association, although in recent years,
Vietnam’s steel industry has made many changes in quality
and quantity with a fairly rapid growth. Every year, it still
24 GENERAL INFORMATION Operational risks
has to import a large amount of finished and semi-finished
steel products from China, accounting for more than 50%
of total steel imports.
For the steel industry, the direct influence of the trade
remedies and the US-China trade war is not much, but in
the long term, when the pressure on China’s steel exports
is increasing, it will probably cause the cheap China’s steel
products such as construction steel, cold rolled steel,
various kinds of steel sheet ... to be imported in Vietnam
more massively, affecting the domestic market.
This will create strong competition with Vietnam steel,
making it difficult for the consumption of domestic steel
products. At the same time, a certain part will “disguise”
Vietnamese goods to evade taxes and export to third
countries.
Solutions:
Recognizing the impact of the trade war, Hoa Phat Group
understands that the most radical measure to respond to
China’s steel imported is that domestic enterprises must
improve the competitiveness of their products, develope
export markets, in which, the most competitive criterion
must be price.
The costs of production inputs, production process must be
rationalized to increase competition by price, while quality
must be guaranteed. Hoa Phat Group is also aware of the
need to protect its market by improving the knowledge
of the laws of steel importing countries to avoid trade
remedies, thereby offering the best competitive conditions
with China’s steel. At the same time, it is necessary to
protect the domestic market by using both tariff and non-
tariff tools, ie trade remedies as well as technical barriers.
Exchange rate risk:
The State Bank of Vietnam continues its application of
daily central rate as reference for transaction rate of joint
stock commercial banks under the Decision No. 2730/
QD-NHNN on announcement of central rate of VND and
USD, cross rate of VND and other foreign currencies. The
aforesaid central rate is based on three principal indicators
including fluctuation of currency basket of currencies of
Vietnam’s key partners, foreign currency demand and
supply index, macro balances. Transaction margin is
consistently remained at 3%.
Solutions:
Although the exchange rate was quite stable last year
with a fluctuation range of 1.8-2.2% compared to the
beginning of the year but with the operating mechanism
of central rate, unpredictable changes, the Group always
calculated carefully implementation time and payment
term of import contracts to take measures to balance
foreign currency accordingly. All measures ranging from
production revenue, onshore or offshore facility, deviratives
have been taken to balance foreign currency and minimize
exchange rate risks.
ANNUAL REPORT 2019
 Interest rate risks:
The Group is currently in process upgrading its range
through investing in various large projects in various areas.
Accordingly, the Group has a very high demand for capital.
Hence, any relatively high increase in interest rates will lead
to an increase in interest expenses which will significantly
influence the Group’s operations.
Solutions:
Always taking the initiative to implement a debt and equity
structuring which is suitable to the Group’s operations and
credit market developments from time to time. With 28
years of experience and a high credit rating in the credit
market, Hoa Phat Group has been able to achieve loan
agreements while incurring reasonable borrowing costs.
Price fluctuation risk:
Steel is a core product of the economy in general and of
Hoa Phat in particular. In this regard, the steel segment
consistently accounts for more than 80% of the Group’s
revenue and profit. The price of raw materials for steel
production such as iron ores and coals and the selling price
of steel are similarly sensitive to the international market.
In the past year, prices of raw materials increased sharply.
Solutions:
Continuously updating information, taking advantage of
high-class technology and commodity derivative products to
control the cost at low levels. Management and prevention
of price fluctuation are implemented every day through
departments with the same functions such as Materials
Department, Accounting Department. Materials Department
and Accounting Department jointly aggregate and encode all
types of materials with respect to the whole Group, compare
vendors in order to determine the most optimal choice from
the most competitive supplier in the market. Accordingly,
these specialised departments have effectively contributed
to the overall development of the Group.
Personnel risks:
With 22,300 employees coming from all parts of the country
at young working age, the personnel fluctuation is always
a special matter to be resolved. While the steel production
segment always needs a large amount of skilled workers,
the training system of Vietnam in mechanical engineering
has not yet met the actual requirement.
Solutions:
Considering human resources to be the central factor
to success, Hoa Phat consistently focuses on training
knowledge and skills for employees. Subsidiaries regularly
hold training courses, closely coordinate with universities,
colleges, vocational schools in mechanical engineering to
attract skilled workers satisfying requirements for business
development. Development policies in terms of both
quality and quantity are always implemented equally. Hoa
Phat Group has deployed a rating system to standardize
the human resource system on a group scale to be applied
on a step by step basis in calculation and payment of
salaries to motivate employees.
HOA PHAT’S INTERNAL STRENGTH
Project progress risk:
The Group is accelerating the implementation of Hoa Phat
Dung Quat Steel Integrated Complex project and many
other projects. This work consists of various procedures
on law, land, environment, site clearance, contracts with
foreign providers, recruitment for projects. All of these
may effect progress and plans.
Solutions:
Hoa Phat Group is always proactive in its project
implementation plan with extensive experience and good
coordination with relevant authorities. With contractors,
equipment suppliers, the Group always clearly stipulates
the requirements on progress, quality of work when
participating in supplying materials, deploying the work,
with clear rewards and penalties, etc. Thanks to that, the
progress of Hoa Phat Group’s projects is ensured according
to the plan.
Epidemic risk
In 2019, our country’s agriculture will be seriously affected
by the African swine fever spreading throughout the
country. This is also an epidemic causing unprecedented
damage to the livestock industry. In reality, the livestock
industry is still facing many difficulties and challenges such
as low productivity, high product cost, unstable quality
and food safety, low competitiveness, etc.
The main cause of this situation is that farmers’ disease
prevention and control is still subjective, neglected and
irresponsible.
In early 2020, the outbreak of acute respiratory infections
COVID-19 raised concerns about the global economy,
including Vietnam. Because of the dangerous infectious
disease, Vietnam and other countries around the world
have taken many strong measures to limit the spread of
the disease. This has greatly affected the production and
business activities of businesses.
Solutions:
For agricultural segment, one of the direct and decisive
factors is biosafety and disease control, especially
dangerous infectious diseases, such as foot and mouth
disease, blue ear, African swine fever, bird flu. Hoa Phat
Group fully complies with the most stringent processes of
advanced countries in biosecurity and epidemic control.
The acute respiratory infections CoVID-19, caused by
corona virus, is still unpredictable globally. In the face
of complicated disease situation, Hoa Phat Group has
actively implemented many synchronous solutions as
recommended by the Ministry of Health to minimize the
risk of disease in all activities at companies, minimize
impact of the disease on the Group’s production and
business activities.
GENERAL INFORMATION Operational risks 25
Committing itself to leading in quality,
Hoa Phat rose to a new stature
26
27
REPORT OF
BOARD OF DIRECTORS
1. LIST OF MEMBERS OF BOD
2. REPORT OF BOD
3. OPERATING PERFORMANCE EVALUATION
4. FINANCIAL SITUATION
5. IMPROVEMENT OF MANAGEMENT STRUCTURE
6. BUSINESS PLAN FOR 2020

28 BÁO CÁO BAN GIÁM ĐỐC các rủi ro trong quá trình hoạt động
 LIST OF MEMBERS OF BOD

TRAN TUAN DUONG Number of shares held at 02/03/2020

General Director 2.68 %
• Educational qualification: Bachelor of economics – National Economics University
• Joining date: 1992
Before he became the Deputy Chairman of Management Board cum CEO of Hoa
Phat Group since January 2007, Mr. Tran Tuan Duong held management position in
subsidiaries such as: Hoa Phat Equipment & Accessories Co., Ltd, Hoa Phat Furniture
JSC and Hoa Phat Steel Pipe Co., Ltd.

NGUYEN VIET THANG Number of shares held at 02/03/2020

Deputy General Director 0.32 %
• Educational qualification: Bachelor of civil engineering, National University of Civil
Engineers.
• Joining date: 2003
Mr. Nguyen Viet Thang had several years in the management position as the Deputy
Director of Hoa Phat Urban Development and Construction JSC and Director of Hoa
Phat Hung Yen Feeds Co.,Ltd before he was appointed as the Deputy General Director
of Hoa Phat Group Joint Stock Company on 7th April 2012. He was appointed as the
Director of Hoa Phat Hai Duong Steel JSC since March 2018.

NGUYEN T. THAO NGUYEN Number of shares held at 02/03/2020

Deputy General Director 0.02 %
• Educational qualification:
Bachelor of economics – Hanoi University of Finance and Accounting
• Joining date: 1998
Ms. Nguyen Thi Thao Nguyen was the Chief Accountant of Hoa Phat Steel Pipe Co.,
Ltd. and the Head of Supervisory and Legal Board of Hoa Phat Group Joint Stock
Company before she was appointed as the Deputy General Director of Hoa Phat
Group Joint Stock Company on 1st September 2010.

PHAM T. KIM OANH Number of shares held at 02/03/2020

CFO & Chief Accountant 0.0006 %
• Educational qualification: Master of economics, National Economics University
• Joining date: 2008
Ms. Pham Thi Kim Oanh was appointed as CFO & Chief Accountant of Hoa Phat
Group Joint Stock Company on April 28, 2016.

HOA PHAT’S INTERNAL STRENGTH REPORT OF BOARD OF DIRECTORS List of members of BOD 29
REPORT OF BOD
In 2019, the world economic growth slowed down due
to many instability factors such as: the rise of trade
protectionism, the US-China trade war is still lasting, the
Federal Reserve System (FED) continuously lowered basic
interest rates, fluctuating oil prices ... In this context,
Vietnam’s economy still achieved impressive results with
a growth rate of 7.02%, exceeding the target of 6.6%
-6.8% set by the National Assembly of Vietnam. This was
the second consecutive year that Vietnam’s economic
growth reached over 7% since 2011. Timely and effective
direction and control were made by the Government and
efforts made by agencies and localities in realizing socio-
economic development plan to achieve the above growth
target.
The industry and the construction in 2019 still maintained
an 8.9% growth momentum compared to the previous
INDICATORS 2018 2019
(VND bn) (VND bn)
Total revenue 56,580 64,678
Profit after tax 8,601 7,578
OPERATING PERFORMANCE
EVALUATION
Despite many challenges, in 2019, the Group achieved
a revenue of VND 64,678 billion, although only reaching
92% of the plan, but achieved a growth rate of 14%
compared to 2018, with a triple size after 6 years (from
2013). In particular, the main contribution was still the
steel industry when the revenue growth of 11% was mainly
from the increase in output by Hoa Phat Dung Quat Steel
JSC along with the Hoa Phat Equipment & Accessories
Co., Ltd. renamed as Hoa Phat Metal Producing Co., Ltd.
transfering to steel production and trading (including
drawn steel and prestressed concrete steel).
In parallel with the growth, the steel segment was still a key
segment contributing 80% of the Group’s total revenue. In
2019, the total output of steel consumed was 3,618,000
tons, an increase of 14% compared to 2018. While the
30 REPORT OF BOARD OF DIRECTORS Report of BOD
year, of which the industry increased by 8.86% thanks to
the manufacturing and processing increased by 11.29%,
playing a key role in leading the overall growth of the
entire segment. In addition, the construction also achieved
good growth, estimated from 9-9.2%. (Source: VSA, 2019)
However, Vietnam’s steel segment continued to face
many challenges, especially the sharp increase in iron ore
prices, which reduced the segment’s profit margin. In such
circumstances, 2019 was still considered to be stable with
Hoa Phat Group when it obtained many achievements in
different fields. Revenue reached VND 64,678 billion, profit
after tax VND 7,578 billion. The total payment to the State
Budget for the year was VND 6,639 billion, an increase of
4% over the same period, of which, three provinces that
Hoa Phat contributed the most were Hung Yen, Hai Duong
and Quang Ngai.
% achieved
2019 plan % growth rate
compared to
(VND bn) 2019/2018
plan
70,000 14% 92%
6,700 -12% 113%
whole market of finished steel products of all types grew
by 6.4% over the same period in 2018. Hoa Phat Group’s
construction steel and steel pipes continued to maintain
the No. 1 market share in the market respectively 26.2%
and 31.5%.
The Group’s agriculture segment also developed
significantly with revenue growth of 72%, increasing the
proportion of revenue from 8% (2018) to 12% (2019). 2019
was a quite successful year for the agricultural segment
of Hoa Phat Group with strong growth of the livestock
and animal feed segments. Agricultural products such as
Australian beef supply, Hoa Phat Group’s clean chicken
eggs were at the top of the market, thereby showing great
potential for development in the coming years.
ANNUAL REPORT 2019
Chart of Revenue, Profit of Hoa Phat Group
Sales Profit after tax 64,678

56,580

46,855

33,885
27,865
25,852

19,200

8,015 8,601 7,578

6,606
2,010 3,250 3,504

2013 2014 2015 2016 2017 2018 2019

Other industrial segment exceeded the target of profit
after tax compared to the assigned plan. Hoa Phat
Refrigeration, Funiki air conditioner output was boosted
with the total output sold to the market of 260,000 products.
The segment of freezers and refrigerators also grew well.
Hoa Phat Furniture recorded a strong impression with the
household products, in parallel with constantly leading the
market share of office furniture with a series of large-scale
projects across the country. Real estate exceeded the
revenue and profit targets compared to the assigned plan.
By the end of 2019, Hoa Phat industrial parks subleased
more than 430,000 m2 of land, up 48% over the same
period, revenue increased 56% to over VND 702 billion
with 25 investors coming to lease land in 2019.

120% Share of revenue by industry segments in 2019

100%
3% 3% 2% 2% 4%
5% 6% 6% 8% 9%
6% 4%
80% 12% 8% 8%

60%

40%

20%

0%

2019 2018 2017 2016 2015

Steel Agriculture Real estate Other industries

Although the revenue achieved was lower than the plan, the Ebitda (profit before tax, interest and depreciation) in
Group’s profit after tax still exceeded the plan, completed 2019 was VND 12,918 billion, an increase compared to
113% when reaching VND 7,578 billion. The ratio of net 2018, showing that the net profit from business activities
income/net sales in 2019 reached 12%. Profit exceeded excluding corporate income tax, loan interest and
the target, the profitability ratio for industrial production depreciation flow.
in the context of the steel market continued to be difficult,
showing the efficiency of the Group’s cost management
despite the rising ore price and the advantage of a closed
production process from upstream.

HOA PHAT’S INTERNAL STRENGTH REPORT OF BOARD OF DIRECTORS Operating performance evaluation 31
FINANCIAL SITUATION
Asset structure
The Group’s total assets increased sharply in 2019 with
an increase of 30% compared to 2018. In particular,
non-current assets still accounted for the majority with
an increase of VND 18,425 billion, reaching VND 71,339
billion, thereby, the process of investing in fixed assets
has been promoted by the Group since 2018. Although
there is a sharp increase in non-current assets, the asset
structure is still maintained by the Group compared to
2018, thereby the current assets are found to increase
significantly by VND 5,128 billion. By the end of 2019,
current assets accounted for 30% of the asset structure,
non-current assets accounted for 70%. Total assets doubled
after only 2 years (from 2017, the time to start investing in
the construction of Hoa Phat Dung Quat Steel Integrated
Complex). This is still a very standard and typical asset
structure of industrial production.

Sales revenue, total assets,

Equity of whole group for period of 2009-2019
Sales Total assets Equity
8,244
10,243
4,899

14,493
14,904
6,398

18,093
17,525
7,414

17,122
19,016
8,085

19,200
23,076
9,500

25,852
22,089
11,796

27,865
25,507
14,467

33,885
33,227
19,850

46,855
53,022
32,398

56,580
78,223
40,623

64,678
101,791
47,788
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Out of current assets which increased sharply, inventory
accounted for 64%, inventory turnover as at 31/12/2019
was 2.7 times. The figures indicating the fast inventory
turnover rate continued showing that the Group’s
inventory management was always monitored, supervised
and operated effectively.
Non-current assets increased sharply over the same
period last year, as at December 31, 2019, non-current
assets reached VND 71,339 billion, an increase of 35%
over the same period as at December 31, 2018, of which
fixed assets, investment properties and long-term work
in progress accounted for 97%. 2019 continued to be
the year when the Corporation focused its investment
to gradually complete the Hoa Phat Dung Quat Steel
Integrated Complex, which strongly increased the long-
term asset indicator.

Asset structure from 2015 to 2019 Current assets Non-Current assets

45% 38%
53%
68% 70%

47% 55% 62%

32% 30%

2015 2016 2017 2018 2019

32 REPORT OF BOARD OF DIRECTORS Financial situation ANNUAL REPORT 2019

 Capital source structure

Capital source structure from 2015 to 2019 (vnd bn) Liabilities Owner’s equity

40% 39%
43%
48% 53%

57% 60% 61%

52% 47%

2015 2016 2017 2018 2019

In 2019, the Group’s financial structure was maintained
at a stable level. Equity increased by 18%, from VND
40,623 billion to VND 47,787 billion from the profit
generated during the year. Although the debt-to-equity
ratio increased to above coefficient of 1, the ratio of bank
debt to equity increased at 0.77 times. The year marked a
strong investment process of Hoa Phat Dung Quat Steel
Integrated Complex. Therefore, this was also the year with
the highest ever bank loan level but still at a safe level,
helping the Group have a very strong rebound in the near
future. Cash flow from operating activities grew steadily
and remained stable to operate.
Current ratio at the end of 2019 was 1.13 times, better
than the same period in 2018. This ratio always stays more
than 1, indicating that the Group’s ability to pay short-
term obligations is good.

Quick ratio and Current ratio

Current solvency
1.80
1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

2015 2016 2017 2018 2019

HOA PHAT’S INTERNAL STRENGTH REPORT OF BOARD OF DIRECTORS Financial situation 33

 Investment
The Group’s investments in subsidiaries in 2019 Unit: Billion VND

Company name Investment Investment Additional

31/12/2019 1/1/2019 investment
Hoa Phat Hung Yen Steel Co., Ltd 1,000 600 400
Hoa Phat Hai Duong Steel JSC 7,000 3,500 3,500
Hoa Phat Dung Quat Steel JSC 29,800 21,688 8,112
Hoa Phat Metal Producing Co., Ltd 400 350 50
Hoa Phat Steel Sheet Co., Ltd 2,000 1,500 500
Hoa Phat Agriculture Development JSC 3,100 2,880 220
In 2019, in parallel with the investment of Hoa Phat Dung Quat Steel Integrated Complex, the Group also invested in
increasing authorized capital in other subsidiaries to increase their own capital resources to support their production and
business activities.

Operating Performance
The key indicators when evaluating performance are ROE
(ratio of net profit to equity) and ROA (ratio of net profit to
total assets). In 2019, Hoa Phat Group’s ROE reached 16%,
lower than the 21.2% of 2018. Along with that, the Group’s
ROA also decreased from 11% in 2018 to 7.4%. The decline
was due to the Group’s strong investment in assets in 2019,
but many assets have not been put into operation, so they
have not been profitable. Last year, we could see that the
total assets increased remarkably, above VND 100,000
billion, along with the increase in owner’s equity, causing
the ROA and ROE to decrease. However, in the near future,
when the new asset block is profitable, the above indicators
will be better.

IMPROVEMENT OF MANAGEMENT STRUCTURE:

Hoa Phat Group’s office block is the first unit to apply
technology in management with the use of the V-Office
electronic office system of Viettel Group. With this
software, documents are stored synchronously, quickly
searched, while minimizing the time for processing,
signing/submitting documents.
Immediately after V-Office, on January 01, 2019, Hoa Phat
Dung Quat Steel Joint Stock Company officially put the
overall management system of SAP S/4HANA enterprise
resources into operation to manage all production and
trading activities in Hoa Phat Dung Quat Steel Integrated
Complex. SAP S/4HANA was applied in all operations such
as finance - accounting, product quality control, production
management, sales ... After 1 year of implementation,
SAP showed its effectiveness in accurate, coherent and
consistent data linking which helped to avoid errors and
minimized uptime.
During the year, the Board of Directors of Hoa Phat Group
approved the policy to equip some professional positions
of Microsoft Office 365 toolkit - a package of professional
office IT utilities. Office employees will experience the most
advanced features available today, with many outstanding
features such as data access anytime, anywhere, multimedia
access, integrated messaging, conference meetings,
online calling ... The application of information technology
in the organization and management work shows that the
Board of Directors of the Group is always conscious of
innovation, adapting to the era, and constantly improving,
cultivating itself so that performance results are at their
highest.
In 2019, Hoa Phat Group continued to apply the salary
system based on scale and work results, rewarding
employees for excellent achievements or innovation. The
salary fund of the Group increased in the past year, all
employees’ incomes were increased in accordance with
the scale, year of experience and the corresponding level.
Many appointment decisions were made at both office
and factory blocks. The personnel appointed to the
management level were often those who have had many
years of experience working at the Group, therefore, not
only have the ability, high professional qualifications but
also understand their businesses and jobs from the most
basic problem. The open working environment, attractive
remuneration policies and open promotion opportunities
are factors that make employees in Hoa Phat ready to
devote to the company.

34 REPORT OF BOARD OF DIRECTORS Improvement of management structure ANNUAL REPORT 2019

BUSINESS PLAN FOR 2020

In 2019, Vietnam’s economy achieved many
breakthrough results with GDP growth rate
exceeding the set target, reaching 7.02%,
the scale of Vietnam’s economy was raised
to USD 266 billion, per capita reached USD
2,800/year, trade surplus reached nearly USD
10 billion; foreign exchange reserves reached
USD 80 billion; Public debt decreased to
56% of GDP. This is an important foundation
for Vietnam’s economy to continue to have
positive development in 2020. However, risks
and challenges from the global economy,
geopolitical tensions, the US-China trade war
continues with many long negotiations, the
Covid 19 pandemic spreads all over the world,
the psychology is widespread, the domestic
economy is still facing many difficulties, human
and animal diseases are affecting significantly
on the target of inflation control and the target
of economic growth.
Completing construction investment items of Phase 2 of Hoa Phat
Dung Quat Steel Integrated Complex.
Consuming all the products produced. Continue to lead the
nationwide market share of construction steel and steel pipe
- galvanized steel in the field of steel production and trading.
Striving to continue to hold the No. 1 market share of Australian
beef supply in the agricultural segment.
Managing inventory well, keeping track of the price of raw
materials, having a reasonable regulation policy.
Updating the fluctuations of the world and domestic economic
situation, especially the exchange rate, interest rates to have
effective cash flow management policies.
Concentrating measures to prevent and control Covid-19
pandemic, at the same time maintain continuous production and
business activities, ensuring the year plan and stable jobs for
workers.

Before the situation of the world and Vietnam

economy, Hoa Phat Group identifies 2020
as a challenging year for the whole Group,
however, with the determination and unanimity
of 22,300 employees, Hoa Phat Group believes
that the orientation and the direction are right,
the Board of Directors strives to achieve the
following goals:

HOA PHAT’S INTERNAL STRENGTH REPORT OF BOARD OF DIRECTORS Business plan for 2020 35
PERFORMANCE IN 2019
1. PERFORMANCE OF SUBSIDIARIES
1.1. Iron and Steel
1.2. Steel pipe & Prepainted hot dipped galvanized steel coils
1.3. Agriculture
1.4. Other industrial production
1.5. Real estate

2. HUMAN RESOURCE MANAGEMENT

3. POLICIES FOR EMPLOYEES

4. INVESTMENT STATUS OF KEY PROJECT

5. STRUCTURE OF SHAREHOLDERS

6. SHAREHOLDER RELATIONS

36
PERFORMANCE OF SUBSIDIARIES
IRON AND STEEL
In 2019, Hoa Phat Construction Steel recorded the highest ever business record with 2.77
million tons of finished steel products of all kinds, an increase of 16.7% compared to 2018.
With business production results, the subsidiaries in the field of iron and steel play a leading
role in keeping the growth pace.

Growth percentage chart of Top 5 construction steel enterprises

30%
26%
VNSteel
25%

20% 21%
POM
15%
12%
HPG
10%
Vina kyoei

5%

0% PoscoSS
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Hoa Phat Steel firstly reached 300,000 tons in

November, the market share of steel exceeded
26%.
In November 2019, the production and sales volume of Hoa Phat
construction steel reached record numbers ever. The amount of steel
supplied to the market reached 300,000 tons, the highest volume in
nearly 20 years of the Group’s history in term of construction steel
business, an increase of 36.4% compared to November 2018. In the
Southern region, sales volume also hit a record 80,000 tons for the first
time in November, nearly three times higher than the same period in
2018.

Accumulated throughout the year, Hoa Phat Steel produced and

provided nearly 2.77 million tons of high quality steel to the market, up
16.7% over the same period, of which over 265,000 tons were exported
to markets such as Japan, Cambodia, Korea, Taiwan, Malaysia, Australia,
and the US ... the market share reached 26.2%, further confirming the
No. 1 position in market share in Vietnam.

The record output level is a confirmation of Hoa Phat Steel’s initial

success in investing in expanding production towards focusing on
product quality, constantly diversifying types, grades and optimizing
value chain from steel products.

This is also a motivation for Hoa Phat Steel to complete the plan in 2020
with the goal of achieving 3.5 - 3.6 million tons of construction steel, of
which it is striving for 100% growth compared to the output achieved in
the South in year 2019.

HOA PHAT’S INTERNAL STRENGTH PERFORMANCE IN 2019 Performance of Subsidiaries 37

 Chart of output and market share of construction steel
of Hoa Phat over the years

Consumption output of Vietnam Steel Association (tons)

Consumption output of HPG (tons)
Consumption market share of HPG

10,000,000
30%

26%
24%

24%
8,000,000 25%

22%
21%
19%
20%
6,000,000
15%
14%

15%
13%
12%

4,000,000
10%

2,000,000
05%

00%
4,464,000

5,237,000
4,806,000
580,000

4,844,000
644,000

611,000

4,579,000
698,000

1,001,000

6,482,000
1,380,000

8,138,000
1,803,000

9,127,000
2,180,000

9,997,000
2,377,000

2,775,066
10,594,129
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Chart of growth percentage of construction steel consumption from 2009-2019

64

43
43
Growth
percentage of 31
31
HPG
26
22 24 21
17
Growth
16
percentage of 14 14 10
11
Vietnam Steel 12
9
Association 6
1 3
-5
2009 2010 2011 2013 2014 2015 2016 2017 2018 2019
-8

2012

38 PERFORMANCE IN 2019 Performance of Subsidiaries ANNUAL REPORT 2019

 Hoa Phat Hai Duong Steel Integrated
Complex increased its generating
capacity by 12MW
The dry coke stamping line at Hoa Phat Hai Duong Steel
Integrated Complex was officially put into operation in
Mid-August 2019. This is the most advanced clean heat
recovery coke technology in the world today, eco-friendly,
improves coke quality and reduces coke consumption for
blast furnaces. In particular, the recovery of residual heat
from the dry coke stamping line will increase the generating
capacity of the Complex by 12MW/year, increase the total
capacity of the Complex to 64MW.

Previously coke coal and thermoelectricity factory in

Hai Duong Steel Integrated Complex invested in a gas
and excess heat collection and treatment system and 3
generating units with a capacity of 52MW, equivalent
to a medium-sized thermal power plant. This measure
proactively supplies power for steel production, on the
other hand ensures the production environment as well as
the surrounding community.

Since 2018, Hoa Phat Hai Duong Steel Joint Stock

Company has invested about nearly VND 700 billion
to invest in the nitrogen dry coke stamping system to
improve the technology to be more eco-friendly, save
production costs, raising the generation of electricity for
production, from 52MW to 64MW from the third quarter
of 2019, helping Hoa Phat Group take the initiative in 50-
60% of the electricity demand for production, raising the
competitiveness of Hoa Phat steel.
The company is also focusing on building and installing
machinery and equipment with a surplus capacity of 50
MW. It is expected that when the project of this super-high-
pressure thermal power plant is completed in September
2020, the total surplus thermal power output of Hoa Phat
Hai Duong Steel will be increased to 114MW, help the
Complex self-control 80% of the total electricity demand
for production.
Hoa Phat Dung Quat Steel Integrated
Complex carried out trial operation of
the first phase
After nearly 3 years, Hoa Phat Dung Quat Steel Integrated
Complex basically completed phase 1 and commissioning
of No. 1 and No. 2 blast furnaces together with related
items in a closed production chain from iron ore to
construction steel.
For phase 2, over 80% of main equipment items have been
completed, expected to put into operation the remaining
2 blast furnaces and hot rolled coil line (HRC) in operation
in the year of 2020.
In parallel with the trial operation of phase 1, Hoa Phat
Dung Quat seaport was capable of receiving 200,000-ton
ships is also being completed. In 2019, the total volume
of goods delivered to Hoa Phat Dung Quat port reached
about 3.7 million tons, including both export and import
goods. When two project phases are completed, Hoa Phat
Group’s port will have a total capacity of 32 million tons/
year.
With 11 wharfs, Hoa Phat Dung Quat Port is considered
as one of the most important items of Hoa Phat Dung
Quat Steel Integrated Complex, because it is a huge and
unique advantage of Hoa Phat Dung Quat Steel, helping
to minimize optimizing logistic problems, easily importing
input materials, unloading goods and exporting finished
products ... from the complex to domestic and foreign
markets.
Thanks to the deep-water port, each ton of fuel helps
Hoa Phat Dung Quat reduce USD 3-5/ ton, this is a great
advantage because the material must be imported every
year up to millions of tons.

