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Analysis of Financial Report of SABECO for the year ended

2019
Financial Report Analysis (Học viện Ngân hàng)

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TABLE OF CONTENTS
1. Overview about Saigon Beer - Alcohol - Beverage Corporation (SABECO) 2
2. Industry analysis 3
2.1. Strength 3
2.1.1. Economic environmental factors 3
2.1.2. Cultural & social factors 4
2.2. Weakness 5
2.2.1. Rivals 5
2.2.3. Product expense 6
3. Balance sheet analysis 7
3.1. Total assets analysis 7
3.2. Total resources analysis 9
4. Income statement analysis 12
5. Cash flows statement analysis 16
5.1. Evaluation of the sources and uses of cash 16
5.1.1. Major sources and use 16
5.1.2. Primary determinants of operating cash flow 16
5.1.3. Primary determinants of investing cash flow 17
5.1.4. Primary determinants of financing cash flow 17
5.2. Common size analysis of the statement of cash flows 18
5.3. Free cash flow to the firm and free cash flow to equity 19
6. Financial ratios analysis 21
6.1. Activity ratios analysis 21
6.2. Liquidity ratios analysis 21
6.3. Solvency ratios analysis 22
6.4. Profitability ratios analysis 22
7. Conclusion 24

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1. Overview about Saigon Beer - Alcohol - Beverage Corporation (SABECO)

Vietnamese consumers are familiar with the brand: Saigon Beer (or Bia Saigon)
of Saigon Beer-Alcohol-Beverage Corporation (SABECO). Saigon Beer is leading
brand name in Vietnam beer industry with about 