HOA PHAT’S INTERNAL STRENGTH PERFORMANCE IN 2019 Performance of Subsidiaries 39

 Hoa Phat Steel Hung Yen completed drawn steel was exported to countries such as Korea, USA,
Canada, Laos and Cambodia. In 2019, steel wire exports
continuous casting and rolling complex
accounted for 39% of the total withdrawn steel output of
After 19 years of attachment to Nhu Quynh land, on June
Hoa Phat Metal Producing Company.
17, 2019, the Rolling Steel Factory, Hoa Phat Hung Yen
Steel Co., Ltd. moved to Pho Noi A Industrial Park, forming
For prestressed steel products, on March 18, 2019, the
a closed steel production process from scrap to finished
Company officially launched a new product - prestressed
steel.
steel bars (PC Bar) and received the attention of foreign
and domestic customers. Many large enterprises in the
Previously, cast billets must be cooled, stored and transported
Association of prestressed concrete piles have “registered”
from Pho Noi A Industrial Park to Rolling Factory in Nhu
to purchase products of the Company and PC Bar products
Quynh - Van Lam Industrial Cluster in Hung Yen province for
have been exported to markets in Cambodia, Hong Kong,
rolling steel. That fact interrupted the production process,
Taiwan, etc. and completing the manual requisements to
increased transportation costs, storage, kiln fuel and billet
meet export standards for Japan.
consumption. After moving the Rolling Factory to Pho Noi
A Industrial Park to complete the continuous casting and
The company is also rushing to speed up the process of
rolling complex, Hoa Phat Hung Yen Steel Co., Ltd created a
putting pre-stressed strand (PC Strand) line imported from
closed production process, contributing to reduce material
Italy into operation, so that it can bring products to market
consumption, costs, production stages, increase recovery of
in 2020.
finished steel products.

With the advantage of autonomy in input materials, Hoa

In addition to optimizing costs, the casting and rolling
complex also helps to improve factory infrastructure and
landscape to improve working conditions and environment
for employees, reduce emissions and be more eco-friendly.
The continuous casting and rolling process helps the
Company control the stages and inputs for the production
system and equipment, maintaining stability and efficiency
for the whole factory.
Starting operation in September, currently the continuous
casting and rolling complex has run about 90% of design
capacity. When reaching 100% capacity, the Company will
supply the market with nearly 400,000 tons of construction
steel per year.
Hoa Phat Equipment & Accessories
Co., Ltd changed its name to Hoa Phat
Metal Producing Co., Ltd.
After 27 years of pioneering in supplying high quality products
to the market, Hoa Phat Equipment & Accessories Co., Ltd
transformed itself into the steel business (prestressed steel,
drawn steel wire) and achieved remarkable achievements in
terms of production as well as sales volume. With the focus
on deep processing of steel products, Hoa Phat Equipment
& Accessories Co., Ltd. changed its name to Hoa Phat Metal
Producing Co., Ltd. from September 19, 2019.
The company’s steel drawn wire is rated to be of the highest
quality on the market today with products including: hot-
dipped galvanized steel wire, soft annealed steel wire
widely used in construction, fences, wire mesh, gabions ...
These products are certified by the Quality Assurance and
Testing Center (Quacert 1) to meet all standards such as
TCVN, ASTM (USA), BSI (UK) and JISG (Japan).
In August 2019, the company completed installation of
the second hot-dip galvanized steel wire line in Hung Yen
to double the capacity of galvanized wire product. Not
only replacing imported goods, Hoa Phat Group’s wire-
40 PERFORMANCE IN 2019 Performance of Subsidiaries
Phat prestressed steel factory in Dung Quat Economic
Zone, Quang Ngai Province supplies high-class products
with competitive prices, including: pre-stressed steel bars
(PC Bar), prestressed steel cable (PC Strand). Hoa Phat
Group’s pre-stressed steel products are used in large-scale
projects requiring engineering, load-bearing capacity,
high safety such as towers, viaducts, sea-crossing bridges,
high-rise buildings, cable cars, etc at the same time help
optimize the space as well as the cost of materials, shorten
the construction time for works.
Pioneering in the production of wire drawn steel, high-quality
post-tensioning to replace imported goods, it is expected
that when the Company completes the investment stages
and put the equipment into operation, the capacity will
reach about 200,000 tons/ year, meeting domestic demand
and boosting exports.
Maintain iron ore mining
and processing
In 2019, An Thong Mineral Investment Joint Stock
Company achieved the highest consumption volume ever
with over 500,000 tons of ores of all kinds.
The refined iron ore and pellet iron products of An
Thong Company were mainly supplied to Hoa Phat Steel
Integrated Complex in Kinh Mon, Hai Duong. Minh Son
iron ore refining factory actively researched and changed
technology to suit the properties of the original ore
according to the mining divergence of the Sang Than iron
mine in order to produce refined iron ore of good quality,
in accordance with the current steel production technology
of Hoa Phat Hai Duong Steel Joint Stock Company.
In 2020, the Company continues to focus on improving
product quality to stabilize production costs to maintain
profit margins.
ANNUAL REPORT 2019
STEEL PIPE & PREPAINTED HOT DIPPED
GALVANIZED STEEL COILS
Last year, Hoa Phat steel pipe overcame many
difficulties, continued to maintain the number 1 in
terms of market share in the industry, set the highest
record ever in sales volume. Meanwhile, sales volumes
of Hoa Phat Sheet Steel increased 5 times compared
to 2018.

Hoa Phat Steel Pipe exceeded 750,000

tons for the first time
In November 2019, not only the sales of construction steel
achieved record volume, but Hoa Phat steel pipe also
reached the highest level ever in sales history, reaching
72,500 tons, increased by 27.6% over the same period of
2018. In particular, the North market had the highest growth
rate with 38.4%. With this result, Hoa Phat maintained its
position as the No. 1 steel pipe manufacturer in Vietnam

Pecentage chart of growth of Top 5 steel pipe enterprises

30% 32%

28%
25% 26% 26%

23%
20%

15% SeAH VN
14%
HPG
10%
HSG
5% Viet Duc
Minh Ngoc
0%

2011 2012 2013 2014 2015 2016 2017 2018 2019

with over 31.5% market share. for 2020.

Accumulated in 12 months, Hoa Phat provided 750,800
tons of steel pipe, increased by 14.8% over the same period
of 2018, exports reached 19,100 tons, up 17% over the
same period. Besides the No. 1 position in Vietnam, Hoa
Phat Steel Pipe also exports to markets in North America,
Southeast Asia, India, Australia and Latin America, etc. In
addition to supplying finished steel pipes, Hoa Phat Steel
Pipe Company also supplied more than 80,000 tons of
galvanized iron sheets as raw materials to other factories
in the market.
Along with consistent sales policy and superior and
stable product quality, Hoa Phat steel pipe products were
positively welcomed by customers and partners, helping
Hoa Phat Group continuously grow, affirming its leading
position in the market. These are also important factors
for Hoa Phat Steel Pipe to achieve the 10% growth target
In December, the Company put into operation a large-
sized steel pipe line. Hoa Phat large-sized steel pipes will
be supplied for bridges and roads, steel structures for
large national projects, fire protection systems, high-rise
buildings, apartments, airport construction, gas pipelines,
oil pipelines systems, etc.
The launch of Hoa Phat large-sized steel pipes in the
market helps engineers and contractors to actively select
reputable quality suppliers for projects. This is also the first
and only large-sized steel pipe production project in the
North, contributing to affirming No. 1 position of Hoa Phat
Steel Pipe in Vietnamese market.

HOA PHAT’S INTERNAL STRENGTH PERFORMANCE IN 2019 Performance of Subsidiaries 41

 Hoa Phat Steel Sheet Co., Ltd achieved
sales volume increased by 5 times
compared to 2018
After nearly 2 years of official presence on the market, with
the enthusiastic support of customer agents, Hoa Phat
Steel Sheet Co., Ltd built a distribution system throughout
the country, achieved an increase in sales volume in 2019
increased by 5 times compared to 2018.

With modern technology lines imported from Europe, Hoa

Phat Steel Sheet Co., Ltd supplied the main product ranges
such as pickled and oiled (PO) steel sheet, cold rolled (Full
hard) steel sheet, galvanized (GI) steel sheet, galvanlume
(GL) steel sheet, color coated steel sheet, especially
galvanized steel coil applied in harsh environmental
conditions (SPE paint, PVDF paint), widely used for civil,
domestic and industrial projects and exported to markets
all over the world.

Currently, Hoa Phat Steel Sheet Co., Ltd increased its

coverage, gained a certain position in the domestic market
and conquered many export markets such as the EU, US
and some Southeast Asian countries (Indonesia, Malaysia)
,etc. Hoa Phat Steel Sheet Co., Ltd products were highly
appreciated by partners for quality and after-sales service.
Following the successes in the North and the Central,
since September 2019, Hoa Phat Steel Sheet Co., Ltd has
continued to expand its market into the Southern region.

AGRICULTURE
After 4 years of investing in agriculture, Hoa Phat
Group recorded remarkable achievements in agriculture
segment. The revenue in 2019 of this segment reached
172% compared to 2018.
2019 was a quite successful year for the agricultural
segment of Hoa Phat Group with strong growth of the
livestock and animal feed segments. In which, the supply
of Australian beef and clean chicken eggs of Hoa Phat
Group was at the top of the market.

Hoa Phat Trading Co., Ltd. (under Hoa Phat Agriculture

Development JSC) had impressive business results, the
consumption of Australian beef accounted for over 50% of
the national market share. By increasing the market share
of Australian beef from 42% from the end of 2018 to 50%
in 2019, Hoa Phat Group continued to affirm its position,
holding the number 1 market share of Australian beef
supply across the country.

Only after a short time to enter the market, from September

2019, chicken egg production of Hoa Phat Poultry Co., Ltd
also took the lead among businesses supplying chicken
eggs in North region with an output of 450,000 eggs
per day. Hoa Phat Group’s commercial chicken eggs are
processed through a modern line to ensure high quality
eggs - clean - safe to consumers.

In the field of pig breeding, with the farm system in both

regions, the market price of live weight increased sharply
in 2019, also contributed to the revenue growth for Hoa
Phat Group’s pig breeding.

42 PERFORMANCE IN 2019 Performance of Subsidiaries ANNUAL REPORT 2019

OTHER INDUSTRIAL PRODUCTION
The other subsidiaries of other industries made
important strides in the past year, contributed to the
overall growth of the Group. In particular, Hoa Phat
Furniture JSC had strong impression in the market, while
Hoa Phat Refrigeration Engineering Co., Ltd exceeded
the revenue of VND 1,100 billion for the first time.
Hoa Phat Furniture JSC – A strong
impression in 2019
As a leading furniture manufacturer in Vietnam, constantly
leading the market for office furniture with a series
of large-scale projects across the country, 2019 was a
breakthrough year for projects. The most outstanding
was the success of the Family Product Project - with two
Vietbuild exhibitions successfully held in Hanoi and Ho Chi
Minh City bringing great reputation for Hoa Phat Furniture
JSC in the vibrant Southern market. The application of the
latest technologies in production has brought advantages
and strong growth momentum for Hoa Phat Furniture JSC,
from office furniture to home furniture, in which the family
ranges grew by 46% compared to 2018.
Not only interested in numbers, Hoa Phat Furniture JSC
was proud to lead the trend when it was the first furniture
business to launch a campaign to reduce plastic waste
in the factory system located in 3 regions. With millions
of furniture products each year, the practical action
of reducing plastic waste of Hoa Phat Furniture JSC
is expected to help formulate habits for businesses in
reducing plastic waste and at the same time be able to
provide positive consumer reception.
With this action, Hoa Phat Furniture JSC hopes to become
a leading furniture business in synchronous development,
unifying the goal of maintaining the leading manufacturer
position, and green development for a clean environment.
HOA PHAT’S INTERNAL STRENGTH
Hoa Phat Refrigeration Engineering
Co., Ltd exceeded the revenue of VND
1,100 billion for the first time
With the high temperature base for many months,
the demand for refrigeration products in Vietnam has
increased, especially air conditioners. This is the main
factor helping to increase sales volume of Hoa Phat
Refrigeration Engineering Co., Ltd. For the first time in 18
years of development, the Company “smoothly” exceeded
the profit target in 2019 before the deadline of 5 months.
For the whole year of 2019, the Company sold a total of
about 260,000 products to the market. Especially, the
after-tax profit target increased by 82% over the same
period and exceeded 9% of the plan assigned by the
Group for the whole year 2019.
Funiki Air Conditioner MMC2 is the air conditioner
range produced in Malaysia, imported and distributed in
Vietnam by Hoa Phat Refrigeration Engineering Co., Ltd.
The product has many outstanding features, compact
and sophisticated design; using Gas R410a which is safe
and eco-friendly; extremely fast cooling; energy saving,
etc. In 2019, the company supplied Funiki HSC series air
conditioners using the new generation R32 refrigerant
with the cooling efficiency much faster than other types of
gas, saving more electricity and safer.
This year, Funiki air conditioner not only increased in the
segment of civil and family, but also in many schools,
hospitals, industrial park projects, public works. In addition
to quality, reasonable prices, warranty, after-sales are also
factors that promote sales growth.
In addition to the Air conditioner products, Hoa Phat
Freezers and Refrigerators also grew well, of which the
most popular was the Hoa Phat Freezer with the traditional
form. Manufactured on modern lines, meeting high quality
standards, durable, power-saving, preserving food always
fresh, Funiki refrigerators and Hoa Phat freezers are
becoming the familiar brand for consumers.
PERFORMANCE IN 2019 Performance of Subsidiaries 43
REAL ESTATE
Products of Hoa Phat Urban Development and
Construction JSC prospered in 2019. During the
difficult period of real estate market, Hoa Phat Group’s
real estate sales in the industrial park still achieved
impressive growth, up 56% compared to 2018.
In 2019, Hoa Phat Group’s Industrial Parks continuously
“welcome” many large domestic and foreign enterprises
to rent land as factories, help residential real estate,
urban areas and industrial zone infrastructure business of
the Company with many flourishes, remarkable growth
compared to the total area and revenue of 2018.
For the whole year, Hoa Phat Group’s Industrial Parks
leased out more than 432,000 m2 of land, an increase of
48% over the same period, revenue increased 56% to over
VND 700 billion with 25 investors coming to lease land
in 2019. With favorable geographical location, located
between two highways 5A and 5B, Yen My II Industrial
Park with a total planning area of 300ha (phase 1 is
100ha) becomes an attractive destination for foreign and
domestic investors.
44 PERFORMANCE IN 2019 Performance of Subsidiaries
These include Kokwang Industry Vietnam (Korea), Mingshin
Vietnam (Hong Kong), especially Uni-President Group
headquarted in Taiwan, headquartered in Taiwan, one
of the earliest foreign investors to Vietnam, specializing
in manufacturing beverage, food, animal feed. In its plan
to expand its scale, Uni - President Group selected Yen
My II Industrial Park to set the location of the Group’s two
factories, Uni - President Vietnam Co., Ltd. and Northern
Tribeco Co., Ltd. with an area of 13.7 ha, total investment
of VND 1,023 billion (about 44 million USD), the highest
among enterprises that chose Yen My II Industrial Park as
the investment destination over the past time.
Not only Yen My II, but Pho Noi A (Hung Yen) and Hoa Mac
(Ha Nam) Industrial Parks, which are invested by Hoa Phat
Group, also attracted many enterprises to lease land.
With a convenient location, synchronous and modern
technical infrastructure, from internal transport systems,
electricity, water, centralized wastewater treatment
systems ..., Hoa Phat Group’s Industrial Parks are always
attractive to investors and have high occupancy rates. As
for real estate segment, Pho Noi - Hung Yen Urban Area is
expected to be sold by the company by the end of 2020.
ANNUAL REPORT 2019
HUMAN RESOURCE MANAGEMENT

QUALIFICATION GENDER

No. COMPANY NAME Above

University Vocational TOTAL
University Technical Unskilled
Degree College Secondary Male Female
Degree Worker Worker
School

I. Hoa Phat Group JSC 2 51 10 7 6 30 50 56 106

II. Iron and Steel 28 2,506 2,707 2,410 3,601 3,314 13,091 1,475 14,566

1 Hoa Phat 2 126 98 129 216 293 734 130 864

Hung Yen Steel Co., Ltd

2 Hoa Phat 9 725 818 816 1,713 883 4,540 424 4,964
Hai Duong Steel JSC

3 Hoa Phat 13 1,513 1,734 1,386 1,519 1,700 7,090 775 7,865
Dung Quat Steel JSC

4 Hoa Phat 2 81 21 46 74 277 429 72 501

Metal Producing Co., Ltd

5 An Thong 2 61 36 33 79 161 298 74 372

Mineral Investment JSC

III. Steel pipe and prepainted 11 506 474 449 352 1,100 2,589 303 2,892
hot dipped galvanized steel coils

1 Hoa Phat 7 332 395 386 306 1,015 2,207 234 2,441
Steel Pipe Co., Ltd.

2 Hoa Phat Steel Sheet Co., Ltd 4 174 79 63 46 85 382 69 451

IV. Agriculture 11 466 163 126 163 739 1,165 502 1,668

Hoa Phat
1 11 466 163 126 163 739 1,165 502 1,668
Agriculture Development JSC

V. Other industrial production 3 266 135 186 138 1,663 1,559 832 2,391

1 Hoa Phat Furniture JSC 3 196 98 119 95 1,528 1,300 739 2,039

2 Hoa Phat Refrigeration 0 70 37 67 43 135 259 93 352

Engineering Co., Ltd.

VI. Real Estate 2 208 49 30 61 327 505 172 677

1 Hoa Phat Urban Development 2 208 49 30 61 327 505 172 677

and Construction JSC

VII. Total (VII=I+II+III+IV+V+VI) 57 4,002 3,538 3,208 4,321 7,173 18,959 3,340 22,300

HOA PHAT’S INTERNAL STRENGTH PERFORMANCE IN 2019 Human resource management 45

POLICIES FOR EMPLOYEES
With over 22,000 employees located across 3 regions,
it is not easy to manage and take care of such a large
workforce. However, with clear Human resources
hierarchy, payroll policies and benefits generally
applicable to the whole Group, all employees of Hoa
Phat Group are guaranteed all rights according to the
provisions of the state and many other welfare regimes,
and there are many promotion opportunities when
many areas of the Group are expanding production and
business.
Personnel size and training
In 2019, the whole Group had 22,300 employees, an
increase of 12.5% compared to 2018. The strongest
fluctuation continued to be recorded at Hoa Phat Dung
Quat Steel Joint Stock Company with 7,865 employees
at the end of December 2019, an increase of 44.4% over
the same period last year. It is forecasted that the number
of employees of this Company will continue to increase
sharply in 2020 as the Hoa Phat Dung Quat Steel Integrated
Complex is in the process of finishing with extremely large
human resource demand.
The number of highly qualified employees (from
Intermediate level and above) was 10,805, equivalent
to nearly 50% of the total employees of the Group.
Characterized by the Industrial Manufacturing Group, the
male labor force accounts for 80%.
With the desire to promote the continuous development
of the whole team, Hoa Phat Group pays special attention
to training and professional training for all employees in
all positions. Training courses on environmental safety,
occupational safety and health, fire prevention training,
supplementing professional skills and knowledge
dissemination, etc. took place continuously throughout
the past year at all subsidiaries of the Group.
In particular, in order to strengthen the team of highly
knowledgeable and skilled employees, Hoa Phat Group
cooperated with many colleges and universities to improve
the skills of its employees. In 2019 particularly, hundreds
of Hoa Phat Group’s employees were granted certificates
by many advanced training units such as Hanoi University
of Science and Technology, Thai Nguyen University of
Agriculture and Forestry, and Dung Quat Technological
College (Quang Ngai), Northeast Agriculture and Forestry
College, Thai Nguyen Metallurgical Engineering College,
Railway College, Maritime College I, Danang Vocational
College, etc.
On January 1, 2019, Hoa Phat Dung Quat Steel Joint
Stock Company officially put the overall corporate
management system of SAP S/4HANA into operation to
manage all production and business activities at Hoa Phat
Dung Quat Steel Integrated Complex. This move showed
the determination of the BOD in applying modern and
professional management methods, keeping up with the
general trend of the world, and contributing to supporting
the management and transparency of information in
production process.
46 PERFORMANCE IN 2019 Policies for employees
SAP S/4HANA was applied in all majors such as finance
- accounting, product quality management, production
management, sales, etc. After 1 year of implementation,
SAP has shown its effectiveness in linking data accurate,
coherent and consistent that to avoid errors and minimize
uptime of operations.
Benefit policies
Hoa Phat continued to apply the salary system based
on scale and job results. In 2019, the Board of Directors
approved the increase of basic wage and salary fund in
accordance with the Group’s periodic pay rise schedule.
In addition to the main source of income as salary, employees
in Hoa Phat Group also often have the opportunity to receive
awards for outstanding achievements or innovation in their
work. This policy has motivated employees to dedicate to
work, and constantly promote their capacity, improve the
quality of work efficiency. Since then, many initiatives were
implemented in the past year, with initiatives benefiting
businesses of VND billions such as at Hoa Phat Hai Duong
Steel Joint Stock Company.
The welfare regime for employees was strictly implemented
in accordance with the regulations of the State, employees
were fully paid compulsory insurance such as social
insurance, health insurance, etc. Besides, the company
also cooperated with Trade Union, to develop many life
care programs for employees. For the personnel in difficult
circumstances, being sick or having relatives with serious
illness, the Group promptly shared, visited and helped at
the same time with support for living expenses and medical
treatment. In some units, Hoa Phat Group also deployed
a series of trips to bring workers to their hometowns to
celebrate Lunar New Year in the days before New Year
when it was difficult to catch means of transportation.
Internal cultural & sport activities
Activities of sightseeing, vacation, team building, etc.
were also implemented in all units, creating conditions for
employees to have time to rest, recharge after stressful
working hours, and it was also an opportunity to tighten
the spirit of solidarity in the Group.
In particular, the sports movement was still a content of
special interest in Hoa Phat Group. A series of sports
competitions in many subjects such as football, tennis were
organized and professionally within the Group during the
past year, which were also an opportunity for exchanges
between units, factories and facilities, an opportunity for
employees to show their talents and improve their health.
The efforts of Hoa Phat Group were acknowledged by
the hard work of all employees, not few employees were
dedicated to working here for several decades and they
are willing to contribute more to the Group in the coming
time. Hoa Phat really has done well the philosophy of
“harmony for joint development” for its employees.
ANNUAL REPORT 2019
INVESTMENT STATUS OF KEY PROJECTS
• Hoa Phat Dung Quat Steel Integrated Complex
- Address: Dung Quat Economic Zone, Quang Ngai Province
- Total investment: VND 50,000 billion, of which:
- Designed capacity: 4 million tons per year
First phase: 2 million tons of long steel per year
Second phase: 2 million tons of hot rolled coils (HRC) per year
- Progress: Has put in operation the Phase 1 items of Hoa Phat Dung Quat Steel Integrated Complex and is continuing
to invest in the construction of Phase 2. The total amount invested for the Project by the end of 2019 is VND 46,000
billion. It is expected that in the second quarter of 2020, Phase 2 of the project will produce the first hot rolled steel
products to market.
• North Pho Noi Urban Area Project in Hung Yen Province
- Address: Phan Dinh Phung Commune, Nhan Hoa Commune and Ban Yen Nhan Township of My Hao District, Hung
Yen Province.
- Area: 262 hectares
- Size: Urban area and infrastructure complex including trading centers, office services, high-rise buildings, low-rise
buildings, row houses, villas.
- Total investment: The project is divided into two phases. Phase 1 is estimated at VND 6,500 billion in total investment.
Upon finishing the first, the second will be invested in.
Progress: The land clearance and trees growing were completed. The sale is expected to start by the end of 2020.

STRUCTURE OF SHAREHOLDERS
Share information
- Authorized capital: VND 27,610,741,150,000
- Share title: Hoa Phat Group Joint Stock Company
- Share type: Ordinary share
- Stock sticker symbol: HPG
- Par value of share: VND 10,000 per share
- Initial offering date: November 15, 2007
- Total of shares: 2,761,074,115
- Total of treasury shares: 0
- Total of outstanding shares: 2,761,074,115
- Number of freely transferred shares: 2,761,074,115
- Number of shares restricted from transfer: 0

Changes to owner’s equity during the year

- On Jun 12, 2019, the Group announced the change in number of outstanding shares due to issue of shares to
pay dividend of 2018.
+ Authorized capital before issue: VND 21,239,071,660,000
+ Authorized capital after issue: VND 27,610,741,150,000
- Treasury share transaction:
+ Total of treasury shares as at December 31, 2019: 0
+ Treasury share transaction in 2019: 0

HOA PHAT’S INTERNAL STRENGTH PERFORMANCE IN 2019 Investment status of key projects 47
Structure of shareholder as at March 02, 2020

Structure of shareholder by group

Board of Management, Supervisory Board,

36% Board of Directos, Chief Accountant
38%
Related people

Other domestic shareholders

8% Foreign shareholders
18%

Structure of shareholder
by geographical region
38%
Domestic shareholders
62%
Foreign shareholders

Structure of shareholder by equity percentage as at March 02, 2020

No. Content Number of shares Percentage

1 Shareholders holding more than 5% 902,550,000 32.69%

2 Shareholders holding from 1% to 5% 758,147,080 27.46%

3 Shareholders holding less than 1% 1,100,377,035 39.85%

Total 2,761,074,115 100.00%

48 PERFORMANCE IN 2019 Structure of shareholders ANNUAL REPORT 2019

Share transaction of internal
shareholders and related people in 2019
Number of shares Number of shares
owned at the owned at the end of
Relation with
No. Transactions beginning of period period Reason
performed by internal shareholder
Number of Number of
shares % shares %

Mr. Tran Vu Minh, director

Dai Phong Trading of Dai Phong Trading and
1 Investment Co., Ltd. Mr. 0 0.00 1,300,000 0.05
and Investment Co., Ltd. Purchase
Tran Dinh Long’s son-
Chairman of the BOM + share-
based
dividend
Member of the BOM Mr.
2 Ta Tuan Duong 172,450 0.01 354,185 0.01 2018 rate
Ta Tuan Quang’s son
30%

Member of the BOM Mr.

3 Nguyen Thi Hong hai 270,068 0.01 481,088 0.02
Ta Tuan Quang’s wife

Chairman of the BOM Mr.

4 Vu Thi Hien 201,150,751 7.29 202,550,000 7.34 Purchase
Tran Dinh Long’s wife

5 Tran Dinh Long Chairman of the Board 694,433,990 25.15 700,000,000 25.35 Purchase

6 Pham Thi Kim Oanh Finance director 67,813 0.00 17,813 0.00 Sales

Vice Chairman of the BOM

7 Pham Thi Thu Lan 5,404,369 0.20 4,854,369 0.18 Sales
Mr. Doan Gia Cuong’s wife

8 PENM IV Germany GMBH The company is related

to Mr. Hans Christian 28,173,600 1.02 32,635,600 1.18 Purchase
&CO.KG
Jacobsen - Member of the
BOM
9 Nguyen Ngoc Quang Member of the BOM 54,608,837 1.98 53,108,837 1.92 Sales

HOA PHAT’S INTERNAL STRENGTH PERFORMANCE IN 2019 Structure of shareholders 49

Top 10 institutional shareholders as at March 02, 2020

No. Institution name Address Number of shares Rate

Commence Chambers, P.O Box 2208,

1 VOF INVESTMENT LIMITED 102,148,628 3.70
Road Town, Tortola, British Virgin Islands

2 PENM III GERMANY GMBH c/o Johanna Beteiligungsverwaltungs

63,773,811 2.31
& CO.KG GmbH, Friedrich-Ebert-Allee 13, 53113
Bonn, Germany

3 EMPLOYEES PROVIDENT EPF Building Jalan Raja Laut 50350 Kuala

60,645,725 2.20
FUND BOARD Lumpur Malaysia

4 NORGES BANK Bankplassen 2 P.O. Box 1179 Sentrum

42,670,000 1.55
NO-0107 Oslo

5 VIETNAM ENTERPRISE 1501 Cao Ốc Mê Linh Point, 2 Ngô Đức

38,330,214 1.39
INVESTMENTS LIMITED Kế, Quận 1, Tp HCM, Việt Nam

6 PENM IV GERMANY GMBH c/o Johanna Beteiligungsverwaltungs

32,635,600 1.18
& CO. KG GmbH, Friedrich-Ebert-Allee 13, 53113
Bonn, Germany

7 RWC EMERGING MARKETS Ugland house, South Church street,

31,002,712 1.12
EQUITY MASTER FUND George town, Grand Cayman, ky1-1104,
LIMITED Cayman islands

8 KIM VIETNAM GROWTH Hoehyeon-dong, 1(il)-ga, 51 Sogong ro

30,211,143 1.09
EQUITY FUND Jung-gu, Seoul, 100-792, Republic of
Korea

9 JPMORGAN VIETNAM 1 Queen’s Road Central, Hong Kong

28,500,834 1.03
OPPORTUNITIES FUND

10 FRANKLIN TEMPLETON 8A, rue, Albert Borschette, L-1246

27,503,483 1.00
INVESTMENT FUNDS-TEM- Luxembourg, Grand Duchy of Luxembourg
PLETON ASIAN SMALLER
COMPANIES FUND

Totall 457,422,150 16.57

List of majority shareholders at March 02, 2020

Pecentage as at
No. Shareholder Address Number of shares March 02, 2020
(%)

1 Tran Dinh Long 119, Bui Thi Xuan, Hai Ba Trung, Hanoi 700,000,000 25.35%

2 Vu Thi Hien 119, Bui Thi Xuan, Hai Ba Trung, Hanoi 202,550,000 7.34%

Total 902,550,000 32.69%

50 PERFORMANCE IN 2019 Structure of shareholders ANNUAL REPORT 2019

Table of dividend contribution of HPG from 2007 to 2019 (%)

60%

50% 50%

40%

30% 30% 30% 30% 30% 30%

20% 20% 20%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
10% cash 30% cash 10% cash 20% cash 20% cash 20% share 15% cash 10% cash 15% cash 50% share 40% share 30% share Expected
and 40% and 50% and 10% and 15% and 20% and 15% 20%
share share share share share share

Increased authorized capital

of Hoa Phat Group from 2007-2019 (VND billion)
27,611

21,239

15,171

8,429
7,330

4,191 4,819
3,178
1,964
1,320

2007 2008 2010 2012 2014 2015 2016 2017 2018 2019

HOA PHAT’S INTERNAL STRENGTH PERFORMANCE IN 2019 Structure of shareholders 51

SHAREHOLDER RELATIONS
2019 was the year that the activities of the Shareholder
Relations took place with many exciting events and
programs. The candor, openness in sharing and
exchanging information of the Board of Directors were
highly appreciated by shareholders and investors.
The Investor Relations Department always maintained the
interaction with shareholders through annual programs
such as the General Meeting of Shareholders, investor
contact; meetings with domestic and foreign analysts,
organizations and investors. The situation of production
and business of key industries such as steel, agriculture,
real estate, etc. the progress of the projects being
implemented, especially Dung Quat Steel Integrated
Complex project, were regularly updating on the Group’s
website and in the mass media.
Meetings with investors were regularly held to exchange,
disclose information, and promptly answer questions
of investors. Typically, the meeting with investors in the
52 PERFORMANCE IN 2019 Shareholder relations
second quarter of 2019 took place online in Hanoi and Ho
Chi Minh City with the participation of about 150 investors.
In particular, the meeting with investors in the forth quarter
held in Dung Quat - Quang Ngai Complex welcomed more
than 200 investors, showing the great attraction of the
Hoa Phat Dung Quat Steel Integrated Complex Project
to the investors, representatives of securities companies,
domestic and foreign investment funds.
Within the framework of the program, the delegation
of investors was witnessed firsthand and was amazed
at the scale and progress of Hoa Phat Dung Quat Steel
Integrated Complex. The items are gradually completed
and put into trial operation as or even beyond the schedule.
Through this program, the investment community got
better understanding on the production technology and
environmental protection of the project, to firmly believe
in the investment strategies of Hoa Phat Group’s Board
of Directors and together looked at the future ahead with
great prospects.
ANNUAL REPORT 2019
In addition to the above key programs, Hoa Phat Group
welcomed a lot of investment funds accessing to learn
and update information such as Fulleton, Consilium, Truck
Capital, Sumitomo Asset Management, EPF, etc. In May
2019, the Group welcomed Korean business delegation
including 24 senior managers, CEOs, CFOs from leading
companies and organizations of Korea such as Korea
Trade Association, Lotte Construction Company, LG
Group, Doosan Co., Ltd, etc. visiting to work, explore the
activities, production areas of the Group.
In 2020, the Company’s goal continues to be to make
information transparent, provide sufficient information to
shareholders and investors; quickly respond and answer
information; ensuring accuracy and timeliness; complying
with and abide by the law on information disclosure. The
Investor Relations Department will continue to promote
and diversify investor relations activities in order to access
and provide information to investors better.

According to the announcement of Forbes Vietnam on

December 30, 2019, Hoa Phat Group was in the top 10
largest public companies. This was the first time Forbes
Vietnam implemented this list in Vietnam based on four
criteria: revenue, profit, total assets and capitalization,
according to Global 2000 list ranking method (2,000
largest companies worldwide) by Forbes (US).

HOA PHAT’S INTERNAL STRENGTH PERFORMANCE IN 2019 Shareholder relations 53

CORPORATE
GOVERNANCE
1. LIST OF MEMBERS OF BOM AND OWNERSHIP RATIO

2. BOM’S ASSESSMENT OF OPERATION

3. BOM’S ASSESSMENT OF BOD’S OPERATION

4. BOM’S MAIN ACTIVITIES DURING THE YEAR

5. PLANS AND DIRECTIONS

54 BÁO CÁO BAN GIÁM ĐỐC các rủi ro trong quá trình hoạt động
 LIST OF MEMBER OF BOM
AND OWNERSHIP RATIO (2/3/2020)

Mr. TRAN DINH LONG Number of shares held at March 2nd, 2020
BOM Chairman 25.35%
of Hoa Phat Group

• Educational qualification:
Bachelor of economics - National Economics University
• Joining date: 1992
As founding shareholder and holding Chairman position of member companies,
Mr. Long was the first person setting up the foundation for Hoa Phat Equipment
& Accessories Co., Ltd, the earliest member in the Group. Mr. Long employed
a lot of experts who had consensus ambition and responsibilities.During the
establishment and development of Hoa Phat, Mr. Long was the person who
oriented business strategy for each subsidiary.

Mr. TRAN TUAN DUONG Number of shares held at March 2nd, 2020
BOM Vice Chairman 2.68%
General Director of Hoa Phat Group JSC

• Educational qualification:
Bachelor of economics – National Economics University
• Joining date: 1992
Mr. Duong held management position in subsidiaries such as: Hoa Phat
Equipment & Accessories Co., Ltd, Hoa Phat Furniture JSC and Hoa
Phat Steel Pipe Co., Ltd; before he became the Deputy Chairman of
Management Board cum CEO of Hoa Phat Group since January 2007. With
his in deep experience, Mr. Duong has contributed greatly to strengthen
the position of Hoa Phat steel and Hoa Phat Group as a whole.

Mr. NGUYEN MANH TUAN Number of shares held at March 2nd, 2020
BOM Vice Chairman cum Director 2.63%
of Hoa Phat Steel Pipe Co., Ltd

• Educational qualification:
Bachelor of economics – National Economics University
• Joining date: 1996
In 1996, Mr. Tuan was a Vice Director of Hoa Phat Steel Pipe Co., Ltd
cum Head of trading department. Since 10/2004, being Director of Hoa
Phat Steel Pipe Company, Mr. Tuan has helped the Hoa Phat steel pipe
become a top steel pipe maker.

HOA PHAT’S INTERNAL STRENGTH CORPORATE GOVERNANCE List of member of BOM and ownership ratio 55
 Mr. DOAN GIA CUONG Number of shares held at March 2nd, 2020
BOM Vice Chairman cum Director 1.98%
of Hoa Phat Furniture JSC

• Educational qualification: MBA, National Economics University

• Joining date: 1999
Mr. Cuong was appointed first in the position of Vice Director before
promoting as a Director of Hoa Phat Furniture JSC. From 01/2007, he
additionally held the Deputy Chairman position of Hoa Phat Group
JSC. With his straight forward orientation in achieving realistic goals,
Mr. Cuong has helped Hoa Phat Furniture becoming familiar to every
Vietnamese consumer. From April 2016, he held the position of Director
of Hoa Phat Agricultural Development Joint Stock Company, responsible
for managing the whole agricultural segment of Hoa Phat Group.

Mr. NGUYEN NGOC QUANG Number of shares held at March 2nd, 2020
BOM member cum Director 1.92%
of Hoa Phat Equipment & Accessories Co.,Ltd.

• Educational qualification: Vocational training

• Joining date: 1992
Mr. Nguyen Ngoc Quang had been Director of Hoa Phat Equipment &
Accessories Co., Ltd in Ho Chi Minh subsidiary for 4 years (1992-1996). He
has been Director of the Company (currently as Hoa Phat Metal Producing
Co.,Ltd) since 1997. As one of the top construction equipments producer
in Vietnam, products of Hoa Phat Metal Producing Co., Ltd under his
management have been successfully persuading customers in domestic
and foreign country on their qualities, prices and after sales services.

Mr. TA TUAN QUANG Number of shares held at March 2nd, 2020

BOM Member cum Director of 0.13%
Hoa Phat Refrigeration Engineering Co., Ltd.

• Educational qualification: National Economics University

• Joining date: 1995
Mr. Quang was among founders of Hoa Phat Furniture, he was Director of
Hoa Phat Furniture JSC for 11 years. Since December 2006, he has been
Director of Hoa Phat Refrigeration Engineering Co., Ltd where he has
contributed signicantly to its success and brand name of Funiki position.

56 CORPORATE GOVERNANCE List of member of BOM and ownership ratio ANNUAL REPORT 2019
 Mr. HOANG QUANG VIET Number of shares held at March 2nd, 2020
BOM Member cum Director 0.49%
of Hoa Phat Urban Development & Construction Jsc.

• Educational qualification: Graduated from People’s Security University

• Joining date: 2001
Joining the Group since 2001, Mr. Viet has been elected as a Director of Hoa
Phat Urban Development and Construction JSC. He was successful in real
estate, initically with constructings trading for industrial infrastructure starting
with Pho Noi A industrial park. Mr. Viet and Board of Directors are now going
to deploy other housing and urban areas after the success of Pho Noi A.

Mr. NGUYEN VIET THANG Number of shares held at March 2nd, 2020
BOM Member cum Deputy 0.32%
General Director of Hoa Phat Group JSC

• Educational qualification: Bachelor of civil engineering, National Universi-

ty of Civil Engineers.
• Joining date: 2003
Mr. Nguyen Viet Thang had several years in the management position as the
Deputy Director of Hoa Phat Urban Development and Construction JSC and
Director of Hoa Phat Hung Yen Feeds Co.,Ltd before he was appointed as
the Deputy General Director of Hoa Phat Group Joint Stock Company on 7th
April 2012. He was appointed as the Director of Hoa Phat Hai Duong Steel
JSC since March 2018.

Mr. HANS CHRISTIAN Number of shares held at March 2nd, 2020

BOM Member 0%
• Educational qualification: Master of Business, Denmark
• Joining date: 2012
Being appointed as a member of the Management Board in 2012, Mr. HANS
CHRISTIAN has held many important responsibilities of the Industrialization
Fund for Developing Countries (IFU), Denmark (1983-1989); Regional
Director, Investment Fund for the Europe Central and East, Denmark (1989
- 1991); CEO of array of agriculture, the European Bank for construction and
development (EBRD), London (1991-2006); CEO of PENM I, PENM II, PENM
IV (2006 - present).

HOA PHAT’S INTERNAL STRENGTH CORPORATE GOVERNANCE List of member of BOM and ownership ratio 57
BOM’S ASSESSMENT OF OPERATION
In the context that the world economy slowed down becoming the first unit in the North to be able to supply
due to geopolitical problems, US-China trade tensions this special product line. For steel sheet product line,
have been escalating, Vietnam’s GDP in 2019 achieved after nearly 2 years of official presence in the market, Hoa
impressive results with a growth rate of 7.02%, inflation Phat Steel Sheet Company Limited has built a distribution
was controlled at a low level, the average consumer system throughout the country, achieving 2019 annual
price index in 2019 increased by only 2.79. Industrial sales volume of 5 times higher than 2018. Currently, Hoa
development indexes also achieved positive growth, Phat Steel Sheet has increased its occupation, gained a
helping domestic production to overcome significant position in the domestic market and conquered many
challenges. With synchronous solutions and quickly export markets such as the EU, US and some Southeast
adapting to volatile economic conditions at home and Asian countries (such as Indonesia, Malaysia), etc. Since
abroad, Hoa Phat Group achieved impressive results. September 2019, Hoa Phat Steel Sheet has continued to
expand its market into the Southern region.
Iron and Steel
The price of iron ore, coal and other steelmaking fuels
increased sharply during the year, combined with the
increasing protectionism trend in the world, etc. which are
adverse factors for Hoa Phat construction steel. However,
Hoa Phat construction steel still achieved an output of 2.77
million tons, up 16.7% over the same period, of which over
265,000 tons were exported to markets such as Japan,
Cambodia, South Korea, Taiwan, Malaysia, Australia, USA,
etc. The market share reached 26.2%, further confirming
the No. 1 position in market share in Vietnam.

After nearly 3 years, Hoa Phat Dung Quat Steel Integrated

Complex basically completed phase 1 and was testing
and operating the No. 1 and No. 2 blast furnaces and
related items in a closed production chain from iron ore to
construction steel. This is also a motivation for Hoa Phat Agriculture
Steel to complete the plan in 2020 with the goal of reaching 2019 was a quite successful year for the agricultural
3.6 million tons of construction steel, of which the Central segment of Hoa Phat Group with strong growth of the
region - Central Highlands strives to grow by 50% and the livestock and animal feed segments. Revenue of this
South to grow by 100% compared to production in 2019. segment reached 172% compared to 2018, in which the
output of Australian beef, clean chicken eggs of Hoa Phat
For phase 2, over 80% of main equipment items have been Group was at the top of the market.
completed, expected to put into operation the remaining
2 blast furnaces and hot rolled coil (HRC) line in 2020. Specifically, the consumption of Australian beef accounted
for more than 50% of the national market share, confirming
its position and No. 1 in supplying Australian beef
Steel Pipe and Prepainted nationwide. In addition, in term of the egg production,
Hoa Phat Poultry Company Limited was also the leading
Hot Dipped Galvanized Steel Coil enterprise in supplying eggs in the North with the output
The market of steel pipe and galvanized steel coil was
of 450,000 eggs per day. In term of pig breeding, with the
never as difficult as last year. Many countries initiated
farm system in both 2 regions, the market price of live pig
ongoing investigations aimed at these two product lines of
increased sharply in 2019, also contributing to the revenue
Vietnam. However, Hoa Phat Steel Pipe still achieved the
growth for Hoa Phat Group’s pig farming segment.
plan and exceeded 750,000 tons of finished steel pipe of
all kinds for the first time, an increase of 14.8% compared
Other industrial production
to the same period in 2018, exports reached 19,100 tons,
an increase of 17% compared to the same period. Besides
After restructuring, other industrial production segments
the No. 1 position in Vietnam, Hoa Phat Steel Pipe also
of Hoa Phat Group have two subsidiaries, namely Hoa Phat
exported to markets in North America, Southeast Asia,
Furniture Joint Stock Company and Hoa Phat Refrigeration
India, Australia and Latin America, etc. With this result,
Engineering Co., Ltd. Hoa Phat Metal Producing Co., Ltd.
Hoa Phat maintained its position as the No. 1 steel pipe
moved into the field of iron and steel to conform to the
manufacturer in Vietnam with over 31% market share.
new development strategy.

Another important highlight is that at the end of the year,

the Company put into operation a large steel pipe line,

58 CORPORATE GOVERNANCE Bom’s assessment of operations ANNUAL REPORT 2019


The strong development of technology and application of
technology in production brought the maximum strength
to Hoa Phat Furniture in developing a series of new
products, from office furniture to household furniture with
strong growth momentum in 2019. In which the household
furniture grew by 46% compared to 2018, solidified the
position of the leading furniture manufacturer in Vietnam.
For Refrigeration products, this group’s revenue exceeded
VND 1,100 billion for the first time last year. In particular,
the target profit after tax increased to 82% over the same
period and exceeded 9% of the plan assigned by the
Group for the whole year of 2019. In the year 2019, the
Company sold a total of about 260,000 products to the
market.
Real estates
In 2019, the Industrial Parks of Hoa Phat Urban Development
and Construction JSC continuously “welcomed” many large
domestic and foreign enterprises to rent land as factories,
bringing the company’s real estate, urban area and industrial
zone infrastructure business to prosperity and outstanding
growth compared to the total area and revenue of 2018. For
the whole year, Hoa Phat Group’s industrial parks leased out
over 43.2 hectares of land, up 48% over the same period.
During the period, revenue increased by 56% to over VND
702 billion with 25 investors coming to lease land in 2019.
For residential real estate and urban areas, Hoa Phat Group is
focusing on developing Northern Pho Noi urban area (Hung
Yen) with a scale of over 262ha. It is expected that phase I of
the project will be eligible for sales by the end of 2020.

BOM’S ASSESSMENT OF
BOD’S OPERATIONS
After a year of 2019 with a lot of domestic and international
events affecting the production and business activities of
the Group, the Board of Directors highly appreciated the
efforts of the General Director and the Executive Board
at all levels in the process of implementing the Group’s
production and business plan in 2019.

The General Director and the Executive Board successfully

performed their roles through timely, flexible management
solutions in line with the guidelines and orientations of
the Board of Management. The policies and guidelines
given by the Board of Management were also fully and
timely implemented by the Executive Board and reported
in details of implementation results with a high sense
of responsibility. The results achieved in all business
segments continued to maintain and strengthen the trust
from partners, customers and shareholders.

The Board of Management believes with firm, flexible

solutions in the management of the Board of General
Directors of the Group and the Board of Directors of
the subsidiaries, which will contribute to increasing the
stability in production activities, gradually conquer new
markets, difficult markets in the region and international in
the context of many complex difficulties.

HOA PHAT’S INTERNAL STRENGTH CORPORATE GOVERNANCE Bom’s assessment of operations 59

BOM’S MAIN ACTIVITIES
DURING THE YEAR

During the year, the BOM carried out the following supervision activities:

• Supervise and direct the General Director and the Executive Board in managing daily business
and production activities of the Group’s companies. Coordinate closely with the General Director
and the Executive Board to give directions and timely solve the proposals and requests of the
Executive Board of companies in daily production and business;

• Regularly organize periodic and extraordinary meetings between the Board of Directors and the
Board of Management to listen to reports and timely solve arising situations;

• Decide to restructure the organizational model of companies, bring efficiency in management;

• Decide on investment plans and projects of the Group’s companies, arrange capital and human
resources for senior management of projects.

In order to serve the growth goals for the Group, the Board of Management has issued 11
Resolutions and passed many important contents:

• Approve the 2019 business plan for the whole Group and submit it to the General Meeting of
Shareholders;

• Approve the detailed plan for dividend payment in 2018;

• Increase capital contribution at Hoa Phat Dung Quat Steel Joint Stock Company, Hoa Phat Steel
Sheet Company Limited; Hoa Phat Hai Duong Steel Joint Stock Company; Hoa Phat Hung Yen
Steel Company Limited; Hoa Phat Metal Producing Company Limited;

• And many other important decisions

60 CORPORATE GOVERNANCE Bom’s main activities during the year ANNUAL REPORT 2019
PLANS AND DIRECTIONS
According to a survey of the Pacific Economic Cooperation Council (PECC; December 2019), the top 5 risks to growth of
Asia-Pacific economies include: Protectionism rise and trade war; Global trade growth slowed down; China’s economy
slowed down; The US economy decelerated; Lack of political leadership.

2019 showed slowing down signs of global steel market and it is expected in the first quarter of this year, industry
consumption will not be improved. In the ASEAN region, many proposed integrated steel projects in ASEAN will lead
to a serious oversupply and it will take about 20 years for ASEAN steel consumption to catch up with this capacity.
Domestic steel industry continues to face challenges due to competitive pressure from increasing domestic supply,
imported steel from abroad; tightening lending credit to the domestic real estate market; and, in addition, the slow
construction progress.

From the assessments and forecasts of the economy as above, the Board
of Management of the Group set out the orientations in 2020 as follows:

1 Closely monitor the developments of the global
and Vietnamese economic situation to set out
orientations for the Group’s production and business
activities, especially the development of US-China
relations, the situation of the epidemic named
COVID-19 acute respiratory tract disease, the
impact of the Chinese economy on the Vietnamese
economy, the policies governing the economy of the
Government and the policies of the Ministries and
Departments related to economic activities business
of the Group.
5 Keep traditional goods continuously promoting
their strengths and available positions in the
market; Research for new product lines to catch up
with the trend of the market.
6 Ensuring biosecurity for livestock, increasing
capacity and output of pig, Australian beef, and
egg; supplying more and more good quality
products to meet the needs of the market. Research
and expand the value chain of processed foods.

2 Assess the trend of price fluctuation of main

raw materials related to the Group’s production
and business activities, in particular, the price
movements of iron ore, coal and some other basic
materials.
3 The project of Hoa Phat Dung Quat Steel
Integrated Complex must be a top priority,
ensuring the operation on schedule, especially in
2020, will be brought the HRC production line into
production and supply finished products to the
market.
4 Diversify the steel export market. Maintain the
domestic market, actively expand new locations in
regions across the country.
7 Strengthen risk control, corporate governance,
technical improvement, continue to apply
information technology to improve productivity,
update production and business data in a timely
manner, thereby contributing to saving production
costs, reducing product costs and supporting the
Board of Directors timely in daily business and
production decisions.
8 Continue to improve the living quality and incomes
of employees, improve the working environment
so that Hoa Phat Group is always an attractive
environment and enhance the creativity, dedication
and engagement of employees to the Group.

HOA PHAT’S INTERNAL STRENGTH CORPORATE GOVERNANCE Plans and directions 61

REPORT OF
SUPERVISORY BOARD
1. LIST OF PERSONNEL AND OWNERSHIP PERCENTAGE

2. REPORT OF SUPERVISORY BOARD

3. REPORT OF INTERNAL CONTROL BOARD

62
LIST OF PERSONNEL
AND OWNERSHIP PERCENTAGE
Mrs.
BUI THI HAI VAN
Head of Supervisory Board
Finance-Accounting Bachelor
Working starting time: 2008
Before coming Head of
Supervisory Board, Ms Van held
position Deputy Chief accountant
- Hoa Phat Hai Duong Steel JSC
(2008 - 2016) and currently she
is also head of Internal control
Board of Hoa Phat Group JSC
(2016-present).
Number of shares held as at
02/03/2019 (%)
0.00%
HOA PHAT’S INTERNAL STRENGTH
Mrs.
LE THI KIM ANH
Member of Supervisory Board
Master of Business
Administration
Working starting time: 2018
Before being voted as a
member of Supervisory Board,
Mrs. Le Thi Kim Anh held a
number of position in: auditor
of Pricewaterhouse Coopers
Vietnam Co.,Ltd (2001 – 2004);
manager of Portfolio Management
Department, project manager of
Vietfund Management (2008 –
2014), manager of Investment
Department – PENM Partners
ApS Fund (from 2017 – now).
Number of shares held as at
02/03/2019 (%)
- -
REPORT OF SUPERVISORY BOARD List of personnel and ownership percentage
Mrs.
VU THANH THUY
Member of Supervisory Board
Economic Bachelor
Working starting time: 2005
Before becoming a member of
Supervisory Board, Ms Thuy held
a number of position in: staff
member in accounting department
of Hoa Phat Hai Duong Steel JSC
(2005-2006); staff member in
Finance Department of Hoa Phat
Group (2007-present)
Number of shares held as at
02/03/2019 (%)
63
REPORTS OF SUPERVISORY BOARD

In 2019, the Supervisory Board worked closely with the Board of Management and the Board
of Directors to follow the issuance and implementation of resolutions of the General Meeting of
Shareholders and the Board of Management. In addition, the Supervisory Board also participated in
monitoring and supervising the audit and internal control activities at the Group and its subsidiaries,
ensuring that the operation of the apparatus complied with the provisions of law and management
regulations of the Group.

During the year, the Supervisory Board implemented the following tasks:

Attend all meetings of the Board of Management, timely update information on the
situation of production and business activities, the implementation of projects, supervise
the implementation of Resolutions of the General Meeting of Shareholders and Board of
Management;
Supervise and comment on the implementation of production and business objectives to
achieve the Group’s revenue and profit plan;
Audit the quarterly, interim and annual financial statements to assess the truthfulness
and reasonableness of financial data, in accordance with Vietnam’s prevailing standards,
accounting regimes and financial policies;
Coordinate with the Internal Control Board, Finance Board, Legal Department to review
and evaluate the potential and significant risks in order to develop and propose a control
plan for 2019, and monitor, supervise and evaluate the results of internal control;
Control the compliance with the regulations on information announcement of the Group in
accordance with the provisions of the law;
Monitor the progress of key projects in the Group such as: Dung Quat Steel Integrated
Complex Project, Prepainted Hot dipped galvanized steel sheet Plant Project, Agriculture
Projects, etc.

During the audit, review, the Supervisory Board assessed that the Group’s production, business
and investment activities were conducted transparently and in compliance with the provisions of
law. In 2019, the Supervisory Board did not recognize any abnormal signs affecting or violating the
regulations of the State as well as the Company in the activities of the members of the Board of
Management, the Executive Board as well as the officers of the company.

In 2020, with the goal of promoting the role of supervision and compliance, transparency in the
Group’s operations, the Supervisory Board is expected to continue to promote its operations,
focusing more on internal audit, specifically:

Supervise the compliance with regulations and rules in the management and operation of
the Group’s production and business activities and the results of implementing resolutions
of the General Meeting of Shareholders and the Board of Management;
Inspect and supervise the observance of the law on capital mobilization, management and
usage; the promulgation and implementation of Financial Regulations, internal regulations
of enterprises, profit distribution, appropriation and use of funds; evaluate the efficiency of
using capital of enterprises;
Periodically verify the truthfulness and transparency of the Group’s quarterly and annual
financial statements and subsidiaries;
Coordinate with the specialized divisions of the Group to conduct irregular and regular
inspections of certain areas of potential risks.

64 CORPORATE GOVERNANCE Reports of supervisory board ANNUAL REPORT 2019

REPORT OF INTERNAL CONTROL BOARD

In 2019, the Internal Control Board of Hoa Phat Group inspected, reviewed and assessed the
business activities and compliance resolution of the Group and its subsidiaries with the following
activities:

Coordinate with the Finance Board to supervise quarterly, interim and annual financial
statements before the Executive Board submits to the Board of Management, the General
Meeting of Shareholders or discloses to the outside in accordance with the law.
Supervising results showed that:
• Quarterly, interim and annual financial statements were prepared and published in
accordance with accounting standards and current law provisions;
• No significant or unreasonable errors were detected relating to accounting estimates
(e.g. provisions, goodwill determination, etc.);
• There was no unusual record for related party transactions;
• Some opinions of the Independent Audit in the Management Letter to improve internal
control were reviewed, evaluated and considered by the Supervisory Board that there
was no significant effect the preparation and publication of financial statements, and at
the same time agreed on improvement resolution with the Executive Board and related
parties;
Monitor and manage relationships between subsidiaries and contractors, suppliers in the
construction and implementation of contracts to ensure transparency, fairness, timeliness
and the spirit of cooperation between the two parties for mutual benefit;
Review the working environment and welfare for employees through inspecting the
kitchen and labor reward and reward regimes, recruitment programs to ensure that all
staffs and employees have fair conditions to develop and to be treated as committed
when recruiting;
Coordinate with the specialized division at the Group to control the safety in the
prevention of fire and explosion in labor at all the Group’s factories and plants;
Coordinate with the Legal Department to regularly check the compliance with legal and
administrative procedures in accordance with provisions of the Law;
Coordinate with Information Technology Department to apply information technology
into the construction of material code lookup systems of the Group and its subsidiaries.
Thereby controlling the price of materials purchased in the Company to ensure the right
purchase needs, approved by the authorities and can compare prices between companies
in the Group.
Follow the progress of key projects in the Group such as: Hoa Phat Dung Quat Steel
Intergrated Complex Project, pre-painted galvanized steel coil factory, Agricultural
projects, etc.
Carry out overall control at a number of companies with the following main contents:
Cash management, advance payment; management of receivables; inventory
management; accounting and tax declaration, etc. The control report includes advice
and recommendations to help companies operate more efficiently and effectively.

In 2019, the activities of the companies in the Group strictly complied with the provisions of laws
and internal regulations of the Group, thereby achieved significant results. The Supervisory Board
did not detect any material errors in the operations of the Companies. A number of immaterial
errors with negligible influence levels were proposed to be overcome.

In order to promote effective internal control activities, in 2020, the Supervisory Board will build
appropriate human resources in combination with departments and divisions to enhance evaluation
and consultancy activities to support the Group and Subsidiaries achieve the goals set by the Board
of Directors.

HOA PHAT’S INTERNAL STRENGTH REPORT OF SUPERVISORY BOARD Report of internal control board 65
SUSTAINABLE
DEVELOPMENT
1. SUSTAINABLE DEVELOPMENT STRATEGY WITH RELEVANT PARTIES

2. RESEARCH & DEVELOPMENT

3. CIRCULAR ECONOMIC MODEL IN HOA PHAT GROUP

4. TECHNICAL INNOVATION

5. SOCIAL RESPONSIBILITY

66
SUSTAINABLE DEVELOPMENT STRATEGY WITH
RELEVANT PARTIES
“The motto “Harmony for Joint Development” is the
lodestar for all activities of Hoa Phat Group. This is
shown in all relations among employees, between the
Group and shareholders, partners, agents and social
community for mutual benefits of parties concerned in
the same boat in direction to sustainable development”,
said Mr. Tran Dinh Long, Chairman of BOM of Hoa Phat
Group.

Relations between Hoa Phat Group and

relevant parties;

EMPLOYEE

• Friendly and safe working environment without discrimination

• Encouraging and facilitating employees to promote their ability and creativity
• Equal opportunity for training and promotion
• Ensuring all benefit policies

SHAREHOLDER

• Always publicizing information

• Ensuring effectiveness of shareholder’s investment capital
• Constantly enhancing enterprise value
• Managing enterprise well

NATIONAL LEVEL

• Strictly complying with policies of the State and provisions of laws

• Making more contributions to the State Budget
• Playing pioneering role as a national brand enterprise

PARTNER

• Cooperation on basis of mutual benefit

• Equal competition
• Ensuring prestige of purchase, obligations with suppliers, contractors

SOCIAL COMMUNITY

• Actively supporting welfare works at localities where factories and offices

are situated nationwide
• Implementing social responsibility in various forms
• Production and business attached to environmental protection

AGENT & CUSTOMER

• Flexible sales policies ensuring rights of agents and customers

• Various, high quality, reliable and sustainable products
• Reasonable and competitive prices
• Good after sale services

HOA PHAT’S INTERNAL STRENGTH SUSTAINABLE DEVELOPMENT Sustainable development strategy with relevant parties 67
RESEARCH AND
DEVELOPMENT Vietnam has had net import of steel
Research and development activities in Hoa Phat for many years (Million tons).
Group are always actively implemented. Based on data
from various sources at home and abroad, the Board of
Management analyzed and made investment decisions
to anticipate future growth opportunities.

The steel industry has many medium

and long-term growth motivations
Steel is used in all economic segments with thousands
of different product categories, from simple to complex,
2014 2015 2016 2017 2018 2019
civil to industrial. The volume of raw steel in 2019 reached
nearly 1.9 billion tons, increasing slightly compared to
the previous year. Chinese state-owned steel companies Vietnam Steel Exports
dominate steel production, accounting for six of the Vietnam Steel Imports
top ten positions for global steel companies. The top
10 businesses account for more than 26% of global Net Imports
production.

Vietnam continued to be a net importer of steel, showing

a large and sustainable demand for domestic steel. By
the end of December 31, 2019, iron and steel imports
increased by 7.6% in volume, reaching 14.56 million tons,
valued at USD 9.51 billion, with the main import markets
Per capita consumption of steel
being China with 5.14 million tons. Meanwhile, the total in 2018 (finished steel in kg)
consumption of finished steel products in the year reached
over 23 million tons, an increase of 6.4% compared to
1,050
2018. The above figures show that Vietnam’s steel demand
is mainly dependent on imported steel, including many
types such as hot rolled coil (HRC), pre-stressed concrete 752
steel, section steel, manufacturing ingot steel, etc. which 585
514 504
are still being mostly imported.
310
234
VSA’s statistics shows that Vietnam’s hot rolled coil
demand is currently about 10 - 11 million tons/year, while
the new production capacity is over 4 million tons/year (of
South Taiwan China Japan Singapore Malaysia Vietnam
Formosa Ha Tinh). Even when Hoa Phat Dung Quat Steel
Integrated Complex produces hot rolled steel products in Korea
2020, domestic production can only meet about 60% of
domestic demand. 234kg, much lower than other Southeast Asian countries
such as Thailand, Malaysia and Singapore.
Besides, Vietnam’s orientation is still towards industrial
production activities, the demand for infrastructure Based on the assessment of market potential, since
construction is still very large with the major projects 2017, Hoa Phat has invested in Hoa Phat Dung Quat
being considered for implementation such as highways, Steel Integrated Complex with a maximum capacity of
Long Thanh airport, North - South railway, urban highway 4 million tons, including 2 million tons of construction
routes, subway systems, etc. Thus, it is forecasted that there long steel and 2 million tons of hot rolled coil (HRC) for
are many chances for long-term growth of investments in the mechanical engineering industry. It is expected that
the steel industry, especially in term of high quality steel in the of 2020, the entire project will be completed and
products, ingot steel, steel for manufacturing engineering put into operation synchronously in both stages, bringing
and supporting industries. the Group into the Top 50 largest steel enterprises in
the world. Not stopping there, Hoa Phat is continuing to
According to World Steel, compared to other more research and implement legal procedures to expand the
developed Asian countries, Vietnam is still ranked at production scale of this Complex at the appropriate time
lower level in terms of per capita consumption of steel, towards increasing production of products that Vietnam
showing strong growth prospects for future steel usage. In has not been able to produce.
2018, per capita consumption of steel in Vietnam was only

68 SUSTAINABLE DEVELOPMENT Research and development ANNUAL REPORT 2019


Agriculture: Demand for cattle meat
is expected to increase sharply
For nearly 30 years, the Group’s success in many fields such
as construction steel, steel pipes, furniture, refrigeration,
real estate and recently the products of pig, cow and
poultry breeding are the most vivid examples of the view
that Hoa Phat does nothing half-heartedly. After more
than 3 years of investing in high-tech agriculture, Hoa
Phat has taken a leading position in the field of supplying
Australian beef and clean chicken eggs. This segment
also contributed the second largest after steel segment
in terms of revenue and profit in 2019. In 2020, Hoa Phat
aims to achieve further growth in agriculture. What is the
basis for the Group to realize this goal?
According to statistics, meat consumption in Vietnam has
increased significantly over the past decade, with annual
per capita consumption increasing from 33kg in 2009 to
over 40kg in 2019. This is due to strong income growth,
as well as population growth, which will make the demand
for meat from cattle expected to 2023 increase sharply. In
particular, pork consumption is expected to continue to
account for a large proportion of each Vietnamese family’s
meal with about 60-70%. However, the consumption
growth of chicken and beef will be higher in the future
because these two types of meat still have a lot of
potential.
Furniture, refrigeration and real estate
fields with much chance for growth
Although, these fields do not have large proportions in
the total of the Group’s annual revenue and profit, they
are highly stable and well profitable. Hoa Phat Group’s
products in these fields have long been trusted and
appreciated by customers, famous brands in the market,
especially furniture products and high-class real estate
projects.
Macro factors of Vietnam indicate that these fields still
have a lot of chances for development. The characteristics
of Vietnam’s young and urbanized population are
creating a basic need for urban areas and commercial
centers. Statistics show that in the period from 2000 -
2018, the proportion of Vietnam’s population was living
in urban areas increased from 24% to 36% while the
total population increased only 20%, and by 2040, it is
HOA PHAT’S INTERNAL STRENGTH
With high and stable demand, Vietnam is expected
to continue to be a net importer of meat and cattle in
the period of 2019 - 2023. Meanwhile, our country is an
agricultural country, having many advantages to develop
cattle and poultry breeding, promoting agricultural and
foodstuff processing towards large-scale, biosecurity,
thereby is active in supplying source right in the domestic
market.
Therefore, in the next time, Hoa Phat Group will continue
to promote the existing animal farms and expand when
it is able to do so. The Group’s goal in the near future
will reach a maximum capacity of 600,000 tons of animal
feed per year; 450,000 commercial pigs per year; 150,000
beefs and 300 million clean chicken eggs per year.
2019-2013
Poultry CAGR: 6.8%
2019-2013 2019-2013
Pig CAGR: 0.8% Cow CAGR: 4.6%
expected that 50% of the population live in urban areas.
In addition, the rise of the middle class and foreign capital
inflows will create demand for housing, interior and
exterior decoration as well as residential refrigeration
products with higher quality requirements.
In the coming time, Hoa Phat Group will invest in
manufacturing to maintain its leading position in office
furniture, promote the development of high-class family
furniture, lines of freezer refrigerators with large capacity,
strive to grow 20-25%/year in the field of furniture and
refrigeration. With real estate segment, the Group
focuses on developing industrial zones in the North,
selectively invests in housing real estate, middle and
high-class urban areas.
SUSTAINABLE DEVELOPMENT Research and development 69
CIRCULAR ECONOMIC MODEL IN HOA PHAT GROUP
The circular economic model aims to effectively use
natural resources throughout the value chain, from
production to consumption and to the process of
restoring and promoting the use of high-tech products
and services, thereby optimizing the use of resources,
limiting emissions to the environment and developing
sustainably. Therefore, Hoa Phat Group has applied
the closed circular economic model in production right
from the beginning of steel making.
Solution of closed circular economic
model: Proven efficiency
The closed steel production process from iron ore to
finished steel is a long cycle in which the output of one
stage is the input of another. During the process, the
recovery and reuse of waste gas, waste water, excess heat
and even solid waste are treated in a circulation chain,
without discharging into the environment, saving energy
and protecting environment, optimizing production
efficiency, product competitiveness.
This solution is applied to both Hoa Phat Steel Integrated
Complexes in Hai Duong and Quang Ngai Provinces.
The investment capital for environmental items of
Hoa Phat steel accounts for about 20-30% of the total
investment capital for the projects. The effectiveness of
the application of closed circulation technology has been
proved very specific in these Complexes. With closed
70 SUSTAINABLE DEVELOPMENT Circular economic model in Hoa Phat Group
blast furnace technology, all waste, exhaust gas and
wastewater are thoroughly treated, meeting the current
standards in heavy industry production, reused circularly,
and not discharged into the environment. The amount of
iron-containing dust recovered during the process of iron
and steel refining is also reused at the production stages
for saving costs and improving the working environment.
Hoa Phat Steel selects the most advanced ultra-clean
coke heat recovery technology in the world today that is
eco-friendly. This is a technology to produce clean coke
with heat recovery that meets environmental standards
under the CDM clean development mechanism to reduce
greenhouse gas emissions under the Kyoto Protocol. This
technology eliminates all gases, fumes and toxic chemicals
generated from the coke making process, only recovers
heat to run the generator.
Thanks to this solution, Hoa Phat Hai Duong Steel
Integrated Complex has a generating capacity of
64MW, contributing to proactively 60% of the annual
electricity demand. With the Complex in Dung Quat
and Quang Ngai, the active power output is up to 70%
thanks to 04 generating sets with a capacity of 240MW,
bringing significant economic value, and increasing
competitiveness for Hoa Phat steel. Not stopping there,
the Group’s subsidiaries are continuing to research and
develop technologies to increase generation capacity,
reduce consumption of coal fuel and other materials to
increasingly optimize the equipment line.
ANNUAL REPORT 2019
Manufacting process Process
Dust
Coal gas

HOA PHAT’S INTERNAL STRENGTH SUSTAINABLE DEVELOPMENT Circular economic model in Hoa Phat Group 71
 Turn blast furnace slag
into building materials
Deep processing along the chain of steel products is a
long-term strategic orientation of Hoa Phat Group. The
collection and processing of blast furnace slag, a solid waste
generated during iron making, has been in place since
2017, turning waste into a mineral additive for cement or
used as input materials for enterprises producing concrete
and cement.

Hoa Phat has optimized the slag granulation technology

with high pressure cold water and invested the slag
crushing line in Hai Duong and Dung Quat Steel Integrated
Complexes. This is a vertical crushing technology line,
classified as the most modern synchronized type today.
Hoa Phat Group’s S95 granulated blast furnace slag
products contribute to thoroughly treat the solid waste in
Hoa Phat Group’s green steel production process, turning
solid waste generated in the process of iron making
into building materials products, not only protecting the
environment but also creating a stable source of revenue
for Hoa Phat Group, bringing significant added value to
the steel production chain.
With two Steel Integrated complexes in Kinh Mon - Hai
Duong and Dung Quat - Quang Ngai, Hoa Phat Group can
supply to domestic and foreign markets 2.6 million tons of
the granulated blast furnace slag per year, in which, the
Complex in Hai Duong supplies 750,000 tons/year and the
Complex in Dung Quat supplies 1.85 million tons/year.
S95 granulated blast furnace slag has many outstanding
advantages, applied as highly activated mineral additives
for the production of cement, concrete, mortar or as a
binder to reinforce weak ground. With S95, it is possible
to produce mass concrete by reducing hydrothermal heat
of concrete, producing heat resistant concrete due to
increased thermal stability of concrete, durable concrete
production in seawater, saltwater and brackish water
environments, due to the increased waterproofing of
concrete, preventing the erosion of chlorine and sulfate,
meeting the need to increase the life expectancy of
constructions on the sea, on islands and coastal areas.
In particular, this product will help lower the cost of
commercial concrete due to lower costs of S95 Hoa Phat,
while reducing clinker content in cement, thereby reducing
CO2 emissions, contributing to environmental protection.
According to the Circular No. 10/2019/TT-BXD of the
Ministry of Construction, S95 granulated blast furnace slag
is used to replace up to 30% of PCB 40 cement in the
material grading norm for all grades of concrete mortars.
This has opened an additional very large and convenient
channel of consuming the granulated blast furnace slag for
the enterprises which produces steel from iron ore such as
Hoa Phat Group. From here, granulated blast furnace slag
from steel making process continues to contribute value to
the community in an official and sustainable manner.
Hoa Phat product ecosystem
complements each other effectively
Hoa Phat has 11 subsidiaries supplying a wide range of
high quality products to the society with main products
from construction steel, steel pipe, steel sheets, pre-
stressed steel, furniture, refrigeration, agriculture. In
particular, the products of each segment group have close
support to each other.
High quality rolled steel is the raw material for production
of drawn steel, pre-stressed concrete steel, welding rod
core, etc. Hot rolled steel coil (HRC) is the input material
for the production of steel pipes, galvanized steel, shaped
steel, industrial steel and other mechanical products. The
Group’s steel products are also supplied to apartment
projects, industrial park infrastructure and in construction
of farms in the agricultural segment.
Some steel pipe and steel sheet products are used in the
manufacture of interior and refrigeration products. Plastic
factory of Hoa Phat Refrigeration can produce product
details not only of Hoa Phat Refrigeration but also of Hoa
Phat Furniture. In addition to be sold in the market, the
animal feed is also is supplied to the internal livestock farm
system across the country with a relatively large output.
In particular, the implementation of Hoa Phat Dung
Quat Steel Integrated Complex project has consumed
thousands of tons of steel pipes and high-quality pre-
painted galvanized steel coil of the Group, helping to
ensure the progress and quality of the project with the
most reasonable cost. Mutual complementarity between
business fields contributes to cost optimization, reducing
initial investment for the Group’s projects and production
activities.

72 SUSTAINABLE DEVELOPMENT Circular economic model in Hoa Phat Group ANNUAL REPORT 2019
 HOA PHAT
PRODUCT ECOSYSTEM

IRON AND STEEL AGRICULTURE OTHER INDUSTRIES REAL ESTATE

Hot Steel pipe Metal

Construction Rolled and Furniture Refrigeration
Producing
steel Coil steel sheet

• Black • Pickled
• Rebar steel pipe steel sheet • Farm • Fridge
• Wire rod • Plate steel • Hot dip • Color-coat • Pre-stressed • Freezer • Apartment
• High quality • Flat steel galvanized steel sheet concrete steel • Air conditioner • Industrial Park
wire rod steel pipe • Galvanized • Flanges • Plastic
• Pre-galvanized sheet • Bolt & nut
steel pipe • Cold rolled
steel sheet
HOA PHAT GROUP SAVES HUNDREDS OF BILLIONS
ANNUALLY THANKS TO TECHNICAL INNOVATION
With the characteristics of multidisciplinary and
multifield industrial production, of which iron and steel
production consumes a large amount of electricity,
water, coal, etc. Hoa Phat emphasizes the economical
use of energy and natural resources and encourages
the application of technical innovation initiatives to be
deployed at the manufacturing plants of the Group
Hai Duong Steel operates more and
more effectively thanks to encouraging
creative labor
In Hoa Phat Group, the Board of Directors always motivates,
encourages the employees to promote their creativity. Therefore,
every year, the innovation movement of subsidiaries takes place
very excitingly. Among them is Hoa Phat Hai Duong Steel, where
there are several dozen initiatives, benefiting the company tens,
hundreds of billions dong each year.
The Company synthesizes initiatives twice a year and organizes
rewarding activities for individuals and teams that have the most
outstanding initiatives. In 2019, Hoa Phat Hai Duong Steel Company
has 55 innovation initiatives, with a profit of about VND 150 billion.
These include the initiative of designing and installing the coal
sorting system of Mr. Le Quang Vuong, Mr. Nguyen Van Duong -
Steel Factory to sort the qualified types of coal for production and
remove coal dust. The designed capacity of the system reaches
50-70 tons/hour, ensuring supply of coal for production, crushing
and sorting of coal with specifications (particle size 8-10mm) to
serve post-furnace alloying, remove unqualified fine coal dust.
This initiative saves for the company VND 89 billion per year while
ensures the quality of coal supplied to the furnace, reduces the
amount of dust generated from post-furnace alloying, reduces loss
and limits the generation of coal dust from post-furnace alloying,
takes advantage of the fine coal dust to provide for sintering.
And the initiative “Improving the quality of billet for casting
system” proposed by Mr. Ho Van Cuong, Manager of Casting
workshop, Steel Factory contributes to limit billet cracks, increase
casting speed. In term of technology, the initiative completed
the standard billet water cooling level table for each steel grade
and each billet cross section. For equipment, it completed the
process of calibration and installation of water plants, adjusted
R&M curved radius for casting machines. The collective spirit of
this initiative helps achieve not only the billet quality, but also the
value benefiting the company with not small number - over VND
12.3 billion per year.
In order to find the optimal solution for the company in production
activities, Mr. Dang Viet Thanh - Head of Technology Department
proposed the initiative “Using blast furnace ores instead of
sintered ores for slag production in the stage of steel making in
basic oxygen furnace” which benefits more than VND 11.35 billion
74 SUSTAINABLE DEVELOPMENT Technical innovation
per year. More importantly, the amount of recovered ore is used to
completely replace the sintered ore, meets the requirements of slag
production in basic oxygen furnace and furnace heat conditioning.
Quantity and quality are satisfactory, since March 2019, there is no
shortage of sintered ores serving for 3 blast furnaces.
In addition, the Steel Factory also contributed two additional
initiatives, such as “Improving the cover of the intermediate barrel”
and “ Fixing air holes in the billet surface “ proposed by Mr. Ho
Van Cuong and Mr. Phung Nhat Quang – Manager of BOF with the
estimated benefit value at over VND 2.5 billion per year.
Some initiatives are not of high value but have very important
implications in production, contributing to stable machinery
operation, reducing material consumption, benefiting health,
protecting the environment, ensuring occupational safety and
health for operating workers. There are some important initiatives,
which creating new products for the company such as “Improving
and perfecting the technological process of producing SWRY11
steel grade to replace 05Kπ as raw materials for welding rod steel
production” of Technology Department. Thanks to the application
of this initiative, the Company supplied nearly 5,500 tons of Ø6
wire steel and nearly 200 tons of Ø 5.5 wire steel to welding rod
manufacturers in the past year.
Hoa Phat Steel Pipe and many solutions
of energy saving, reducing consumption
of raw materials
With many proposed innovations which effectively applied in
practice, Steel pipe factories have benefited Hoa Phat with
many billion dongs every year. More importantly, the innovative
movement has greatly spread to staffs, engineers and workers in all
workshops and factories of Hoa Phat Steel Pipe nationwide.
At Hoa Phat Hung Yen Steel Pipe Factory, with 16 initiatives,
Steel Pipe has saved over 3.6 billion per year by the improvement
projects arising from the actual work in production, bringing the
high economic results, helping reduce raw material consumption,
contribute to environmental protection.
By realizing that the peak electricity consumption on production
lines, especially the rolling line was relatively high, accounting for
18-24% of the total electricity used, while the unit price of electricity
for peak hours was 1.85 times higher than normal time and 2.85
times higher than off-peak hours, Mr. Tran Ngoc Duy, Technical
Department adjusted the capacity, reduced the operating time of
the rolling mill during peak hours, increased productivity during
off-peak hours to save energy for the plant. Thereby, VND 1.36
billion per year on electricity costs is saved for the plant when being
implemented.
ANNUAL REPORT 2019
Contributing to the energy saving initiatives of the plant is also
the topic of reducing fan capacity by designing inverter control
circuits. This design by Mr. Hoang Van Vinh allows adjusting the
Cyclon fan speed from 0 to 100% of the rated speed to reduce
power consumption, benefiting the plant over VND 210 million
per year.
In addition, the initiatives of Hung Yen Steel Pipe also focus on
topics of reducing raw material consumption and avoiding material
waste such as the topic of making full use of straps at production
stages proposed by Mr. Truong Van Dinh Nguyen, Quality Control
Department. During the production process, Mr. Nguyen saw that
BR32x0.9mm steel straps of the raw steel coils and the plastic straps
of galvanized steel coil became scrap after cutting, so he proposed
to take advantage of these straps for all stages of production at
the factory. The plastic straps of galvanized steel coils are welded
after cut and used for packing newly manufactured steel sheets.
A BR32mm strap of material corrugated coils is taken to strap for
corrugated strips produced at rusting and rolling process. After
applying this initiative, 50% of plastic straps have been reduced,
completely reducing the amount of straps required for rusting and
rolling, benefiting the factory VND 380 million per year.
A number of initiatives also contributed to improving the
environment, limiting the risk of unsafe, such as: Reduce the acid
vapor released through the breathing tube of HCL acid storage
tanks in Rolling and galvanizing workshops of Mr. Nguyen Duc
Co, Director of Hoa Phat Hung Yen Steel Pipe Factory; Fabrication
and erection of hoist suspended beams for feeding Dainichi lathes
and servicing for welding CO2 of Mr. Dinh Van Chu, mechanic
and electricity workshop, reducing risks to people and equipment
failure.
At Hoa Phat Steel Pipe factory in Danang, the initiative of
production rationalization to save electricity was leaded by Mr.
Huynh Thanh Thuan - Deputy Director of Da Nang Steel Pipe
Factory, contributing to saving tens of millions of dong each
month. Particularly, the substation of galvanizing, bending,
and pipe plating plants saves over VND 70 million, bringing
remarkable efficiency. And the initiative of manufacturing
semi-automatic sealing rigs of mechanical engineering group -
Technical Department has reduced the labor force for workers,
ensuring safety for workers. The improvement of the inside
blowing for tubes Ø 21mm, Ø 27mm also helps the plant reduce
zinc consumption by over 20% compared to conventional blow
molds.
Hoa Phat Binh Duong Steel Pipe Company also contributed 10
equipment improvement initiatives in 2019. Among them are:
Improving oil recovery system for cutting bending machine;
removing the sink base which is high cost and occupying the
production area of the Technical Department has greatly reduced
the cost of large underground tunnels and iron barrels, especially
clearance of packing areas and warehouses. In addition, the topic
of improving step 1 of drying tunnel tube assembly, stabilizing
the control reduces pipe errors and improving the productivity of
the second pipe plating line which performed by the Department
of Engineering and Mechatronics to help reduce the electricity
consumption for engine, reduce the cost of equipment provision
for pipe supply clusters, improve the productivity of the 2nd line.
HOA PHAT’S INTERNAL STRENGTH
Hoa Phat Furniture has diversified
competition activities
The competition movement, technical improvement at Hoa Phat
Furniture Joint Stock Company has gained many “sweet fruits”
thanks to a series of initiatives and improvements that benefit the
company, including 03 areas: Product improvement initiatives -
Initiatives in labor manufacturing - Initiatives for environmental
protection.
In 2019, hundreds of innovative products and initiatives to
increase the aesthetics and product structure, brought practical
value to users. Through product evaluations, listening to
customers, Hoa Phat Furniture’s engineers have developed the
functions, features, changed the size appropriately, increased
the use of products to fit the market demand, for example,
improving the style of legs and chair backs, increased the ability
to stack chairs, avoiding scratching the coating paint of the
legs to increase product life. Not only improving the structure,
Hoa Phat Furniture prioritizes increasing the aesthetics of the
product such as improving the edge of the table surface, adding
decorative lines, or creating an elegant and various pattern for
cabinet, wardrobe, shoe cabinet products, etc. to offer many
options to customers. With constant research, each improved
product has been evaluated and tested by a team of experts
many times before publication, and received a good response
from a large number of customers.
According to the leader of Hoa Phat Furniture Joint Stock
Company, in order for the movement of initiative and technical
improvement to develop strongly, the company has specific
incentive mechanisms and policies to encourage and reward
based on the benefits created. Thanks to the encouragement of
the Board of Directors, outstanding initiatives from North and
South factories are continuously proposed, evaluated, tested and
put into practice. In the North, initiatives from Tan Quang Wood
Factory, Iron Cabinet Factory (Hung Yen) such as research of mold
improvement, welding jigs by robots or research of alignment
of 400T hydraulic press machines to increase productivity and
significant power efficiency and savings. In the South, the
research for supported devices has contributed to saving power
for the plant system, increasing labor productivity by dozens of
times, supporting workers for easier work performance.
In 2019, Hoa Phat Furniture will improve packaging of some
products, change the specification from using plastic in product
packaging to direct packaging by carton box, significantly
reducing the amount of plastic waste in the environment. With
millions of products every year, this is a major improvement that
brings practical benefits to society.
The movement of technological creativity and innovation in Hoa
Phat Furniture Joint Stock Company is spreading and gaining
success. Most importantly, it is spreading the spirit of non-stop
creativity, creating a motivation for development, striving daily
for the staffs of Hoa Phat Furniture.
SUSTAINABLE DEVELOPMENT Technical innovation 75
HOA PHAT WITH SOCIAL AND CHARITY ACTIVITIES 2019
In addition to production and business activities, in the past 28 years, Hoa Phat has always carried out its corporate
social responsibility substantially and from the heart with the motto “Harmony for joint development”. This is
reflected in the increasing contribution to the annual state budget, stable employment for thousands of labors,
good implementation of social security and a meaningful series of charity, for community programs. In 2019, the
total amount of Hoa Phat Group’s funding for social and charity activities reached nearly VND 19 billion.

Heartbeat for Love Hoa Phat a companion of students

“Heartbeat for Love” is a free of charge heart operation
program for poor children held by Hoa Phat Group since
2015. So far, after four years of operation, the event has
become a reliable address for poor patients with congenital
heart disease requiring supports.

This is a scholarship sponsor activity for students with

excellent academic results and disadvantaged students
studying at the National Economics University.

In 2019, the total sponsorship value for this activity was

Nong Tran Tri Nghia (left) and Luc Bao An in Lang Son were
sponsored for heart surgery by Hoa Phat
In 2019, Hoa Phat supported successful surgery for 39
cases, confirmed 13 cases waiting for surgery, performed
mainly at Hospital E, Hanoi Heart Hospital and National
Hospital of Pediatrics at a cost of over VND 1.7 billion.
Hoa Phat follows children to school
“Hoa Phat follows children to school” is a practical activity
of Hoa Phat Group, in order to modernize educational
infrastructure, improve the quality of teaching and learning
in localities across the country.
In 2019, Hoa Phat Group develops the activity of giving
bunk beds to the ethnic minority schools in Chien Pho
and Ho Thau, Hoang Su Phi Districts, Ha Giang through
Hope fund (VnExpress), helping young people always feel
comfortable and have fun in studying and living.
over VND 800 million. Specifically, the Group awarded
01 batch of scholarships to students of the National
Economics University and paid 03 months of the 2nd batch
of scholarships with a total of 169 students who received
scholarships, scholarships awarded in each semester of
each student was 5.5 million. At the same time, Hoa Phat
Group also sponsored 13 scientific research projects of the
students which won the 1st prize at the Student Science
Research Conference 2019.
“Charity rice - Kind heart”
“Charity rice - Kind heart” which is also known as “Hospital
K Meal” is given by patients at Vietnam National Cancer
Hospital (Hospital K), Tam Hiep campus – branch II to
meaningful activities which have been performed by Hoa
Phat since 2010 up to now and will be maintained in the
future.
Accordingly, at noon during the week from Monday
- Saturday, Hoa Phat Group will distribute free lunch to
patients treated at Vietnam National Cancer Hospital (Tam
Hiep - Thanh Tri Campus). In 2019, the number of daily
meals were 100 hot meals with full of nutrients, regularly
delivered to poor patients being treated at the hospital.

Although it is not a large number, it is performed from the

heart of Hoa Phat Group’s employees with the desire to
share the pains that patients suffer, reduce the economic
burden for patients in difficult circumstances.

76 SUSTAINABLE DEVELOPMENT Social resposibility ANNUAL REPORT 2019

 Spring of Love
It is an annual activity carried out by Hoa Phat Group
before the Lunar New Year, in order to bring a warm and
joyful new year to families in difficult circumstances
“Spring of Love” gave New Year gifts for families in
difficult circumstances in localities nationwide where Hoa
Phat’s factories and breeding farms are located. In 2019,
Hoa Phat group reached 14 provinces across the country,
bringing nearly 2,500 gifts with a value of VND 500,000/
gift and total value of more than VND 1.2 billion.
“Spring of Love” has become the traditional practice of
Hoa Phat Group. Every Lunar New Year comes, Hoa Phat
companies organize charity programs and give gifts to
poor people in 3 regions across the country. This activity
attracted numerous employees to participate in the spirit
of “good leaves protect the torn leaves”, sharing with the
difficult circumstances to bring a warm and meaningful
New Year to the people.
HOA PHAT’S INTERNAL STRENGTH
Brigde building
Started in 2019, this activity aims to support localities in
the West and the Mekong Delta provinces to build bridges
through canals, contribute to improving the quality of
people’s life and boost local economic development.
In 2019, Hoa Phat Group built the first bridge in Xi Nghiep
Hamlet, Tam Giang Tay commune, Ngoc Hien District, Ca
Mau.
In 2020, Hoa Phat continues to build bridges in the most
remote and most difficult areas of the Mekong Delta
region, helping people in the areas where new bridges are
built be convenient in trade, transportation and helping
the road to school of many children be more joyful and
less rugged.
In addition to the main programs that are conducted
annually, in 2019 there were many other sponsorships
and charity activities that Hoa Phat contributed to the
community.
These included financing for construction and repair of
roads in Kinh Mon and Hai Duong with a budget of VND
1 billion; financing for road renovation around Hoa Phat
Dung Quat Complex (VND 1.27 billion); Supporting the
anti- plastic waste project named “Kindness to Sa Can”,
supporting households raising fish in cages in Binh Son
district, Quang Ngai. Hoa Phat Group also spent VND 4
billion to renovate the graves of martyrs in Hai Duong and
Hung Yen provinces in Truong Son cemetery. Especially, at
the end of December 2019, Hoa Phat Group supported
VND 5 billion for the Program “Joining hands to build
houses for meritorious people and poor households in
Hung Yen province in 2019-2020” held by the Provincial
Party Committee, People’s Council, People’s Committee,
Vietnam Fatherland Front Committee, etc.
SUSTAINABLE DEVELOPMENT Social resposibility 77
Committing itself to leading in quality,
Hoa Phat rose to a new stature
78
79
AUDITED FINANCIAL STATEMENTS
1. REPORT OF THE BOD

2. INDEPENDENT AUDITOR’S REPORT

3. CONSOLIDATED BALANCE SHEET

4. CONSOLIDATED STATEMENT OF INCOME

5. CONSOLIDATED STATEMENT OF CASH FLOWS

6. NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS

80
 The audited consolidated Financial Statement
is posted on Company’s website at: www.hoaphat.com.vn

81
 Hoa Phat Group Joint Stock Company
Report of the Board of Directors
The Board of Directors of Hoa Phat Group Joint Stock Company (“the Company”) presents this report
and the consolidated financial statements of the Company and its subsidiaries (together referred to as “the
Group”) for the year ended 31 December 2019.

The members of the Board of Management and the Board of Directors of the Company during the year and at
the date of this report are as follows:

Board of Management Mr. Tran Dinh Long Chairman

Mr. Tran Tuan Duong Vice Chairman
Mr. Nguyen Manh Tuan Vice Chairman
Mr. Doan Gia Cuong Vice Chairman
Mr. Nguyen Ngoc Quang Member
Mr. Ta Tuan Quang Member
Mr. Hoang Quang Viet Member
Mr. Nguyen Viet Thang Member
Mr. Hans Christian Jacobsen Member

Board of Directors Mr. Tran Tuan Duong General Director

Mrs. Nguyen Thi Thao Nguyen Deputy General Director
Mr. Nguyen Viet Thang Deputy General Director

CORPORATE INFORMATION

The Company was originated from Hoa Phat Steel Joint Stock Company incorporated under the Law on
Enterprise of Vietnam pursuant to the initial Business Registration Certificate No. 0503000008 issued by Hung
Yen Department of Planning and Investment on 26 October 2001. In accordance with the 8th amendment of
the Business Registration Certificate No. 0503000008 issued by Hung Yen Department of Planning and
Investment on 9 January 2007, Hoa Phat Steel Joint Stock Company was transformed into Hoa Phat Group
Joint Stock Company.

The Company’s Enterprise Registration Certificate has been amended several times, the most recent of which
is by Enterprise Registration Certificate No. 0900189284 dated 4 July 2019. The Enterprise Registration
Certificate was issued by the Hung Yen Department of Planning and Investment.

The registered office of the Company is located in Pho Noi A Industrial Zone, Giai Pham Commune, Yen My
District, Hung Yen Province, Vietnam.

The subsidiaries of the Company are disclosed in Note 1.4 to the consolidated financial statements

82 ANNUAL REPORT 2019

Hoa Phat Group Joint Stock Company
Report of the Board of Directors (continued)
OPERATING RESULTS AND DIVIDENDS

The consolidated net profit attributable to the equity holders of the Company for the year ended 31 December
2019 was VND7,527,443 million (2018: VND8,573,014 million).

On 29 March 2019, the Company’s General Meeting of Shareholders passed the resolution on the distribution
of 2018 dividends to the shareholders in the form of shares at the rate of 30% (shareholders will receive 3
additionally-issued shares for every 10 ordinary shares they own). This dividend payment scheme was approved
for execution by the Company’s Board of Management in the resolution dated 9 May 2019 and executed
during the second Quarter of 2019.

POST BALANCE SHEET EVENTS

There are no significant post balance sheet events that need to be adjusted or disclosed in the consolidated
financial statements.

AUDITOR

The auditor of the Company and the Group is KPMG Limited.

STATEMENT OF THE BOARD OF DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE

CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors is responsible for the preparation and presentation of the consolidated financial
statements which give a true and fair view of the Group’s consolidated financial position as at 31 December
2019, consolidated results of operations and consolidated cash flows for the year then ended in accordance
with Vietnamese Accounting Standards, the Vietnamese Accounting System for Enterprises and the relevant
statutory requirements applicable to financial reporting. In preparing the consolidated financial statements,
the Board of Directors is required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;
• confirm that applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the consolidated financial statements; and
• prepare the consolidated financial statements on the going concern basis unless it is inappropriate to
presume that the Group will continue in business.

The Board of Directors is also responsible for ensuring that proper accounting records are prepared and kept
which disclose, with reasonable accuracy at any time, the financial position of the Group and to ensure that
the accounting records comply with Vietnamese Accounting Standards, the Vietnamese Accounting System for
Enterprises and the relevant statutory requirements applicable to financial reporting. The Board of Directors is
also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The Board of Directors confirms with the Company’s Board of Management and Shareholders that they have
complied with the above requirements in preparing the consolidated financial statements.

HOA PHAT’S INTERNAL STRENGTH 83

Hoa Phat Group Joint Stock Company
Report of the Board of Directors (continued)
APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

We hereby approve the accompanying consolidated financial statements for the year ended 31 December
2019. These financial statements give a true and fair view of the consolidated financial position of the Group
as at 31 December 2019, its consolidated results of operations and its consolidated cash flows for the year
then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System for
Enterprises and the relevant statutory requirements applicable to financial reporting.

On behalf of the Board of Directors

Hung Yen, 16 March 2020

Tran Tuan Duong

General Director

84 ANNUAL REPORT 2019

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS AND BOARD OF MANAGEMENT

HOA PHAT GROUP JOINT STOCK COMPANY

We have audited the accompanying consolidated financial statements of Hoa Phat Group Joint Stock Company
(“the Company”), which comprise the consolidated balance sheet as at 31 December 2019, the consolidated
statements of income and cash flows for the year then ended and the explanatory notes thereto which were
authorised for issue by the Company’s Board of Directors on 16 March 2020, as set out on pages 6 to 74.

MANAGEMENT’S RESPONSIBILITY

The Company’s Board of Directors is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System
for Enterprises and the relevant statutory requirements applicable to financial reporting, and for such internal
control as the Board of Directors determines is necessary to enable the preparation of the consolidated financial
statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgement, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the Company’s preparation and
fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Company’s Board of Directors, as well as evaluating the
overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.

HOA PHAT’S INTERNAL STRENGTH 85

AUDITOR’S OPINION

In our opinion, the consolidated financial statements give a true and fair view, in all material respects, of the
consolidated financial position of Hoa Phat Group Joint Stock Company as at 31 December 2019 and of its
consolidated results of operations and its consolidated cash flows for the year then ended in accordance
with Vietnamese Accounting Standards, the Vietnamese Accounting System for Enterprises and the relevant
statutory requirements applicable to financial reporting.

KPMG LIMITED
Vietnam
AUDIT REPORT NO.: 19-02-00184-20-2

WANG TOON KIM DOAN THANH TOAN

Practicing Auditor Registration Practicing Auditor Registration
Certificate No.: 0557-2018-007-1 Certificate No.: 3073-2019-007-1
Deputy General Director

Hanoi, 16 March 2020

86 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2019

Form B 01 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Code Note 31/12/2019 1/1/2019

VND VND
ASSETS

Current assets
(100 = 110 + 120 + 130 + 140 + 150) 100 30,436,936,909,894 25,308,725,187,618

Cash and cash equivalents 110 5 4,544,900,252,204 2,515,617,135,457

Cash 111 1,678,314,252,204 1,822,302,135,457
Cash equivalents 112 2,866,586,000,000 693,315,000,000

Short-term financial investments 120 1,374,340,352,910 3,724,562,710,535

Held-to-maturity investments 123 6.1 1,374,340,352,910 3,724,562,710,535

Accounts receivable – short-term 130 3,561,397,190,688 3,210,278,608,751

Accounts receivable from customers 131 2,699,937,350,329 2,281,760,501,157
Prepayments to suppliers 132 7 757,832,561,191 810,319,171,039
Other receivables 136 8 139,273,246,353 150,952,350,749
Allowance for doubtful debts 137 (37,145,790,132) (37,693,842,866)
Shortage of assets awaiting resolution 139 1,499,822,947 4,940,428,672

Inventories 140 9 19,411,922,748,095 14,115,139,048,908

Inventories 141 19,480,666,530,260 14,188,336,169,734
Allowance for inventories 149 (68,743,782,165) (73,197,120,826)

Other current assets 150 1,544,376,365,997 1,743,127,683,967

Short-term prepaid expenses 151 15.1 118,551,289,085 122,420,331,320
Deductible value added tax 152 1,400,159,900,793 1,601,957,215,751
Taxes and others receivable from
State Treasury 153 25,665,176,119 18,750,136,896

The accompanying notes are an integral part of these consolidated financial statements

HOA PHAT’S INTERNAL STRENGTH 87

HOA PHAT GROUP JOINT STOCK COMPANY
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2019 (CONTINUED)

Form B 01 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Code Note 31/12/2019 1/1/2019

VND VND
Long-term assets
(200 = 210 + 220 + 230 + 240 + 250 + 260) 200 71,339,093,190,006 52,914,282,483,307

Accounts receivable – long-term 210 27,717,594,984 22,301,804,672

Loans receivable – long-term 215 4,910,346,000 -
Other long-term receivables 216 22,807,248,984 22,301,804,672

Fixed assets 220 31,249,493,917,960 12,782,560,625,001

Tangible fixed assets 221 10 30,980,122,434,704 12,565,363,529,879
Cost 222 43,804,940,121,895 22,992,663,946,845
Accumulated depreciation 223 (12,824,817,687,191) (10,427,300,416,966)
Intangible fixed assets 227 11 269,371,483,256 217,197,095,122
Cost 228 339,570,963,463 268,391,812,870
Accumulated amortisation 229 (70,199,480,207) (51,194,717,748)

Investment property 230 12 576,616,510,917 179,740,530,488

Cost 231 663,239,742,390 246,767,060,543
Accumulated depreciation 232 (86,623,231,473) (67,026,530,055)

Long-term work in progress 240 37,435,320,467,014 38,107,320,507,117

Long-term work in progress 241 13 750,146,398,723 910,420,483,699
Construction in progress 242 14 36,685,174,068,291 37,196,900,023,418

Long-term financial investments 250 45,794,216,642 66,584,926,457

Investments in associates 252 (1,431,313,615) -
Equity investments in other entities 253 6.2 700,000,000 700,000,000
Held-to-maturity investments 255 6.1 46,525,530,257 65,884,926,457

Other long-term assets 260 2,004,150,482,489 1,755,774,089,572

Long-term prepaid expenses 261 15.2 1,650,738,623,090 1,461,311,868,435
Deferred tax assets 262 16 292,226,687,882 206,227,896,900
Goodwill 269 17 61,185,171,517 88,234,324,237

TOTAL ASSETS (270 = 100 + 200) 270 101,776,030,099,900 78,223,007,670,925

The accompanying notes are an integral part of these consolidated financial statements

88 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2019 (CONTINUED)

Form B 01 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Code Note 31/12/2019 1/1/2019

VND VND
RESOURCES

LIABILITIES (300 = 310 + 330) 300 53,989,393,956,205 37,600,057,830,115

Current liabilities 310 26,984,198,187,977 22,636,149,492,136

Accounts payable to suppliers 311 7,507,198,913,115 8,706,913,341,857
Advances from customers 312 408,691,837,688 361,444,408,581
Taxes and others payable to
State Treasury 313 18 478,426,384,718 481,510,200,714
Payables to employees 314 247,936,926,136 252,288,255,386
Accrued expenses 315 19.1 429,777,297,411 261,634,131,158
Unearned revenue – short-term 318 27,406,111,996 9,929,720,982
Other payables – short-term 319 20.1 237,391,747,239 300,069,780,261
Short-term borrowings 320 21.1 16,837,653,470,387 11,494,717,393,327
Provisions – short-term 321 22 3,111,122,885 6,238,723,132
Bonus and welfare fund 322 23 806,604,376,402 761,403,536,738

Long-term liabilities 330 27,005,195,768,228 14,963,908,337,979

Long-term accounts payable to
suppliers 331 6,652,492,138,554 1,647,091,707,192
Long-term accrued expenses 333 19.2 427,328,992,030 451,100,573,027
Long-term unearned revenue 336 3,369,818,100 -
Other payables – long-term 337 20.2 58,387,110,781 36,480,820,999
Long-term borrowings 338 21.2 19,842,099,219,720 12,810,996,979,972
Deferred tax liabilities 341 1,104,751,459 -
Provisions – long-term 342 22 20,413,737,584 18,238,256,789

The accompanying notes are an integral part of these consolidated financial statements

HOA PHAT’S INTERNAL STRENGTH 89

HOA PHAT GROUP JOINT STOCK COMPANY
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2019 (CONTINUED)

Form B 01 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Mã số Thuyết 31/12/2019 1/1/2019

minh VND VND

EQUITY (400 = 410) 400 47,786,636,143,695 40,622,949,840,810

Owners’ equity 410 24 47,786,636,143,695 40,622,949,840,810

Share capital 411 25 27,610,741,150,000 21,239,071,660,000
Ordinary shares with voting rights 411a 27,610,741,150,000 21,239,071,660,000
Share premium 412 3,211,560,416,270 3,211,560,416,270
Foreign exchange differences 417 565,534,994 276,819,257
Investment and development fund 418 923,641,612,156 918,641,612,156
Retained profits 421 15,876,913,750,948 15,126,437,863,905
Retained profits brought forward 421a 8,349,470,883,074 6,553,423,653,491
Retained profits for the current year 421b 7,527,442,867,874 8,573,014,210,414
Non-controlling interest 429 163,213,679,327 126,961,469,222

TOTAL RESOURCES
(440 = 300 + 400) 440 101,776,030,099,900 78,223,007,670,925

16 March 2020

Prepared by: Approved by:

Nguyen Thi Thu Trang Pham Thi Kim Oanh Tran Tuan Duong
General Accountant Chief Accountant General Director

The accompanying notes are an integral part of these consolidated financial statements

90 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2019

Form B 02 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Code Note 2019 2018

VND VND
Revenue from sales of goods and
provision of services 01 28 64,677,906,575,644 56,580,423,695,083

Revenue deductions 02 28 1,019,713,901,853 743,965,315,324

Net revenue (10 = 01 - 02) 10 28 63,658,192,673,791 55,836,458,379,759

Cost of sales 11 29 52,472,820,451,654 44,165,626,148,685

Gross profit (20 = 10 - 11) 20 11,185,372,222,137 11,670,832,231,074

Financial income 21 30 471,053,832,011 294,408,270,741
Financial expenses 22 31 1,181,675,710,916 772,317,161,901
In which: Interest expense 23 936,710,218,359 539,861,243,640
Share of loss in associates 24 (1,431,313,615) -
Selling expenses 25 32 873,333,584,688 676,809,221,259
General and administration
expenses 26 33 569,005,805,722 444,024,985,823

Net operating profit

{30 = 20 + (21 - 22) + 24 - (25 + 26)} 30 9,030,979,639,207 10,072,089,132,832
Other income 31 34 657,680,931,477 488,856,588,036
Other expenses 32 35 591,998,447,298 489,872,848,566

Results of other activities

(40 = 31 - 32) 40 65,682,484,179 (1,016,260,530)

Accounting profit before tax

(50 = 30 + 40) 50 9,096,662,123,386 10,071,072,872,302

Income tax expense – current 51 37 1,603,307,926,680 1,506,320,087,551

Income tax benefit– deferred 52 37 (84,894,039,523) (35,797,921,476)

Net profit after tax

(carried forward to next page)
(60 = 50 - 51 - 52) 60 7,578,248,236,229 8,600,550,706,227

The accompanying notes are an integral part of these consolidated financial statements

HOA PHAT’S INTERNAL STRENGTH 91

HOA PHAT GROUP JOINT STOCK COMPANY
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 02 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Code Note 2019 2018

VND VND
Net profit after tax
(brought forward from previous
page) 60 7,578,248,236,229 8,600,550,706,227
(60 = 50 - 51 - 52)

Attributable to 61 7,527,442,867,874 8,573,014,210,414

Equity holders of the parent company 62 50,805,368,355 27,536,495,813
Non-controlling interest

Restated
Basic earnings per share 70 38 2,726 3,105

16 March 2020

Prepared by: Approved by:

Nguyen Thi Thu Trang Pham Thi Kim Oanh Tran Tuan Duong
General Accountant Chief Accountant General Director

The accompanying notes are an integral part of these consolidated financial statements

92 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
(INDIRECT METHOD)

Form B 03 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Code Note 2019 2018

VND VND
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 01 9,096,662,123,386 10,071,072,872,302
Adjustments for
Depreciation and amortisation 02 2,566,183,420,309 2,259,594,298,268
Amortisation of goodwill 02 27,049,152,720 26,051,152,720
Allowances and provisions 03 (5,772,614,376) (72,990,493,823)
Exchange losses arising from
revaluation of monetary items
denominated in foreign currencies 04 24,183,514,856 29,910,869,480
Profits from investing activities 05 (286,185,193,464) (112,985,971,103)
Interest expense 06 936,710,218,359 539,861,243,640

Operating profit before changes in

working capital 08 12,358,830,621,790 12,740,513,971,484

Change in receivables 09 (288,519,564,021) (1,423,156,571,992)

Change in inventories 10 (5,132,237,172,021) (2,301,594,154,020)
Change in payables and other
liabilities 11 3,556,649,268,254 1,459,709,130,157
Change in prepaid expenses 12 (8,476,974,345) (500,921,130,265)

10,486,246,179,657 9,974,551,245,364

Interest paid 14 (867,276,241,172) (611,767,789,386)

Income tax paid 15 (1,551,743,688,539) (1,416,437,918,395)
Other payments for operating
activities 17 (352,057,555,830) (304,001,386,852)

Net cash flows from operating

activities 20 7,715,168,694,116 7,642,344,150,731

The accompanying notes are an integral part of these consolidated financial statements

HOA PHAT’S INTERNAL STRENGTH 93

HOA PHAT GROUP JOINT STOCK COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
(INDIRECT METHOD - CONTINUED)

Form B 03 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Code Note 2019 2018

VND VND
CASH FLOWS FROM INVESTTING ACTIVITIES
Payments for additions to fixed assets
and other long-term assets 21 (20,825,371,574,660) (27,594,117,760,420)
Proceeds from disposals of fixed
assets and other long-term assets 22 26,937,572,033 64,821,767,118
Payments for purchase of debt
instruments of other entities 23 (4,467,553,072,509) (11,295,502,021,543)
Receipts from collecting loans, sales
of debt instruments of other entities 24 6,832,224,480,334 17,443,013,202,984
Payments for investments in other
entities 25 - (115,947,860,804)
Collections on investments in other
entities 26 - 17,599,680,288
Receipts of interests on term deposits
and loans 27 369,546,551,545 946,999,021,433

Net cash flows from investing

activities 30 (18,064,216,043,257) (20,533,133,970,944)

The accompanying notes are an integral part of these consolidated financial statements

94 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
(INDIRECT METHOD - CONTINUED)

Form B 03 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Code Note 2019 2018

VND VND
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from equity issued, capital
contributed by non-controlling
shareholders 31 85,000,000 11,424,719,202
Proceeds from borrowings 33 67,944,184,644,118 53,472,014,216,173
Payments to settle loan principals 34 (55,553,681,828,677) (42,335,009,094,686)
Payments of dividends 36 (12,646,859,136) (5,918,198,429)

Net cash flows from financing

activities 40 12,377,940,956,305 11,142,511,642,260

Net cash flows during the year

(50 = 20 + 30 + 40) 50 2,028,893,607,164 (1,748,278,177,953)

Cash and cash equivalents at the

beginning of the year 60 2,515,617,135,457 4,264,641,954,689

Effect of exchange rate

fluctuations on cash and cash 61 389,509,583 (746,641,279)
equivalents

Cash and cash equivalents at the

end of the year (70 = 50 + 60 + 61) 70 5 4,544,900,252,204 2,515,617,135,457

16 March 2020

Prepared by: Approved by:

Nguyen Thi Thu Trang Pham Thi Kim Oanh Tran Tuan Duong
General Accountant Chief Accountant General Director

The accompanying notes are an integral part of these consolidated financial statements

HOA PHAT’S INTERNAL STRENGTH 95

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

These notes form an integral part of and should be read in conjunction with the accompanying consolidated financial
statements.

1. REPORTING ENTITY

1.1 Ownership structure

Hoa Phat Group Joint Stock Company (“the Company”) is incorporated as a joint stock company in
Vietnam. The consolidated financial statements of the Company for the year ended 31 December
2019 comprise the Company and its subsidiaries (together referred to as “the Group”) and the Group’s
interest in associates.

1.2 Principal activities

The principal activities of the Group are as follows:
• Office leasing;
• Financial investments;
• Integrated investment and construction of infrastructures, industrial zones and urban zones;
• Manufacturing of furniture for offices, households and schools;
• Timber production and processing;
• Manufacturing of mechanical products (mainly construction machinery, office desks, chairs and
cabinets);
• Leasing machines, equipment and motor vehicles;
• Dealing in automobiles, motorbikes, equipment, parts for transport and mining sectors, trans
port vehicles;
• Production and trading of construction and mining machineries;
• Dealing in electrical, electronic appliances, optical and medical equipment;
• Production, trading, assembly, installation, repair and maintenance of electrical, electronic,
electrical refrigeration and civil electrical appliances and air-conditioners;
• Production and trading of raw materials and plastic products;
• Advertisement;
• Civil and industrial construction;
• Exploitation of sand, stones and gravel;
• Production, trading and assembly of furniture products and construction equipment;
• Real estate trading (excluding land price consultancy);
• Domestic and foreign investment advisory (excluding law advisory);
• Production and trading of non-ferrous metal and non-ferrous metal scraps;
• Trading and export and import of steel and supplies for steel making and rolling;
• Production of rolled steel products and roofing sheets;
• Exploitation of metal ores;
• Trading metals, metal ores, iron and steel scraps;
• Making cast iron and steel, and casting cast iron, iron and steel;
• Production of plated and non-plated steel pipes and inox pipes;
• Production and trading of galvanized steel sheet, color coated steel sheet and galvalum steel
sheet;

96 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

• Rendering sports and gymnastics services (training, competition organisation, athlete transfer);
• Building and renting sports practice ground and competition ground;
• Entrusted export-import activities;
• Raising pigs;
• Raising cows;
• Raising poultry;
• Raising other animals;
• Provision of raising services;
• Processing and preserving meat and meat products;
• Producing feeds for cattle, poultry and aquaculture sector;
• Producing fertilizer and nitrogen compounds; and
• Trading agricultural equipment, machineries and accessories.

1.3 Normal operating cycle

The normal operating cycle of the Group is generally within 12 months.

HOA PHAT’S INTERNAL STRENGTH 97

98
HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
1.4 Group structure
As at 31 December 2019, the Group’s subsidiaries are as follows:

Percentage of ownership and voting

No. Tier-1 subsidiaries Principal activities rights of the Group
31/12/2019 1/1/2019

1 An Thong Mineral Investment JSC Exploring, exploiting, processing, importing and exporting minerals 99.96% 99.96%
(mainly iron ores).
2 Hoa Phat Hai Duong Steel JSC Producing steel, iron, exploiting iron ores, exploiting and collecting lignite; 99.998% 99.998%
wholesaling metals and metal ores; producing, trading coke coal.
3 Hoa Phat Dung Quat Steel JSC Producing steel, iron, exploiting iron ores; wholesaling metals and metal ores; 99.999% 99.999%
producing and wholesaling coke coal and other related business activities.
4 Hoa Phat Hung Yen Steel Co., Ltd. Producing steel, iron, wholesaling metals and metal ores 100% 100%
5 Hoa Phat Steel Pipe Co., Ltd. Producing and trading various kinds of steel pipes. 99.967% 99.967%
6 Hoa Phat Steel Sheet Co., Ltd. Production and trading of galvanized steel sheet, color coated steel sheet 100% 100%
and galvalum steel sheet
7 Hoa Phat Metal Producing Co., Ltd. Producing construction equipment, trading construction machinery and 99.875% 99.875%
(previously known as Hoa Phat equipment, exploiting small and medium-sized minerals.
Equipment and Accessories Co., Ltd.)
8 Hoa Phat Furniture JSC Producing and trading various kinds of furniture. 99.60% 99.60%
9 Hoa Phat Refrigeration Engineering Producing and trading various kinds of refrigerant equipment. 99.67% 99.67%
Co., Ltd.
10 Hoa Phat Urban Development and Civil and industrial construction, development of real estate for sales and 99.85% 99.85%
Construction JSC lease, leasing houses and offices, investing in and building technical
infrastructure.
11 Hoa Phat Agriculture Development JSC Raising livestock and poultry; farming; providing plantation, raising, post- 99.999% 99.999%
harvest services; producing feeds for cattle, poultry and aquaculture sector.

ANNUAL REPORT 2019

 HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Percentage of direct Percentage of ownership

No. Tier-2 subsidiaries Principal activities ownership of and voting rights of the
tier-1 subsidiaries Group
31/12/2019 1/1/2019 31/12/2019 1/1/2019

HOA PHAT’S INTERNAL STRENGTH

SUBSIDIARIES OF AN THONG MINERAL INVESTMENT JSC
1 Binh Vang One Member Co., Ltd. Exploiting iron ore, non-ferrous metal, producing non-ferrous 100% 100% 99.96% 99.96%
metal and precious metal, exploiting precious and rare metal
ore.
2 Hoa Phat Mitraco Mining JSC Exploring and production of iron, bauxite and other rare ores; 98.42% 98.42% 98.38% 98.38%
trading metal and metal ores.
SUBSIDIARIES OF HOA PHAT HAI DUONG STEEL JSC
3 Hoa Phat Energy JSC Producing and wholesaling coke coal, exploiting and collecting 99.89% 99.89% 99.888% 99.888%
coal; producing refined petroleum products; wholesaling
metals and metal ores; and trading various kinds of coal.
4 Hoa Phat Shipping JSC (i) Coastal, inland waterway and ocean transportation 68% - 67.998% -
SUBSIDIARIES OF HOA PHAT DUNG QUAT STEEL JSC
5 Hoa Phat Dung Quat Ferro Alloy JSC Production of iron, steel and cast iron products. 89.99% 89.99% 99.99% 99.99%
6 Hoa Phat Dung Quat Steel Pipe JSC Production of iron, steel and cast iron products. 89.99% 89.99% 99.987% 99.987%
7 Hoa Phat Dung Quat Steel Sheet JSC Production of iron, steel and cast iron products. 89.99% 89.99% 99.99% 99.99%
8 Hoa Phat Trading International Pte Ltd., Trading of iron, steel and cast iron products 100% 100% 99.999% 99.999%
9 Hoa Phat Multi-Purpose Port JSC Direct support services for waterway transportation. 98% 98% 99.999% 99.999%
10 Harmonia Co., Ltd. (i) Hospitality services 100% - 99.999% -
SUBSIDIARIES OF HOA PHAT HUNG YEN STEEL CO., LTD.
11 Hoa Phat - Binh Dinh One Member Co., Producing steel, iron, wholesaling metals and metal ores. 100% 100% 100% 100%
Ltd.
12 Nhon Trach Service Trading Co., Ltd. Provision of warehouses, storage yards for rent; and storing, 99.97% 99.97% 99.97% 99.97%
loading/unloading of goods.

99
100
HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Percentage of direct Percentage of ownership

No. Tier-2 subsidiaries Principal activities ownership of and voting rights of the
tier-1 subsidiaries Group
31/12/2019 1/1/2019 31/12/2019 1/1/2019
SUBSIDIARIES OF HOA PHAT STEEL PIPE CO., LTD.
13 Hoa Phat Cold Rolled Steel Co., Ltd. Producing of cold rolled steel products. 100% 100% 99.967% 99.967%
14 Hoa Phat Binh Duong Steel Pipe One Producing and trading various kinds of steel pipes. 100% 100% 99.967% 99.967%
Member Co., Ltd.
15 Hoa Phat Da Nang Steel Pipe Co., Ltd. Producing and trading various kinds of steel pipes. 99.98% 99.98% 99.944% 99.944%
16 Hoa Phat Long An Steel Pipe One Producing and trading various kinds of steel pipes. 100% 100% 99.967% 99.967%
Member Co., Ltd.

SUBSIDIARIES OF HOA PHAT METAL PRODUCING CO., LTD. (PREVIOUSLY KNOWN AS HOA PHAT EQUIPMENT AND ACCESSORIES CO., LTD.)
17 Hoa Phat Steel Wire Co., Ltd. (previously Producing and trading construction and mining machines; 100% 100% 99.875% 99.875%
known as Hoa Phat Mining and Construction producing engines and turbines.
Machinery Manufacturing Co., Ltd.)
18 Hoa Phat Mechanical Manufacturing Repairing and producing mechanical products; leasing 99.95% 99.95% 99.83% 99.83%
Co., Ltd. machines, equipment and vehicles.
19 Hoa Phat Prestressed Concrete Steel Production of iron, steel and cast iron products. 100% 100% 99.875% 99.875%
Co., Ltd.

SUBSIDIARIES OF HOA PHAT URBAN DEVELOPMENT AND CONSTRUCTION JSC

20 Pho Noi A Industrial Zone Management Civil and industrial construction, freehold or leasehold real 100% 100% 99.85% 99.85%
and Operation Company estate trading, workshop and office leasing, integrated
investment and construction of infrastructure, clean water
trading, waste collection, exploitation, treatment and supply of
water and operation of restaurants.

ANNUAL REPORT 2019

 HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
Percentage of direct Percentage of ownership
No. Tier-2 subsidiaries Principal activities ownership of and voting rights of the
tier-1 subsidiaries Group
31/12/2019 1/1/2019 31/12/2019 1/1/2019

HOA PHAT’S INTERNAL STRENGTH

21 Hoa Mac Industrial Zone Management Civil and industrial construction, freehold or leasehold real 100% 100% 99.85% 99.85%
and Operation Co., Ltd. estate trading, workshop and office leasing, integrated
investment and construction of infrastructure, clean water
trading, waste collection, exploitation, treatment and supply of
water.
22 Hoa Phat Hung Yen Urban Development Trading of real estate, land use rights of land owners, land 100% 100% 99.85% 99.85%
and Construction Co., Ltd. users or land lessees

23 Golden Gain Vietnam JSC Real estate trading. 99.99% 99.99% 99.84% 99.84%
24 Long Viet Construction JSC Real estate trading. 99.80% 99.80% 99.65% 99.65%

SUBSIDIARIES OF HOA PHAT AGRICULTURE DEVELOPMENT JSC

25 Hoa Phat Trading Co., Ltd. Raising buffalos, cows; providing plantation, raising, post- 99.90% 99.90% 99.899% 99.899%
harvest services.
26 Hoa Phat Livestock Development JSC Raising and providing breeding and market pigs. 99.975% 99.975% 99.974% 99.974%
27 Hoa Phat Hung Yen Feeds Co., Ltd. Producing and trading feeds and materials for producing feeds 100% 100% 99.999% 99.999%
for cattle, poultry and aquaculture sector.
28 Hoa Phat Dong Nai Feeds Co., Ltd. Producing and processing feeds for cattle, poultry and 100% 100% 99.999% 99.999%
aquaculture sector.
29 Hoa Phat Poultry Co., Ltd. Raising poultry. 100% 100% 99.999% 99.999%

101
102
HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Percentage of direct Percentage of

No. Tier-3 subsidiariest Principal activities ownership of tier-2 ownership of
subsidiaries the Group
31/12/2019 1/1/2019 31/12/2019 1/1/2019
SUBSIDIARIES OF GOLDEN GAIN VIETNAM JSC
1 Hanoi Investment and Services JSC Sports, entertainment activities, including tennis, badminton, 95.27% 95.27% 95.111% 95.111%
billiards, swimming, body-building, games and real estate
trading.
2 Hanoi Transportation and Trading Goods transport by automobiles, inter-provincial passenger 99.90% 99.90% 99.736% 99.736%
Services JSC transport by automobiles, machinery and equipment repair,
domestic travel, petrol and oil trading agency, transport
agency services and automobiles keeping services, office,
warehouse and storage yard services and real estate trading.
SUBSIDIARIES OF HOA PHAT TRADING CO., LTD.
3 Hoa Phat Quang Binh Breeding Raising livestock and poultry: providing plantation services. 72.72% 72.72% 72.647% 72.647%
Co., Ltd.
4 Viet Hung Breeding One-member Co., Ltd. Raising livestock and poultry: providing plantation services. 100% 100% 99.899% 99.899%
5 Dong Phat Breeding One-member Co., Raising livestock and poultry: providing plantation services. 100% 100% 99.899% 99.899%
Ltd.
6 Dragon Trading and Investment Pty Ltd. (ii) Import, export, trading and distribution of livestock, poultry, 100% - 99.899% -
other agricultural products, ore, coal, iron and steel.

SUBSIDIARIES OF HOA PHAT LIVESTOCK DEVELOPMENT JSC

7 Thai Thuy Breeding Co., Ltd. Raising pigs, raising poultry, raising other animals. 100% 100% 99.974% 99.974%
8 Lac Thuy Breeding Co., Ltd. Raising poultry, raising other animals. 100% 100% 99.974% 99.974%
9 Hoa Yen Breeding One Member Co., Ltd. Raising pigs, raising other animals. 100% 100% 99.974% 99.974%
10 Hoa Phat Bac Giang Breeding Raising pigs, raising poultry, raising other animals. 100% 100% 99.974% 99.974%
One-member Co., Ltd.

ANNUAL REPORT 2019

 HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Percentage of direct Percentage of

No. Tier-3 subsidiariest Principal activities ownership of tier-2 ownership of
subsidiaries the Group
31/12/2019 1/1/2019 31/12/2019 1/1/2019

HOA PHAT’S INTERNAL STRENGTH

SUBSIDIARIES OF HOA PHAT LIVESTOCK DEVELOPMENT JSC
11 Hoa Phat Lang Son Breeding Raising pigs, raising poultry, raising other animals. 100% 100% 99.974% 99.974%
One-member Co., Ltd.
12 Hoa Phuoc Breeding Co., Ltd. Raising breeding and market pigs. 99.998% 99.998% 99.972% 99.972%

SUBSIDIARIES OF HOA PHAT POULTRY CO., LTD

13 Hoa Phat Phu Tho Poultry Raising pigs, raising poultry, raising other animals. 100% 100% 99.999% 99.999%
One Member Co., Ltd.
14 Hoa Phat Dong Nai Poultry Raising pigs, raising poultry, raising other animals. 100% 100% 99.999% 99.999%
One Member Co., Ltd.
15 Van Thang Phu Tho JSC (previously Raising livestock and poultry, providing plantation services. 100% 100% 99.999% 99.999%
known as Van Thang Livestock One
Member Co., Ltd.)

(i) These are tier-2 subsidiaries that were established during the year.

(ii) These are tier-3 subsidiaries that were established during the year.

All the Group’s subsidiaries are incorporated in Vietnam, except Hoa Phat Trading International Pte Ltd., which is incorporated in Singapore and Dragon Trading
and Investment Pty Ltd., which is incorporated in Australia.

As at 31 December 2019, the Group had 22,300 employees (1/1/2019: 19,914 employees).

103
HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
2. BASIS OF PREPARATION
2.1 Statement of compliance
These consolidated financial statements have been prepared in accordance with Vietnamese
Accounting Standards, the Vietnamese Accounting System for Enterprises and the relevant statutory
requirements applicable to financial reporting.

2.2 Basis of measurement

The consolidated financial statements, except for the consolidated statement of cash flows, are
prepared on the accrual basis using the historical cost concept. The consolidated statement of cash
flows is prepared using the indirect method.

2.3 Annual accounting period

The annual accounting period of the Group is from 1 January to 31 December.

2.4 Accounting and presentation currency

The Group’s accounting currency is Vietnam Dong (“VND”), which is also the currency used for
consolidated financial statement presentation purpose.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following significant accounting policies have been adopted by the Group in the preparation of
these consolidated financial statements.

The accounting policies that have been adopted by the Group in the preparation of these consolidated
financial statements are consistent with those adopted in the preparation of the latest consolidated
annual financial statements.

3.1 Basis of consolidation

(a) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of the subsidiaries are
included in the consolidated financial statements from the date that control commences until the
date that control ceases.
(b) Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable
net assets at date of acquisition.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted
for as transactions with owners. The difference between the change in the Group’s share of net
assets of the subsidiary and any consideration paid or received is recorded directly in retained
profits under equity.
(c) Loss of control
When the Group losses control over a subsidiary, it derecognises the assets and liabilities of the
subsidiary, and any related non-controlling interest and other components of equity. Any resulting
gain or loss is recognised in the consolidated income statement. Any interest retained in the
former subsidiary when control is lost is stated at the carrying amount of the retained investment

104 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
in the consolidated financial statements adjusted for appropriate shares of changes in equity of the
investee since the acquisition date, if significant influence in the investee is maintained, or
otherwise stated at cost.
(d) Associates
Associates are those entities in which the Group has significant influence, but not control, over
the financial and operating policies. Associates are accounted for using the equity method. The
consolidated financial statements include the Group’s share of the income and expenses of the
associates, after adjustments to align the accounting policies with those of the Group, from the
date that significant influence commences until the date that significant influence ceases. When
the Group’s share of losses exceeds its interest in associates, the carrying amount of that interest
(including any long-term investments) is reduced to nil and the recognition of further losses is
discontinued except to the extent that the Group has an obligation or has made payments on
behalf of the associates .
(e) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-
group transactions, are eliminated in preparing the consolidated financial statements. Unrealised
gains and losses arising from transactions with equity accounted associates are eliminated against
the investment to the extent of the Group’s interest in the associates.
(f) Business combination
Business combinations are accounted for using the acquisition method as at the acquisition date,
which is the date on which control is transferred to the Group. Control exists when the Group has
the power to govern the financial and operating policies of an entity so as to obtain benefits from
its activities. In assessing control, potential voting rights that presently are exercisable are taken
into account.

3.2 Foreign currency

(a) Foreign currency transactions
Transactions in currencies other than VND during the year have been translated into VND at rates
approximating actual rates of exchange ruling at the transaction dates.

Monetary assets and liabilities denominated in currencies other than VND are translated into VND
at the account transfer buying rates (for assets) and account transfer selling rates (for liabilities) at
the end of the accounting period quoted by the commercial bank where the Group most frequently
conducts transactions.

All foreign exchange differences are recorded in the consolidated statement of income.
(b) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising
on acquisition, are translated to VND at exchange rates as at 31 December 2019. The income and
expenses of foreign operations are translated to VND at exchange rates at the dates of transactions.

Foreign currency differences arising from the translation of foreign operations are recognised in the
balance sheet under the caption “Foreign exchange differences” in equity.

3.3 Cash and cash equivalents

HOA PHAT’S INTERNAL STRENGTH 105

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
Cash comprises cash balances and call deposits. Cash equivalents are short-term highly liquid
investments that are readily convertible to known amounts of cash, are subject to an insignificant
risk of changes in value, and are held for the purpose of meeting short-term cash commitments
rather than for investment or other purposes.

3.4 Investments
(a) Held-to-maturity investments
Held-to-maturity investments are those that the Company’s and its subsidiaries’ management has
the intention and ability to hold until maturity. Held-to-maturity investments include term deposits
at bank and bonds. These investments are stated at costs less allowance for doubtful debts.
(b) Investments in equity instruments of other entities
Investments in equity instruments of other entities are initially recognised at cost which include
purchase price plus any directly attributable transaction costs. Subsequent to initial recognition,
these investments are stated at cost less allowance for diminution in value. An allowance is made
for diminution in investment values if the investee has suffered a loss, except where such loss was
anticipated by the Group’s management before making the investment. The allowance is reversed
if the investee subsequently made a profit that offsets the previous loss for which the allowance
had been made. An allowance is reversed only to the extent that the investment’s carrying amount
does not exceed the carrying amount that would have been determined if no allowance had been
recognised.

3.5 Accounts receivable

Trade and other receivables are stated at cost less allowance for doubtful debts.

Allowance for doubtful debts is established for amount of outstanding receivables at the balance
sheet date which are overdue more than 6 months or are doubtful of recovery. Increases and
decreases to the allowance for doubtful debts balance are recorded as general and administration
expense account in the consolidated statement of income.

3.6 Inventories
Inventories are stated at the lower of cost and net realisable value.

Cost is determined on a weighted average basis and includes all costs incurred in bringing the
inventories to their present location and condition.

Net realisable value is the estimated selling price of inventory items, less the estimated costs of
completion and direct selling expenses.

Allowance for inventories is established for the estimated losses arising due to the impairment of
value (through diminution, damage or obsolescence) of inventories owned by the Group, based on
appropriate evidences of impairment available at the balance sheet date. Increases and decreases
to the allowances for inventories balance are recorded in cost of goods sold account in the
consolidated statement of income.
Manufacturing, trading and production of goods
Cost in the case of finished goods and manufactured work in progress includes raw materials, direct

106 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
labour and attributable production overheads. The Group applies the perpetual method of
accounting for inventories.
Real estate development for future sales
Cost is determined on a specific identification basis and includes land costs and other related
development and infrastructure costs, other direct costs and attributable manufacturing overheads.

3.7 Tangible fixed assets

(a) Cost
Tangible fixed assets are stated at cost less accumulated depreciation. The initial cost of a tangible
fixed asset comprises its purchase price, including import duties, non-refundable purchase taxes
and any directly attributable costs of bringing the asset to its working condition for its intended
use. Expenditure incurred after tangible fixed assets have been put into operation, such as repair
and maintenance cost, except overhaul and major maintenance expenses recognised in long-term
prepaid expenses (Note 3.11(b)), is charged to the consolidated statement of income in the year in
which the cost is incurred. In situations where it can be clearly demonstrated that the expenditure
has resulted in an increase in the future economic benefits expected to be obtained from the use
of tangible fixed assets beyond their originally assessed standard of performance, the expenditure
is capitalised as an additional cost of tangible fixed assets.
(b) Depreciation
Depreciation is computed on a straight-line basis over the estimated useful lives of tangible fixed
assets. The estimated useful lives are as follows:

• buildings 5 – 50 years
• machinery and equipment 1 – 25 years
• motor vehicles 1 – 30 years
• office equipment 2 – 12 years
• livestock 3 – 5 years
• others 2 – 12 years
3.8 Intangible fixed assets
(a) Land use rights
Land use rights comprise:
• those granted by the State for which land use payments are collected;
• those acquired in a legitimate transfer; and
• rights to use leased land obtained before the effective date of Land Law (2003) for
which payments have been made in advance for more than 5 years and supported by land use
rights certificate issued by competent authority.
Land use rights are stated at cost less accumulated amortisation. The initial cost of land use
rights comprise the purchase price and any directly attributable costs incurred in conjunction with
securing the land use rights. For land use rights with definite useful lives, amortisation is computed
on a straight-line basis over 10 to 50 years. No amortisation is provided for land use rights with
indefinite useful lives.
(b) Software
Cost of acquiring new software, which is not an integral part of the related hardware, is capitalised
and treated as an intangible asset. Software cost is amortised on a straight-line basis over 3 to 8
years.

HOA PHAT’S INTERNAL STRENGTH 107

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

3.9 Investment property held to earn rental

(a) Cost
Investment property held to earn rental is stated at cost less accumulated depreciation. The initial
cost of an investment property held to earn rental comprises its purchase price, cost of land use
rights and any directly attributable expenditures of bringing the property to the condition necessary
for it to be capable of operating in the manner intended by management. Expenditure incurred
after the investment property held to earn rental has been put into operation, such as repairs
and maintenance, is charged to the consolidated statement of income in the year in which the
expenditure is incurred. In situations where it can be clearly demonstrated that the expenditure has
resulted in future economic benefits in excess of the originally assessed standard of performance of
the existing investment property held to earn rental, the expenditure is capitalised as an additional
cost of the investment property.
(b) Depreciation
Depreciation is computed on a straight-line basis over the estimated useful lives of investment
property held to earn rental. The estimated useful lives are as follows:

• buildings 3 – 49 years

For land use rights with indefinite useful live, depreciation is not required.

3.10 Construction in progress

Construction in progress represents (i) the costs of construction and machinery which have not
been fully completed or installed and (ii) the costs directly attributable to raising breeding pigs
which are growing and not mature enough for producing piglets. No depreciation is provided for
construction in progress during the period of construction, installation and the period in which
breeding pigs are not mature enough for producing piglets.

3.11 Long-term prepaid expenses

(a) Tools and instruments
Tools and instruments include assets held for use by the Group in the normal course of business.
Tools and instruments are labour materials not satisfying requirements pertaining to value and
useful life prescribed in regulations of fixed assets. Cost of tools and instruments are amortised on
a straight-line basis over a maximum period of 3 years.
(b) Overhaul and major maintenance expenses
These comprise major overhaul and maintenance expenses incurred on a periodical basis during
the use of assets. These expenses are initially stated at cost and are amortised to the consolidated
statement of income on a straight line basis over 2 to 3 years.
(c) Prepaid land costs
Prepaid land costs comprise prepaid land lease rentals, including those for which the Group
obtained land use rights certificate but are not qualified as intangible fixed assets under prevailing
regulations and other costs incurred in conjunction with securing the use of leased land. These
costs are recognised in the consolidated statement of income on a straight-line basis over the term
of the lease.
(d) Site clearance costs

108 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
Site clearance costs comprise compensation and clearance fee paid by the Group. These expenses
are initially stated at cost and amortised on a straight-line basis over the useful lives of land lease
period.
(e) Pre-operating expenses
Pre-operating expenses are recorded in the statement of income, except for establishment costs
and expenditures on training, advertising and promotional activities incurred from the incorporation
date to the commercial operation date. These expenses are recognised as long-term prepaid
expenses, initially stated at cost, and are amortised on a straight-line basis over a period of no more
than three years.

3.12 Goodwill
Goodwill arises on the acquisition of subsidiaries. Goodwill is measured at cost less accumulated
amortisation. Cost of goodwill represents the excess of the cost of the acquisition over the Group’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the
acquiree. When the excess is negative (gain from bargain purchase), it is recognised immediately in
the consolidated statement of income.

Goodwill arising on acquisition of a subsidiary is amortised on a straight-line basis over 10 years.

Carrying value of goodwill arising on acquisition of a subsidiary is written down to recoverable
amount as management determines that it is not fully recoverable.

3.13 Trade and other payables

Trade and other payables are stated at their cost.

3.14 Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive
obligation that can be estimated reliably and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability.
Warranties
The provision for warranties relates mainly to goods sold and services rendered during the year.
The provision is based on estimates derived from historical warranty data associated with similar
products and services.

3.15 Share capital

(a) Ordinary shares
Ordinary shares are recognised at par value. The excess of proceeds from share issuance over the
par value of shares issued is recorded as share premium. Incremental costs directly attributable to
the issue of shares, net of tax effects, are recognized as a deduction from share premium.
(b) Issuance of bonus shares to employees
Under the Company’s policies, bonus shares issued for employees from share premium are
recognised at par value and not recognised as expenses in the consolidated statements of income.
(c) Withdrawal of bonus shares to employees as treasury shares
When bonus shares recognised as equity are withdrawn, the par value of these shares is recognised

HOA PHAT’S INTERNAL STRENGTH 109

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
in retained profits under equity. Withdrawn shares are classified as treasury shares under equity.
When treasury shares are sold for reissue, subsequently, the cost of the reissued shares is determined
on a weighted average basis. Any difference between the amount received and the cost of the
reissued shares is presented within share premium.

3.16 Classification of financial instruments

Solely for the purpose of providing disclosures about the significance of financial instruments to
the Group’s consolidated financial position and consolidated results of operations and the nature
and extent of risk arising from financial instruments, the Group classifies its financial instruments as
follows:
(a) Financial assets
Financial assets at fair value through profit or loss
A financial asset at fair value through profit or loss is a financial asset that meets either of the
following conditions:
• It is considered by the Board of Directors as held for trading. A financial asset is considered
as held for trading if:
- it is acquired principally for the purpose of selling it in the near term;
- there is evidence of a recent pattern of short-term profit-taking; or
- a derivative (except for a derivative that is financial guarantee contract or a designated and
effective hedging instrument).
• Upon initial recognition, it is designated by the Group as at fair value through profit or loss.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and a fixed maturity that the Group has the positive intention and ability to hold to maturity, other
than:
• Those that the Group upon initial recognition designates as at fair value through profit or loss;
• Those that the Group designates as available-for-sale; and
• Those that meet the definition of loans and receivables.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market, other than those:
• That the Group intends to sell immediately or in the near term, which are classified as held
for trading, and those that the Group on initial recognition designates as at fair value through
profit or loss;
• That the Group upon initial recognition designates as available-for-sale; or
• For which the Group may not recover substantially all of its initial investment, other than
because of credit deterioration, which are classified as available-for-sale.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available
for sale or that are not classified as:
• Financial assets at fair value through profit or loss;
• Held-to-maturity investments; or
• Loans and receivables.
(b) Financial liabilities
Financial liabilities at fair value through profit or loss
A financial liability at fair value through profit or loss is a financial liability that meets either of the

110 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
following conditions:
• It is considered by the Board of Directors as held for trading. A financial liability is considered as
held for trading if:
- it is incurred principally for the purpose of repurchasing it in the near term;
- there is evidence of a recent pattern of short-term profit-taking; or
- a derivative (except for a derivative that is financial guarantee contract or a designated and
effective hedging instrument).
• Upon initial recognition, it is designated by the Group as at fair value through profit or loss.
Financial liabilities carried at amortised cost
Financial liabilities which are not classified as financial liabilities at fair value through profit or loss
are classified as financial liabilities carried at amortised cost.

The above described classification of financial instruments is solely for presentation and disclosure
purpose and is not intended to be a description of how the instruments are measured. Accounting
policies for measurement of financial instruments are disclosed in other relevant notes.

3.17 Income tax

Income tax on the consolidated profit or loss for the year comprises current and deferred tax.
Income tax is recognised in the consolidated statement of income except to the extent that it
relates to items recognised directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted
at the end of the accounting period, and any adjustment to tax payable in respect of previous years.
 
Deferred tax is provided using the balance sheet method, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amounts of assets and liabilities using the tax
rates enacted or substantively enacted at the end of the accounting period.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits
will be available against which the temporary difference can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.

3.18 Revenue and other income

(a) Goods sold
Revenue from the sale of goods is recognised in the consolidated statement of income when
the significant risks and rewards of ownership have been transferred to the buyer. No revenue is
recognised if there are significant uncertainties regarding recovery of the consideration due or
the possible return of goods. Revenue on sales of goods is recognised at the net amount after
deducting sales discounts stated on the invoice.
(b) Services rendered
Revenue from services rendered is recognised in the consolidated statement of income in proportion
to the stage of completion of the transaction. The stage of completion is assessed by reference to
surveys of work performed. No revenue is recognised if there are significant

HOA PHAT’S INTERNAL STRENGTH 111

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
uncertainties regarding recovery of the consideration due.
(c) Revenue from sublease of leasehold land
Revenue from sublease of leasehold land is recognised in the consolidated statement of income
when the following conditions are met:
• The leasehold land has been completed and transferred to the buyer. The Group has transferred
the risks and rewards associated with the ownership of the real estate to the buyer;
• The Group no longer holds the right to manage (as the owner of the real estate) or control the
real estate;
• The revenue is reliably measured;
• The Group has received or will receive economic benefits from the sale of real estate; and
• The expenses related to the sublease of leasehold land are determinable.
(d) Rental income
Rental income from leased property is recognised in the consolidated statement of income on a
straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral
part of the total rental income.
(e) Sales of apartments
Revenue from the sale of apartments is recognised in the consolidated statement of income when
the significant risks and rewards of ownership have been transferred to the buyer. No revenue is
recognised if there are significant uncertainties regarding recovery of the consideration due. The
transfer of significant risks and rewards is determined to be at the time of completion and hand
over of the apartments.
(f) Interest income
Interest income is recognised on a time basis with reference to the principal outstanding and the
applicable interest rate. Interest income from deposits during the period of construction is set off
with borrowing costs relating to borrowings in respect of the construction of qualifying assets, net
of the remaining difference from adjustment to decrease the value of investment.
(g) Dividend income
Dividend income is recognised when the right to receive dividend is established.

3.19 Operating lease payments

Payments made under operating leases are recognised in the consolidated statement of income
on a straight-line basis over the term of the lease. Lease incentives received are recognised in the
consolidated statement of income as an integral part of the total lease expense.

3.20 Borrowing costs

Borrowing costs are recognised as an expense in the year in which they are incurred, except where
the borrowing costs relate to borrowings in respect of the construction of qualifying assets, in which
case the borrowing costs incurred during the period of construction are capitalized as part of the
cost of the assets concerned.

3.21 Earnings per share

The Group presents basic earnings per share for its ordinary shares. Basic earnings per share is
calculated by dividing the profit or loss attributable to the ordinary shareholders of the Company
(after deducting any amounts appropriated to bonus and welfare funds for the accounting period)

112 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
by the weighted average number of ordinary shares outstanding during the year. At the reporting
date, the Group did not have any dilutive potential ordinary shares. Therefore, the presentation of
diluted earnings per share is not applicable.

3.22 Related parties

Parties are considered to be related to the Group if one party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial
and operating decisions, or where the Group and the other party are subject to common control or
significant influence.

Related parties may be individuals, directly or indirectly, having voting rights that give them
significant influence over the Group, the Group’s key management personnel, close family members
of any individual considered to be a related party.

4. SEGMENT REPORTING
A segment is a distinguishable component of the Group that is engaged either in providing related
products or services (business segment) or in providing products or services within a particular economic
environment (geographical segment), which is subject to risks and rewards that are different from those
of other segments. The Group’s primary format for segment reporting is based on business segments.
The Group comprises the following main business segments:

• Production and trading of steel: refining steel; casting steel, iron; trading and import-export
of steel, steel-producing machinery and equipment; production of industrial steel including steel
sheet, hot rolled steel, cold rolled steel, steel pipe, steel scrap; production and trading of steel
pipes; production of steel string machinery;
• Other industrial production: production and trading of construction equipment; producing and
trading various kinds of interior furniture and refrigerant products.
• Construction and development of real estate: civil construction, industrial construction, trading
of real estate under its ownership or lease from others; leasing houses, offices and investing in
construction of infrastructure;
• Agriculture: raising pigs, cows, poultry; provision of raising services; processing and preserving
meat and meat products; producing feeds for cattle, poultry and aquaculture sector; producing
fertilizer and nitrogen compounds; trading agricultural equipment, machineries and accessories;
and other relevant auxiliary sectors; and
• Financial investment (parent entity): equity investments in other entities.
The Group did not present geographical segment because the Board of Directors determines that
the Group currently operates in a sole geographical segment which is Vietnam territory.

HOA PHAT’S INTERNAL STRENGTH 113

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Production and Other industrial

trading of steels production
VND VND

FOR THE YEAR ENDED 31 DECEMBER 2019

Net external revenue 51,233,120,178,424 2,817,712,434,540
Net inter-segment revenue 34,507,078,536,582 108,085,621,241

Total segment revenue 85,740,198,715,006 2,925,798,055,781

Segment net operating profits 18,349,735,019,472 433,838,415,313

Other income 751,180,909,150 4,965,484,603

Other expenses (582,603,733,733) (601,653,980)
Share of loss in associates - -
Income tax expenses – current (1,339,481,995,523) (85,209,957,087)
Income tax (expenses)/benefit– deferred 5,289,924,979 4,456,555,534

Net profit after tax 17,184,120,124,345 357,448,844,383

AS AT 31 DECEMBER 2019
Segment assets 97,305,517,934,909 1,710,025,863,879

Total assets 97,305,517,934,909 1,710,025,863,879

Segment liabilities 55,469,885,069,405 920,714,227,148

Total liabilities 55,469,885,069,405 920,714,227,148

FOR THE YEAR ENDED 31 DECEMBER 2019

Capital expenditure 19,993,459,899,558 36,481,789,960
Depreciation of tangible fixed assets and investment
properties 2,082,192,603,443 105,097,946,084
Amortisation of intangible fixed assets 15,503,594,663 2,068,077,862
Amortisation of long-term land prepaid expenses 23,192,855,261 1,922,056,121

114 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Real estates Agriculture Elimination Consolidated

Bất động sản
VND VND VND VND VND

1,622,043,994,339 7,985,316,066,488 - 63,658,192,673,791

36,560,304,199 2,095,876,750 (34,653,820,338,772) -

1,658,604,298,538 7,987,411,943,238 (34,653,820,338,772) 63,658,192,673,791

578,705,175,478 606,035,403,717 (10,935,903,061,158) 9,032,410,952,822

4,300,049,645 2,836,887,646 (105,602,399,567) 657,680,931,477

(7,400,744,172) (5,402,833,606) 4,010,518,193 (591,998,447,298)
- (1,431,313,615) - (1,431,313,615)
(136,141,722,023) (42,474,252,047) - (1,603,307,926,680)
5,175,725,890 (1,019,358,304) 70,991,191,424 84,894,039,523

444,638,484,818 558,544,533,791 (10,966,503,751,108) 7,578,248,236,229

3,139,152,865,264 5,962,449,415,148 (6,341,115,979,300) 101,776,030,099,900

3,139,152,865,264 5,962,449,415,148 (6,341,115,979,300) 101,776,030,099,900

899,017,552,839 2,059,970,080,875 (5,360,192,974,062) 53,989,393,956,205

899,017,552,839 2,059,970,080,875 (5,360,192,974,062) 53,989,393,956,205

494,067,552,518 644,812,426,291 (343,450,093,667) 20,825,371,574,660

58,605,925,717 314,171,386,862 1,343,588,304 2,561,411,450,410

396,737,776 1,048,564,387 (12,212,229) 19,004,762,459
- 7,620,698,407 (729,190,280) 32,006,419,509

HOA PHAT’S INTERNAL STRENGTH 115

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Production and Other industrial Real estates

trading of steels (VND) production (VND) VND

FOR THE YEAR ENDED 31 DECEMBER 2018

Net external revenue 46,424,438,557,484 3,143,642,159,185 1,672,193,024,470
Net inter-segment revenue 24,846,558,699,153 1,512,209,181,834 69,825,151,585

Total segment revenue 71,270,997,256,637 4,655,851,341,019 1,742,018,176,055

Segment net operating

profits 9,074,781,411,234 400,450,243,651 608,767,909,016

Other income 481,555,388,120 6,427,041,940 2,361,816,807

Other expenses (473,877,140,311) (505,693,124) (10,517,197,278)
Income tax expenses –
current (1,282,407,631,700) (77,598,081,433) (126,462,893,836)
Income tax (expenses)/
benefit– deferred (15,011,401,092) 4,353,955,612 9,288,714,217

Net profit after tax 7,785,040,626,251 333,127,466,646 483,438,348,926

AS AT 31 DECEMBER 2018
Segment assets 70,112,614,533,225 2,352,850,909,969 3,103,472,590,479

Total assets 70,112,614,533,225 2,352,850,909,969 3,103,472,590,479

Segment liabilities 34,668,413,777,196 1,156,149,078,573 1,295,312,499,076

Total liabilities 34,668,413,777,196 1,156,149,078,573 1,295,312,499,076

FOR THE YEAR ENDED 31 DECEMBER 2018

Capital expenditure 26,738,252,580,611 272,317,873,374 87,759,535,150
Depreciation of tangible fixed
assets and investment properties 1,777,947,106,997 151,603,926,387 39,907,758,171
Amortisation of intangible fixed
assets 4,034,426,400 2,702,816,090 343,278,188
Amortisation of long-term land
prepaid expenses 222,372,671,125 12,761,252,832 4,133,271,398

116 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Agriculture Financial investment Elimination Consolidated

VND (parent entity) (VND) VND VND

4,596,184,638,620 - - 55,836,458,379,759
20,993,986,355 144,749,999,691 (26,594,337,018,618) -

4,617,178,624,975 144,749,999,691 (26,594,337,018,618) 55,836,458,379,759

167,737,638,337 7,294,706,264,480 (7,474,354,333,886) 10,072,089,132,832

4,648,172,875 5,878,321,906 (12,014,153,612) 488,856,588,036

(4,911,728,653) (3,448,677,322) 3,387,588,122 (489,872,848,566)

(15,845,962,217) (4,005,518,365) - (1,506,320,087,551)

(366,828) - 37,167,019,567 35,797,921,476

151,627,753,514 7,293,130,390,699 (7,445,813,879,809) 8,600,550,706,227

4,736,137,299,885 1,283,829,879,943 (3,365,897,542,576) 78,223,007,670,925

4,736,137,299,885 1,283,829,879,943 (3,365,897,542,576) 78,223,007,670,925

1,587,916,921,745 1,632,900,490,338 (2,740,634,936,813) 37,600,057,830,115

1,587,916,921,745 1,632,900,490,338 (2,740,634,936,813) 37,600,057,830,115

531,980,846,312 119,758,395,348 (156,713,428,631) 27,593,355,802,164

255,399,752,105 25,698,547,463 (11,414,656,220) 2,239,142,434,903

944,383,552 3,201,650,812 (12,212,230) 11,214,342,812

38,883,623,930 8,669,289,252 (1,411,580,970) 285,408,527,567

HOA PHAT’S INTERNAL STRENGTH 117

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)
5. CASH AND CASH EQUIVALENTS

31/12/2019 1/1/2019
VND VND
Cash on hand 16,566,142,092 21,227,327,440
Cash in banks 1,661,725,195,112 1,801,074,808,017
Cash in transit 22,915,000 -
Cash equivalents 2,866,586,000,000 693,315,000,000

4,544,900,252,204 2,515,617,135,457

Cash and cash equivalents at 31 December 2019 included VND3,000 million (1/1/2019: VND231,499
million) pledged with banks as security for loans granted to the Group.

Cash equivalents at 31 December 2019 included VND190,000 million (1/1/2019: Nil) pledged with banks
as security for L/C contracts of Hoa Phat Dung Quat Steel JSC, a tier 1 subsidiary of the Group.

118 ANNUAL REPORT 2019

 HOA PHAT GROUP JOINT STOCK COMPANY Form B 09 – DN/HN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Issued under Circular No. 202/2014/TT-BTC
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED) dated 22 December 2014 of the Ministry of Finance)

6. INVESTMENTS
6.1 Held-to-maturity investments

HOA PHAT’S INTERNAL STRENGTH

31/12/2019 1/1/2019
Quantity Cost Fair value Quantity Cost Fair value
VND VND VND VND

Held-to-maturity investments - short-term

• Term deposits (i) 1,374,340,352,910 1,374,340,352,910 3,724,562,710,535 3,724,562,710,535

Held-to-maturity investments - long-term 26,525,530,257 (*) 65,884,926,457 (*)

• Term deposits (ii) 2000 20,000,000,000 (*) - - -
• Bonds (iii)
46,525,530,257 (*) 65,884,926,457 (*)

(i) These represent term deposits with a remaining term of no more than 12 months placed at financial institutions and with interest rates ranging from
3.8% to 7.8% (2018: from 4.3% to 7.1%) per annum.

(ii) These represent term deposits with a remaining term of more than 12 months placed at financial institutions and with interest rates ranging from 7.4%
to 7.8% (2018: from 6.9% to 7.1%) per annum.

(iii) These represent the bonds issued by Vietnam Joint Stock Commercial Bank for Industry and Trade, maturing in 2026 and earning annual interest rate
at the reference interest rate plus 1%. The reference interest rate is the average of interest rates of individual 12-month saving deposits with interests
paid at maturity announced on the websites of 4 banks: Vietnam Joint Stock Commercial Bank for Industry and Trade, Joint Stock Commercial Bank For
Foreign Trade of Viet Nam, Joint Stock Commercial Bank for Investment and Development of Vietnam, and Bank for Agriculture and Rural Development.

(*) The Group has not determined fair values of these financial instruments for disclosure in the consolidated financial statements because information
about their market prices is not available and there is currently no guidance on determination of fair value using valuation techniques under Vietnamese
Accounting Standards or the Vietnamese Accounting System for Enterprises. The fair values of these financial instruments may differ from their carrying
amounts.

119
120
HOA PHAT GROUP JOINT STOCK COMPANY Form B 09 – DN/HN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Issued under Circular No. 202/2014/TT-BTC
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED) dated 22 December 2014 of the Ministry of Finance)

6.2 Long-term financial investments

31/12/2019 1/1/2019
Address % of equity % of voting Carrying amount Fair value % of equity % of voting Carrying amount Fair value
owned rights VND VND owned rights VND VND

Equity investments in
other entities
• Bac Ha Noi Urban Hanoi, 7.00% 7.99% 700,000,000 (*) 7.00% 7.99% 700,000,000 (*)
Development JSC Vietnam

(*) The Group has not determined fair values of these financial instruments for disclosure in the consolidated financial statements because information about
their market prices is not available and there is currently no guidance on determination of fair value using valuation techniques under Vietnamese Account-
ing Standards or the Vietnamese Accounting System for Enterprises. The fair values of these financial instruments may differ from their carrying amounts.

ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

7. PREPAYMENTS TO SUPPLIERS
31/12/2019 1/1/2019
VND VND
OTHER PARTIES
Cisdi Thermal & Environmental Engineering Co., Ltd. 76,483,806,000 -
Thien Truong Trading and Production Co., Ltd. 70,417,790,130 25,293,887,952
Danieli & C. Offcine Meccaniche S.P.A. - 97,670,989,755
Other suppliers 610,930,965,061 687,354,293,332

757,832,561,191 810,319,171,039

8. OTHER RECEIVABLES
31/12/2019 1/1/2019
VND VND
Interest income 33,200,395,079 81,149,546,700
Short-term deposits 30,757,172,310 5,909,590,049
Export tax paid 29,169,457,446 7,232,772,315
Materials lent to third parties 2,937,478,865 1,785,851,782
Materials issued for outside processing 460,791,004 8,023,107,431
Commodity swap contract - 7,232,060,000
Other receivables 42,747,951,649 39,619,422,472

139,273,246,353 150,952,350,749

9. INVENTORIES
31/12/2019 1/1/2019
Cost Allowance Cost Allowance
VND VND VND VND
Goods in transit 2,871,139,551,905 - 1,623,197,709,854 -
Raw materials 7,381,248,359,674 (3,877,969,713) 4,961,008,117,990 (20,733,723,761)
Tools and supplies 2,101,425,673,044 (5,840,805,888) 1,332,123,835,404 (5,238,692,265)
Work in progress 1,573,282,308,451 (28,311,250,423) 2,141,040,914,296 (11,097,564,473)
Finished goods 4,489,362,757,309 (13,381,769,149) 3,580,989,993,951 (24,439,053,883)
Merchandise inventories 741,358,297,568 (17,331,986,992) 543,305,582,635 (11,688,086,444)
Goods sent for processing 1,777,303,715 - - -
Goods on consignment 321,072,278,594 - 6,670,015,604 -

19,480,666,530,260 (68,743,782,165) 14,188,336,169,734 (73,197,120,826)

Included in inventories as at 31 December 2019 was VND708,398 million (1/1/2019: VND860,882 million)
of inventories carried at net realisable value.

As at 31 December 2019, inventories with a carrying value of VND4,220,685 million (1/1/2019:

VND5,215,369 million) were pledged with banks as security for loans granted to the Group.

HOA PHAT’S INTERNAL STRENGTH 121

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

10. TANGIBLE FIXED ASSETST

Buildings Machinery and equipment Motor vehicles

VND VND VND

Cost
Opening balance 5,443,056,494,039 16,249,878,974,087 936,724,916,922
Additions 16,305,364,784 162,979,333,853 77,409,391,599
Transfer from
construction in progress 7,668,104,263,995 12,916,395,073,590 36,956,422,482
Transfer to long-term
prepaid expenses (1,542,271,353) - -
Disposals and written off (12,384,014,117) (114,967,366,412) (31,832,793,032)
Reclassifications - (1,995,000,000) 1,995,000,000
Other movements (72,383,422) (251,067,177) 533,636,364

Closing balance 13,113,467,453,926 29,212,039,947,941 1,021,786,574,335

Accumulated depreciation
Opening balance 1,727,328,640,341 8,121,862,125,586 435,126,501,546
Charge for the year 484,277,108,835 1,824,768,435,087 126,425,813,571
Disposals and written off (5,135,951,606) (109,382,450,179) (29,226,124,822)
Reclassifications - (546,250,000) 546,250,000

Closing balance 2,206,469,797,570 9,836,701,860,494 532,872,440,295

Net book value

Opening balance 3,715,727,853,698 8,128,016,848,501 501,598,415,376
Closing balance 10,906,997,656,356 19,375,338,087,447 488,914,134,040

Included in tangible fixed assets were assets costing VND2,499,266 million which were fully depreciated as
at 31 December 2019 (1/1/2019: VND1,808,092 million) but still in active use.

As at 31 December 2019, tangible fixed assets with a carrying value of VND22,097,737 million (1/1/2019:
VND2,322,746 million) were pledged with banks as security for loans granted to the Group.

122 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Office equipment Livestock Others Total

VND VND VND VND

73,040,957,140 284,786,687,591 5,175,917,066 22,992,663,946,845

18,835,481,805 - 913,232,811 276,442,804,852

7,116,050,816 68,279,572,007 53,202,050 20,696,904,584,940

- - - (1,542,271,353)
(554,955,593) - - (159,739,129,154)
- - - -
- - - 210,185,765

98,437,534,168 353,066,259,598 6,142,351,927 43,804,940,121,895

39,583,083,271 101,915,939,624 1,484,126,598 10,427,300,416,966

17,323,533,702 88,331,547,350 688,310,447 2,541,814,748,992
(552,952,160) - - (144,297,478,767)
- - - -

56,353,664,813 190,247,486,974 2,172,437,045 12,824,817,687,191

33,457,873,869 182,870,747,967 3,691,790,468 12,565,363,529,879

42,083,869,355 162,818,772,624 3,969,914,882 30,980,122,434,704

HOA PHAT’S INTERNAL STRENGTH 123

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

11. INTANGIBLE FIXED ASSETS

Land use rights Software Others Total

VND VND VND VND

Cost
Opening balance 230,430,259,099 36,460,644,107 1,500,909,664 268,391,812,870
Additions 36,977,769,000 4,850,014,441 - 41,827,783,441
Transfer from construction in
progress - 29,351,367,152 - 29,351,367,152

Closing balance 267,408,028,099 70,662,025,700 1,500,909,664 339,570,963,463

Accumulated amortisation
Opening balance 35,303,798,938 14,390,009,146 1,500,909,664 51,194,717,748
Charge for the year 6,379,358,609 12,625,403,850 - 19,004,762,459

Closing balance 41,683,157,547 27,015,412,996 1,500,909,664 70,199,480,207

Net book value

Opening balance 195,126,460,161 22,070,634,961 - 217,197,095,122
Closing balance 225,724,870,552 43,646,612,704 - 269,371,483,256

Included in intangible fixed assets were assets costing VND10,145 million which were fully amortised as of 31
December 2019 (1/1/2019: VND5,012 million), but which are still in active use.

At 31 December 2019, intangible fixed assets with a carrying value of VND72,655 million (1/1/2019: VND74,684
million) were pledged with banks as security for loans granted to the Group.

124 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

12. INVESTMENT PROPERTY

Buildings Land use rights Total

VND VND VND

Cost
Opening balance 230,986,065,943 15,780,994,600 246,767,060,543
Transfer from construction in prog-
ress 376,550,975,482 39,921,706,365 416,472,681,847

Closing balance 607,537,041,425 55,702,700,965 663,239,742,390

Accumulated depreciation
Opening balance 67,026,530,055 - 67,026,530,055
Charge for the year 19,596,701,418 - 19,596,701,418

Closing balance 86,623,231,473 - 86,623,231,473

Net book value

Opening balance 163,959,535,888 15,780,994,600 179,740,530,488
Closing balance 520,913,809,952 55,702,700,965 576,616,510,917

Investment property of the Group and its subsidiaries includes:

• Land use rights and factories for rent in Pho Noi A Industrial Park, Giai Pham Commune, Yen My District,
Hung Yen Province, Vietnam, some floors for rent of the building at 257 Giai Phong Street, Hai Ba Trung
District, Hanoi, Vietnam.

• Land use rights and areas for commercial lease at Mandarin Garden Complex 1 at South-East Tran Duy Hung
Urban Area, Trung Hoa Ward, Cau Giay District, Hanoi, Vietnam; Mandarin Garden Complex 2 at 493 Truong
Dinh, Hoang Mai District, Hanoi, Vietnam and Apartment buildings at 70 Nguyen Duc Canh Street, Hoang Mai
District, Hanoi, Vietnam.

As the investment property being land use right has an indefinite term, the Group did not depreciate it.

At the reporting date, the Group has not determined the fair value of its investment property as there was no
active market for such property for reliable determination of the fair value.

HOA PHAT’S INTERNAL STRENGTH 125

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

13. LONG-TERM WORK IN PROGRESS

Cost and recoverable amount

31/12/2019 1/1/2019
VND VND
The Urban Area and Industrial Park Project in Hung Yen 730,370,717,352 864,094,718,493
Other projects 19,775,681,371 46,325,765,206

750,146,398,723 910,420,483,699

14. CONSTRUCTION IN PROGRESS

2019 2018
VND VND
Opening balance 37,196,900,023,418 4,726,077,899,797
Additions during the year 19,398,227,780,457 33,710,099,893,236
Interest expenses capitalised during the year 1,371,477,036,921 419,620,498,455
Decrease due to disposal and dissolution of subsidiary - (2,413,696,610)
Transfer to tangible fixed assets (20,696,904,584,940) (1,535,599,568,042)
Transfer to intangible fixed assets (29,351,367,152) (18,506,979,186)
Transfer to investment properties (416,472,681,847) -
Transfer to long-term prepaid expenses (126,351,414,583) (45,567,864,862)
Transfer to short-term prepaid expenses (5,248,613,116) (6,161,692,214)
Disposals (490,150,000) (50,248,878,905)
Others (6,611,960,867) (399,588,251)

Closing balance 36,685,174,068,291 37,196,900,023,418

Major constructions in progress were as follows:

31/12/2019 1/1/2019
VND VND
Iron and Steel Production Complex Project in Dung Quat 33,097,995,330,249 33,754,919,592,351
Color Coating Steel Sheet Factory Project 2,471,423,149,154 2,540,735,364,553
Iron and Steel Production Complex Project in Hai Duong 244,430,685,541 228,647,924,909
Agriculture projects 434,027,505,133 252,111,559,414
Steel pipe Factory expansion Project 123,602,944,657 23,605,102,727
Other projects 313,694,453,557 396,880,479,464

36,685,174,068,291 37,196,900,023,418

At 31 December 2019 constructions in progress with a carrying value of VND34,763,405 million (1/1/2019:
VND34,275,473 million) were pledged with banks as security for loans granted to the Group.

126 ANNUAL REPORT 2019

 HOA PHAT GROUP JOINT STOCK COMPANY Form B 09 – DN/HN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Issued under Circular No. 202/2014/TT-BTC
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED) dated 22 December 2014 of the Ministry of Finance)

15. PREPAID EXPENSES

15.1 Short-term prepaid expenses

31/12/2019 1/1/2019

HOA PHAT’S INTERNAL STRENGTH

VND VND
Tools and instruments 57,692,551,361 53,369,610,322
Maintenance and repair cost of assets 27,582,504,748 39,975,823,527
Other expenses 33,276,232,976 29,074,897,471

118,551,289,085 122,420,331,320

15.2 Long-term prepaid expenses

Overhaul and
Tools and major mainte- Prepaid Site clearance Pre-operating Others Total
supplies nance expenses land costs costs expenses VND VND
VND VND VND VND VND

Opening balance 85,366,234,919 470,808,008,956 518,700,698,252 74,292,781,907 103,077,539,159 209,066,605,242 1,461,311,868,435

Additions 82,609,941,863 102,502,473,526 221,328,808,636 147,737,672,362 19,376,353,583 35,644,327,056 609,199,577,026
Transfer from construction in progress 41,862,398,752 51,351,836,119 3,065,854,836 14,057,610,338 6,890,042,420 9,123,672,118 126,351,414,583
Transfer from tangible fixed assets - 1,542,271,353 - - - - 1,542,271,353
Disposals and written off (25,617,584) - (172,548,500) - - - (198,166,084)
Amortisation for the year (82,664,939,152) (346,933,167,444) (32,006,419,509) (5,374,498,197) (15,360,982,099) (65,033,613,894) (547,373,620,295)
Reclassifications (1,160,525,889) 627,810,386 63,650,569,033 1,102,486,149 (371,384,158) (63,848,955,521) -
Other movements - (56,098,110) - - - (38,623,818) (94,721,928)

Closing balance 125,987,492,909 279,843,134,786 774,566,962,748 231,816,052,559 113,611,568,905 124,913,411,183 1,650,738,623,090

At 31 December 2019, long-term prepaid expenses with the net book value of VND29,361 million (1/1/2019: VND36,304 million) were pledged with banks
as security for loans granted to the Group.

127
HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

16. DEFERRED TAX ASSETS

Deferred tax assets were recognised in respect of the following items:

31/12/2019 1/1/2019
VND VND
Accrued expenses 82,643,228,965 70,387,522,690
Unrealised profits arising on the intra-group sales of
inventories and fixed assets 204,750,794,495 131,616,679,852
Allowance for inventories - 4,090,510,804
Unrealised foreign exchange differences 4,832,664,422 133,183,554

292,226,687,882 206,227,896,900

17. GOODWILL
Lac Thuy Nhon Trach Long Viet
Hoa Phat Energy Breeding Co., Service Trading Construction
JSC Ltd. Co., Ltd. JSC Total
VND VND VND VND VND

Cost
Opening and
closing balance 206,244,396,684 4,367,130,430 195,950,665 59,880,000,000 270,687,477,779
Accumulated
amortisation
Opening balance 177,026,440,494 436,713,048 - 4,990,000,000 182,453,153,542
Amortisation for
the year 20,624,439,672 436,713,048 - 5,988,000,000 27,049,152,720

Closing balance 197,650,880,166 873,426,096 - 10,978,000,000 209,502,306,262

Net book value

Opening balance 29,217,956,190 3,930,417,382 195,950,665 54,890,000,000 88,234,324,237
Closing balance 8,593,516,518 3,493,704,334 195,950,665 48,902,000,000 61,185,171,517

128 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

18. TAXES AND OTHERS PAYABLE TO STATE TREASURY

1/1/2019 Incurred/offset Paid 31/12/2019
VND VND VND VND

Value added tax 74,350,883,643 4,873,968,107,080 (4,915,884,847,428) 32,434,143,295

Special consumption tax 241,999,747 65,634,931,735 (65,580,595,978) 296,335,504
Import-export tax 198,446,246 250,056,568,786 (250,055,557,914) 199,457,118
Corporate income tax 372,463,071,710 1,604,549,422,019 (1,551,743,688,539) 425,268,805,190
Withholding tax 13,619,484,328 104,763,488,972 (106,089,299,322) 12,293,673,978
Personal income tax 3,536,723,610 36,112,026,242 (34,423,096,500) 5,225,653,352
Natural resource taxes 17,029,601,830 124,527,370,151 (139,755,048,416) 1,801,923,565
Land rental - 11,912,234,575 (11,912,234,575) -
Other taxes 69,989,600 103,910,991,310 (103,074,588,194) 906,392,716

481,510,200,714 7,175,435,140,870 (7,178,518,956,866) 478,426,384,718

19. ACCRUED EXPENSES

19.1 Accrued expenses – short-term

31/12/2019 1/1/2019
VND VND
Interest expense 247,399,009,822 134,576,976,320
Electricity expense 53,493,139,586 46,778,473,607
Promotion expense 44,055,822,912 46,566,249,185
Expenses payable to contractor 57,456,841,999 15,622,014,627
Transportation cost 13,083,272,180 10,328,348,793
Salaries and bonuses 4,082,998,879 3,799,166,005
Others 10,206,212,033 3,962,902,621

429,777,297,411 261,634,131,158

19.2 Accrued expenses – long-term

31/12/2019 1/1/2019
VND VND

Accruals for cost of industrial zone land 403,328,992,030 433,100,573,027

Accruals for infrastructure maintenance 24,000,000,000 18,000,000,000

427,328,992,030 451,100,573,027

HOA PHAT’S INTERNAL STRENGTH 129

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

20. OTHER PAYABLES

20.1 Other payables – short-term

31/12/2019 1/1/2019
VND VND
Payables related to imports of goods - 137,111,395,750
Sales discounts 32,161,933,755 46,513,739,461
Trade union fee, social and health insurance 37,005,877,757 26,193,773,064
Deposits received for lease of land in industrial parks 45,531,873,259 18,945,712,017
Surplus of assets awaiting resolution 1,571,432,489 9,640,059,107
Dividends payable 8,222,744,202 6,231,445,088
Others 112,897,885,777 55,433,655,774

237,391,747,239 300,069,780,261

20.2 Other payables – long-term

31/12/2019 1/1/2019
VND VND

Apartment maintenance fund 38,791,080,145 24,620,141,400

Others 19,596,030,636 11,860,679,599

58,387,110,781 36,480,820,999

130 ANNUAL REPORT 2019

 HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED) Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

21. BORROWINGS
21.1 Short-term borrowings

HOA PHAT’S INTERNAL STRENGTH

1/1/2019 Movement during the year 31/12/2019
Amount within Amount within
Carrying amount Addition Decrease Carrying amount
repayment capacity repayment capacity
VND VND VND VND
VND VND

Short-term borrowings 11,186,394,038,747 11,186,394,038,747 54,502,367,067,436 (51,537,441,904,159) 14,151,319,202,024 14,151,319,202,024

Current portion of
long-term borrowings
(Note 21.2) 308,323,354,580 308,323,354,580 2,736,320,268,363 (358,309,354,580) 2,686,334,268,363 2,686,334,268,363

11,494,717,393,327 11,494,717,393,327 57,238,687,335,799 (51,895,751,258,739) 16,837,653,470,387 16,837,653,470,387

At 31 December 2019, short-term borrowings included borrowings in VND and USD with carrying amounts of VND12,403,659 million and VND1,747,660
million (1/1/2019: VND9,565,188 million and VND1,621,206 million), respectively.

At 31 December 2019, short-term borrowings in VND and USD with the carrying amounts of VND8,515,119 million and VND1,463,079 million (1/1/2019:
VND7,851,798 million and VND1,204,271 million), respectively, are secured by cash equivalents (Note 5), inventories (Note 9), tangible and intangible
fixed assets (Notes 10 and 11), construction in progress of some projects of the Group (Note 14), long-term prepaid expenses (Note 15.2), the right to the
receivables and a number of Hoa Phat Group Joint Stock Company (“HPG”) shares owned by a number of the members of the Board of Management of
the Company (related parties).

The remaining short-term borrowings were unsecured.

The borrowings denominated in VND bore interest at rates ranging from 2.80% to 6.20% (2018: from 4.3% to 9.6%) per annum. The borrowings denominated
in USD bore interest at rates ranging from 3.19% to 5.50% (2018: from 3.24% to 4.1%) per annum.

131
HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

21.2 Long-term borrowings

31/12/2019 1/1/2019
VND VND

Long-term borrowings 22,528,433,488,083 13,119,320,334,552

Repayable within twelve months (Note 21.1) (2,686,334,268,363) (308,323,354,580)

Repayable after twelve months 19,842,099,219,720 12,810,996,979,972

Terms and conditions of outstanding long-term borrowings were as follows:

Year of
Currency maturity 31/12/2019 1/1/2019
VND VND
Vietnam Joint Stock Commercial Bank for
Industry and Trade – Hanoi Branch (*) VND 2025 8,732,692,162,550 7,245,457,423,257
Joint Stock Commercial Bank For Foreign
Trade of Viet Nam – Thanh Cong branch (*) VND 2025 7,806,883,295,815 3,400,291,289,471
BNP Parisbas Bank (***) USD 2023 4,640,000,000,000 699,000,000,000
HSBC Bank (Vietnam) Ltd. (**) VND 2022 736,327,292,253 898,829,176,016
ANZ Bank (Vietnam) Ltd. (*) VND 2020 169,970,721,924 339,941,443,852
Vietnam Joint Stock Commercial Bank for
Industry and Trade – Dong Da Branch (*) VND 2020 2,162,000,000 163,948,792,415
Vietnam Joint Stock Commercial Bank for
Industry and Trade – Hoang Mai Branch (*) VND 2021 22,412,209,541 48,512,209,541
HSBC Bank (Vietnam) Ltd. (*) VND 2024 137,731,806,000 -
Environmental Protection Fund VND 2025 23,154,000,000 23,340,000,000
Borrowings from individuals VND 2020 257,100,000,000 300,000,000,000

22,528,433,488,083 13,119,320,334,552

(*) These long-term borrowings are secured by certain inventories (Note 9), tangible and intangible fixed
assets (Notes 10 and 11), construction in progress of some projects of the Group (Note 14).

(**) This long-term borrowing is guaranteed by a company within the Group.

(***) This loan has a limit of USD200 million from BNP Paribas Bank– Singapore Branch that acts as the
representative of the lenders. This loan is secured over the debt payment account at BNP Paribas Bank – Hanoi
Branch and is guaranteed by two companies within the Group.

The remaining long-term borrowings are unsecured.

The long-term borrowings in VND bore interest rates ranging from 2.60% to 11% (2018: from 4.59% to 11%)
per annum. The long-term borrowings in USD bore interest at LIBOR + 2.05% per annum.

132 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

22. PROVISIONS

Warranties Environmental restoration Total

VND VND VND

Opening balance 14,272,558,249 10,204,421,672 24,476,979,921

Provision made during the year 4,315,764,072 500,394,319 4,816,158,391
Provision used during the year (180,896,471) - (180,896,471)
Provision reversed during the
year (5,587,381,372) - (5,587,381,372)

Closing balance 12,820,044,478 10,704,815,991 23,524,860,469

Current 3,111,122,885 - 3,111,122,885

Non-current 9,708,921,593 10,704,815,991 20,413,737,584

23. BONUS AND WELFARE FUND

This fund is established by appropriating from net profit after tax as approved by shareholders at Gener-
al Meeting of Shareholders. This fund is used to pay bonus, welfare and allowance to the Company’s and
subsidiaries’ Board of Management, Board of Directors and employees in accordance with the Group’s
bonus and welfare policies. Movements of bonus and welfare fund during the year were as follows:

2019 2018
VND VND
Balance at the beginning of the year 761,403,536,738 705,690,675,557
Appropriation during the year 399,055,995,494 361,741,289,236
Utilisation during the year (353,855,155,830) (306,028,428,055)

Balance at the end of the year 806,604,376,402 761,403,536,738

HOA PHAT’S INTERNAL STRENGTH 133

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

24. CHANGES IN OWNERS’ EQUITY

Share capital Share premium Treasury shares Foreign

VND VND VND exchange
differences
VND

Balance at 1/1/2018 15,170,790,000,000 3,202,198,967,068 (1,693,270,000) -

Net profit for the year - - - -

Payment of dividends in
the form of shares 6,068,281,660,000 - - -
Increase due to
acquisition of a
subsidiary - - - -
Withdrawal of bonus
shares to employees as
treasury shares - - (370,000,000) -
Reissuance of treasury
shares - 9,361,449,202 2,063,270,000 -
Appropriation to bonus
and welfare fund - - - -
Appropriation to
investment and
development fund - - - -
Dividends paid by
subsidiaries to non-
controlling shareholders - - - -
Effect of reporting
currency translation - - - 276,819,257
Other movements - - - -

Balance at 31/12/2018 21,239,071,660,000 3,211,560,416,270 - 276,819,257

134 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Investment and Retained profits Non-controlling interest Total

development fund VND VND VND
VND

518,641,612,156 13,397,029,077,196 110,613,825,490 32,397,580,211,910

- 8,573,014,210,414 27,536,495,813 8,600,550,706,227

- (6,068,281,660,000) - -

- - 120,000,000 120,000,000

- 370,000,000 - -

- - - 11,424,719,202

- (360,445,489,236) (1,295,800,000) (361,741,289,236)

400,000,000,000 (400,000,000,000) - -

- - (10,013,052,081) (10,013,052,081)

- - - 276,819,257
- (15,248,274,469) - (15,248,274,469)

918,641,612,156 15,126,437,863,905 126,961,469,222 40,622,949,840,810

HOA PHAT’S INTERNAL STRENGTH 135

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Share capital Share premium Treasury shares Foreign

VND VND VND exchange
differences
VND

Balance at 1/1/2019 21,239,071,660,000 3,211,560,416,270 - 276,819,257

Contributed capital - - - -
Net profit for the year - - - -
Payment of dividends
in the form of shares
(Note 26) 6,371,669,490,000 - - -

Appropriation to
bonus and welfare
fund - - - -
Appropriation to
investment and
development fund - - - -
Dividends paid by
subsidiaries to
non-controlling
shareholders - - - -
Effect of reporting
currency translation - - - 288,715,737
Other movements - - - -

Balance at 31/12/2019 27,610,741,150,000 3,211,560,416,270 - 565,534,994

136 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Investment and Retained profits Non-controlling interest Total

development fund VND VND VND
VND

918,641,612,156 15,126,437,863,905 126,961,469,222 40,622,949,840,810

- - 85,000,000 85,000,000
- 7,527,442,867,874 50,805,368,355 7,578,248,236,229

- (6,371,669,490,000) - -

- (399,055,995,494) - (399,055,995,494)

5,000,000,000 (5,000,000,000) - -

- - (14,638,158,250) (14,638,158,250)

- - - 288,715,737
- (1,241,495,337) - (1,241,495,337)

923,641,612,156 15,876,913,750,948 163,213,679,327 47,786,636,143,695

HOA PHAT’S INTERNAL STRENGTH 137

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

25. SHARE CAPITAL

The Company’s authorised and issued share capital are;

31/12/2019 1/1/2019
Number of Number of
VND VND
shares shares
Authorised share
capital 2,761,074,115 27,610,741,150,000 2,123,907,166 21,239,071,660,000

Issued share
capital
Ordinary shares 2,761,074,115 27,610,741,150,000 2,123,907,166 21,239,071,660,000

Shares in
circulation
Ordinary shares 2,761,074,115 27,610,741,150,000 2,123,907,166 21,239,071,660,000

All ordinary shares have a par value of VND10,000. Each share is entitled to one vote at meetings of
the Company. Shareholders are entitled to receive dividend as declared from time to time. All ordinary
shares are ranked equally with regard to the Company’s residual assets.

Movements of share capital during the year were as follows:

2019 2018
Number of Par value Number of Par value
shares VND shares VND
Opening balance 2,123,907,166 21,239,071,660,000 1,516,909,673 15,169,096,730,000
Payment of
dividends in
the form of shares 637,166,949 6,371,669,490,000 606,828,166 6,068,281,660,000
Withdrawal of
bonus shares to
employees as
treasury shares - - (37,000) (370,000,000)
Reissuance of
treasury shares - - 206,327 2,063,270,000

Closing balance 2,761,074,115 27,610,741,150,000 2,123,907,166 21,239,071,660,000

138 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

26. DIVIDENDS
On 29 March 2019, the Company’s General Meeting of Shareholders passed the resolution on the
distribution of 2018 dividends to the shareholders in the form of shares at the rate of 30% (shareholders
will receive 3 additionally-issued shares for every 10 ordinary shares they own). This dividend payment
scheme was approved for execution by the Company’s Board of Management in the resolution dated 9
May 2019 and executed during the second Quarter of 2019.

27. OFF BALANCE SHEET ITEMS

27.1 Foreign currencies
31/12/2019 1/1/2019
Original VND Original VND
currency equivalent currency equivalent

United State Dollars (“USD”) 19,286,141 445,702,718,510 22,027,561 511,742,354,766

Euro (“EUR”) 1,922 49,637,572 1,802 47,108,949
Japanese Yen (“JPY”) 3,465,300 727,713,000 - -
Australian Dollar (“AUD”) 417,914 6,723,818,346 - -

453,203,887,428 511,789,463,715

27.2 Capital expenditure commitments

At the reporting date, the Group had the following outstanding capital commitments approved but
not provided for in the consolidated balance sheet:

31/12/2019 1/1/2019
VND VND

Approved but not contracted 74,306,833,278 -

Approved and contracted 666,931,828,182 11,681,964,854,599

741,238,661,460 11,681,964,854,599

27.3 Lease
At the reporting date, the Group had the following future minimum lease payments under non-cancellable
operating leases:

31/12/2019 1/1/2019
VND VND

Within one year 32,007,469,097 23,967,816,010

Within two to five years 133,074,077,652 95,871,264,041
More than five years 269,888,924,130 125,107,937,387

434,970,470,879 244,947,017,438

HOA PHAT’S INTERNAL STRENGTH 139

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

28. REVENUE FROM SALES OF GOODS AND PROVISION OF SERVICES

Total revenue represents the gross value of goods sold and services rendered exclusive of value added
tax. Net revenue comprised:

2019 2018
VND VND

TOTAL REVENUE
• Sales 62,523,707,011,126 54,925,454,767,158
• Services 613,633,954,877 210,022,988,666
• Revenue from sublease of leasehold land 738,144,858,625 449,966,515,633
• Rental income from investment property 54,280,124,794 40,744,093,902
• Sales of real estate 711,872,407,016 950,772,479,524
• Others 36,268,219,206 3,462,850,200

64,677,906,575,644 56,580,423,695,083
LESS REVENUE DEDUCTIONS
• Sales discounts (957,210,485,501) (704,201,282,232)
• Sales allowances (2,425,393,504) (714,583,730)
• Sales returns (60,078,022,848) (39,049,449,362)

(1,019,713,901,853) (743,965,315,324)

63,658,192,673,791 55,836,458,379,759

29. COST OF SALES

2019 2018
VND VND

Finished goods and merchandise goods sold 51,076,008,928,634 43,262,052,605,460

Services provided 486,688,612,434 136,039,024,534
Cost of leasehold land subleased 421,970,093,151 296,004,982,957
Cost of investment property held to earn rental 18,923,757,872 17,912,392,359
Cost of real estate sold 463,656,461,976 523,208,991,393
Other costs 10,025,936,248 1,521,935,744
Allowance for inventories (4,453,338,661) (71,113,783,762)

52,472,820,451,654 44,165,626,148,685

140 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

30. FINANCIAL INCOME

2019 2018
VND VND

Interest income from deposits 276,783,283,933 163,434,005,510

Realised foreign exchange gains 177,270,502,599 115,851,955,886
Unrealised foreign exchange gains 15,303,987,880 7,311,244,552
Payment discounts - 3,963,967,200
Other financial income 1,696,057,599 3,847,097,593

471,053,832,011 294,408,270,741

31. FINANCIAL EXPENSES

2019 2018
VND VND

Interest expense 936,710,218,359 539,861,243,640

Payment discounts 12,037,994,693 13,562,300,498
Realised foreign exchange losses 188,554,340,708 165,195,158,549
Unrealised foreign exchange losses 39,487,502,736 37,222,114,032
Other financial expenses 4,885,654,420 16,476,345,182

1,181,675,710,916 772,317,161,901

32. SELLING EXPENSES

2019 2018
VND VND

Staff costs 105,060,273,041 90,304,394,644

Depreciation 24,256,179,838 23,778,051,778
Warranty expenses 9,226,513,057 7,613,411,168
Transportation expenses 305,033,724,481 238,679,725,659
Advertising expenses 108,229,175,275 60,566,399,339
Promotion expenses 1,807,663,244 9,056,295,407
Export expenses 133,011,396,233 100,146,389,143
Outside services and other selling expenses 186,708,659,519 146,664,554,121

873,333,584,688 676,809,221,259

HOA PHAT’S INTERNAL STRENGTH 141

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

33. GENERAL AND ADMINISTRATION EXPENSES

2019 2018
VND VND

Goodwill amortisation 27,049,152,720 26,051,152,720

Staff costs 227,158,953,782 196,492,766,190
Depreciation expenses 53,200,254,814 40,289,154,302
Outside services and other general and administration
expenses 261,597,444,406 181,191,912,611

569,005,805,722 444,024,985,823

34. OTHER INCOME

2019 2018
VND VND

Gain from disposals of fixed assets and construction in

progress 19,930,474,713 2,047,287,701
Income from sales of electricity, water and
rendering services 563,556,916,803 430,657,845,942
Compensation received from other parties 25,307,799,110 5,012,698,203
Others 48,885,740,851 51,138,756,190

657,680,931,477 488,856,588,036

35. OTHER EXPENSES

2019 2018
VND VND

Loss on disposals of fixed assets and construction in

progress 9,097,251,567 52,620,505,786
Costs of electricity, water sold and services rendered 560,414,088,234 416,094,814,602
Other expenses 22,487,107,497 21,157,528,178

591,998,447,298 489,872,848,566

142 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

36. PRODUCTION AND BUSINESS COSTS BY ELEMENT

2019 2018
VND VND

Raw material costs included in production costs 43,216,883,256,386 36,585,746,491,178

Staff costs 1,857,975,662,793 1,584,989,943,790
Depreciation and amortisation 2,566,183,420,309 2,259,594,298,268
Outside services 3,775,041,395,046 2,639,853,534,460
Other expenses 3,353,922,546,681 3,631,779,099,564

37. INCOME TAX

37.1 Recognised in the consolidated statement of income

2019 2018
VND VND

Current corporate income tax expense (“CIT”)

Current year 1,596,527,974,235 1,455,876,632,228
Additional corporate income tax for prior year 6,779,952,445 50,443,455,323

1,603,307,926,680 1,506,320,087,551

Deferred tax benefit

Origination and reversal of temporary differences (84,894,039,523) (35,797,921,476)

Income tax expense 1,518,413,887,157 1,470,522,166,075

HOA PHAT’S INTERNAL STRENGTH 143

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

37.2 Income tax expense

2019 2018
VND VND

Accounting profit before tax 9,096,662,123,386 10,071,072,872,302

Adjustments to increase/(decrease) accounting profit

Non-deductible expenses 52,217,309,060 16,482,132,683
Goodwill amortisation 27,049,152,720 26,051,152,720
Allowance for inventories 17,976,419,050 (47,304,208,908)
Unrealised foreign exchange differences (4,734,516,843) 18,997,010,011
Accrued cost of sales of real estate sold 96,389,167,191 53,447,507,077
Origination and reversal of other temporary differences 499,996,948,997 141,779,316,094
Share of loss from associates (1,431,313,615) -

9,784,125,289,946 10,280,525,781,979
Tax losses brought forward (67,977,454,503) (14,220,505,384)

Current year taxable profit 9,716,147,835,443 10,266,305,276,595

Income tax expense at the Company’s tax rate 1,943,229,567,089 2,053,261,055,319

Tax incentives in subsidiaries (364,948,615,888) (601,511,349,283)
Effect of different tax rates in subsidiaries (5,444,236,159) (5,804,120,081)
Deferred tax assets unrecognised on tax losses of
subsidiaries 23,691,259,193 9,931,046,273
Deferred tax benefit (84,894,039,523) (35,797,921,476)
Additional corporate income tax for prior year 6,779,952,445 50,443,455,323

Income tax expense 1,518,413,887,157 1,470,522,166,075

37.3 Applicable tax rates

Under the terms of the prevailing Law on Corporate Income Tax, the Company has an obligation to
pay the Government income tax at the rate of 20% of taxable profits.

The Group’s subsidiaries have obligations to pay the Government income tax at the rate as defined
in the enacted tax regulations.

38. BASIC EARNINGS PER SHARE

The calculation of basic earnings per share for the year ended 31 December 2019 was based on the profit
attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding
during the year, calculated as follows:

144 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

38.1 Weighted average number of ordinary sharesi

2019 2018
(Number of shares) (Number of shares)
Restated

Issued ordinary shares at the beginning of the year 2,123,907,166 1,516,909,673

Effect of dividends paid in the form of shares
(Note 26) 637,166,949 1,243,995,115

Effect of withdrawal of bonus shares to employees as treasury shares - (37,000)

Reissuance of treasury shares - 129,238

Weighted average number of ordinary shares outstanding during the year 2,761,074,115 2,760,997,026

38.2 Basic earnings per share

2019 2018
VND VND
Restated

Net profit attributable to ordinary shareholders (VND) 7,527,442,867,874 8,573,014,210,414

Weighted average number of ordinary shares
outstanding during the year (Number of shares) 2,761,074,115 2,760,997,026

Basic earnings per share (VND) 2,726 3,105

38.3 Restatement for the weighted average number of ordinary shares and basic earnings per
share for the year ended 31 December 2018
Due to the effect of dividends paid in the form of shares (Note 26), the weighted average number of
ordinary shares and basic earnings per share for the year ended 31 December 2018 were restated as
follows:

Weighted average number of Basic earnings per share

ordinary shares VND

As previously reported 2,123,830,077 4,037

Effect of dividends paid in the form of shares 637,166,949 (932)

As restated 2,760,997,026 3,105

HOA PHAT’S INTERNAL STRENGTH 145

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

39. FINANCIAL INSTRUMENTS

39.1 Financial risk management
(a) Overview
The Group has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring and managing risk.

The Company’s Board of Management oversees how the Board of Directors monitors compliance
with the Group’s risk management policies and procedures and reviews the adequacy of the risk
management framework in relation to the risks faced by the Group.

(b) Risk management framework

The Company’s and its subsidiaries’ Board of Directors has overall responsibility for the
establishment and oversight of the Group’s risk management framework. The Company’s and its
subsidiaries’ Board of Directors are responsible for developing and monitoring the Group’s risk
management policies.

The Group’s risk management policies are established to identify and analyse the risks faced by the
Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect changes in market conditions
and the Group’s activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.

39.2 Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations and arises principally from the Group’s receivables and cash
placed at financial institutions.

Exposure to credit risk

The total of carrying amounts of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was as follows:

Note 31/12/2019 1/1/2019

VND million VND million

Cash at banks and cash equivalents (a) 4,528,334 2,494,390

Held-to-maturity investments - short-term and long-term (b) 1,420,866 3,790,448
Accounts receivable from customers – short-term, loans receivable –
long-term and other short-term and long-term receivables (c) 2,829,322 2,409,298

8,778,522 8,694,136

146 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

(a) Cash at bank and cash equivalents

Cash at bank and cash equivalents of the Group is mainly held with well-known financial institutions.
The Board of Directors does not foresee any significant credit risks from these deposits and does
not expect that these financial institutions may default and cause losses to the Group.

(b) Held-to-maturity investments

Held-to-maturity investments of the Group represent time deposits with well-known financial
institutions. The Board of Directors does not foresee any significant credit risks from these deposits
and does not expect that these financial institutions may default and cause losses to the Group.

(c) Accounts receivable from customers short-term, loans receivable - long-term and other short-
term and long-term receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each
customer. In response to the risk, the Board of Directors of the Company and its subsidiaries has
established a credit policy under which each new customer is analysed individually for creditwor-
thiness before the Group’s standard payment and delivery terms and conditions are offered. Credit
purchase limit is established for each customer, which represents the maximum open amount
without requiring approval from the Board of Directors of the Company and its subsidiaries. The
limit is reviewed annually. No collateral is collected from the customers.

Based on historic default rates, the Board of Directors believes that apart from the amount provid-
ed for as per below, no further allowance for doubtful debts is necessary in respect of the outstand-
ing trade and other receivables at the reporting date.

The aging of trade and other receivables not impaired at the year end is as follows:

31/12/2019 1/1/2019
VND million VND million

Not past due 2,702,958 2,227,459

Past due 0 - 30 days 73,704 54,648
Past due 31 - 180 days 17,469 66,644
Past due more than 180 days 35,191 60,547

2,829,322 2,409,298

Movements in the allowance for doubtful debts during the year were as follows:

2019 2018
VND VND

Opening balance 37,693,842,866 35,984,891,839

Increase in allowance during the year 2,696,967,351 2,928,473,222
Written back and used during the year (3,245,020,085) (1,219,522,195)

37,145,790,132 37,693,842,866

HOA PHAT’S INTERNAL STRENGTH 147

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

39.3 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Group’s reputation.

At the reporting date, the financial liabilities with fixed or determinable payments have the following
contractual maturities including the estimated interest payments:

Carrying Contractual Within 1 – 2 years 2 – 5 years More than 5

amount cash flows 1 year VND million VND million years
VND million VND million VND million VND million

31 DECEMBER 2019
Accounts payable
to suppliers and
other payables 14,762,347 14,762,347 8,090,259 6,672,088 - -
Borrowings 36,679,753 43,515,430 20,655,992 6,820,442 16,038,996 -

51,442,100 58,277,777 28,746,251 13,492,530 16,038,996 -

1 JANUARY 2019
Accounts payable
to suppliers and
other payables 10,872,008 10,872,008 9,213,056 1,658,952 - -
Borrowings 24,305,714 26,853,781 12,255,813 1,255,356 2,374,919 10,967,693

35,177,722 37,725,789 21,468,869 2,914,308 2,374,919 10,967,693

The Group manages its ability to meet the expected operational expenses and servicing its debts by
investing its cash surpluses in term deposits and maintaining several bank facilities from some
domestic banks.

39.4 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates
will affect the Group’s results of operations or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
(a) Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated
in a currency other than VND, the accounting currency of the Group. The currency in which these
transactions primarily are denominated is United States Dollar (“USD”), Euro (“EUR”).

The Group’s exposure to currency risk is managed by keeping the exposure to an acceptable level
by buying or selling foreign currencies at spot rates when necessary.

148 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

Exposure to currency risk

At the reporting date, the Group had the following net monetary asset/(liability) position exposed
to currency risk:

31/12/2019

USD EUR JPY AUD CNY

Cash and cash equivalents 19,286,141 1,922 3,465,300 417,914 -

Accounts receivable from
customers 13,335,794 - - 5,868 -
Accounts payable to
suppliers (253,611,805) (38,585,799) - - (411,442)
Short-term borrowings (72,892,904) - - - -
Long-term borrowings (200,000,000) - - - -

(493,882,774) (38,583,877) 3,465,300 423,782 (411,442)

1/1/2019

USD EUR

Cash and cash equivalents 22,027,561 1,802

Accounts receivable from
customers 16,964,223 -
Accounts payable to
suppliers (213,358,450) (15,950,676)
Short-term borrowings (69,568,540) -
Long-term borrowings (30,000,000) -

(273,935,206) (15,948,874)

The followings are the significant exchange rates applied by the Group:

Exchange rate as at
31/12/2019 1/1/2019
Buying exchange rate of USD/VND 23,110 23,155
Selling exchange rate of USD/VND 23,230 23,300
Buying exchange rate of EUR/VND 25,826 26,311
Selling exchange rate of EUR/VND 26,601 27,179
Buying exchange rate of JPY/VND 210 -
Buying exchange rate of AUD/VND 16,089 -
Buying exchange rate of CNY/VND 3,332 -

HOA PHAT’S INTERNAL STRENGTH 149

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

(b) Interest rate risk

At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments
was:

Carrying amount
31/12/2019 1/1/2019
VND million VND million

Fixed rate financial instruments

Financial assets 4,287,452 4,483,763
Financial liabilities (32,039,753) (23,606,714)

(27,752,301) (19,122,951)

Variable rate financial instruments

Financial liabilities (4,640,000) (699,000)

A change of 100 basis points in interest rates would have increased or decreased the consolidated
net profit of the Group by VND37,120 million (2018: VND5,592 million). This analysis assumes
that all other variables, in particular foreign currency rates, remain constant.

39.5 Fair values

(a) Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the
consolidated balance sheet, are as follows:

150 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

31/12/2019 1/1/2019
Carrying amount Fair value Carrying amount Fair value
VND VND VND VND
million million million million

Categorised as held-to-maturity
investments:
- Held-to-maturity investments
– short-term 1,374,340 1,374,340 3,724,563 3,724,563
- Held-to-maturity investments
– long-term 46,526 (*) 65,885 (*)

Categorised as loans and receivables:

- Cash and cash equivalents 4,544,900 4,544,900 2,515,617 2,515,617
- Accounts receivable from customers
and other receivables – short-term 2,801,604 2,801,604 2,386,996 3,091,875
- Loans receivable – long-term and
other long-term receivable 27,718 (*) 22,302 (*)

Categorised as financial assets

available-for-sale:
- Equity investments in other entities 700 (*) 700 (*)

Categorised as financial liabilities at

amortised cost:
- Accounts payable to suppliers and
other payables – short-term (8,090,259) (8,090,259) (9,213,056) (9,213,056)
- Accounts payable to suppliers,
accrued expenses and
other payables – long-term (6,672,088) (*) (1,658,952) (*)
- Borrowings (36,679,753) (*) (24,305,714) (24,298,044)

(42,646,312) (26,461,659)

(b) Basis for determining fair values

Cash and cash equivalents, held-to-maturity investments – short-term, accounts receivable from customers –
short-term and other short-term receivables and short-term non-derivative financial liabilities

The fair value of cash and cash equivalents, held-to-maturity investments – short-term, accounts receivable
from customers – short-term and other short-term receivables and short-term non-derivative financial
liabilities approximates the carrying value due to the short-term nature of these financial instruments. The
fair value of these instruments is determined for disclosure purpose only.

HOA PHAT’S INTERNAL STRENGTH 151

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

(*) The Group has not determined fair values of these financial instruments for disclosure in the
consolidated financial statements because information about their market prices is not available
and there is currently no guidance on determination of fair value using valuation techniques under
Vietnamese Accounting Standards or the Vietnamese Accounting System for Enterprises. The fair
values of these financial instruments may differ from their carrying amounts.

(c) Hedging
The Group adopts a policy to ensure that a certain percentage of its exposure to changes in interest
rates on borrowings is on a fixed rate basis. Interest rate swaps have been entered into to achieve an
appropriate mix of fixed and floating rate exposure within the Group’s policy. At 31 December 2019,
the Group had interest rate swaps with a notional contract amount of VND4,640,000 million
(1/1/2019: Nil). The Group does not apply hedge accounting.

40. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

In addition to related party balances disclosed in other notes to the consolidated financial statements,
the Group had the following significant transactions with related parties during the year:

Transaction value
2019 2018
VND VND
Members of Supervisory Board, Board of Directors and
Board of Management 7,200,600,000 8,385,499,000
Salary and Bonus 40,812,000,000 2,504,000,000
Allowances

41. NON-CASH INVESTING AND FINANCING ACTIVITIES

2019 2018
VND VND

Payment of dividends in the form of shares 6,371,669,490,000 6,068,281,660,000

152 ANNUAL REPORT 2019

HOA PHAT GROUP JOINT STOCK COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)
Form B 09 – DN/HN
(Issued under Circular No. 202/2014/TT-BTC
dated 22 December 2014 of the Ministry of Finance)

42. CORRESPONDING FIGURES

Corresponding figures as at 1 January 2019 were derived from the balances and amounts reported in the
Company’s consolidated financial statements as at and for the year ended 31 December 2018.

16 March 2020

Prepared by: Approved by:

Nguyen Thi Thu Trang Pham Thi Kim Oanh Tran Tuan Duong
General Accountant Chief Accountant General Director

HOA PHAT’S INTERNAL STRENGTH 153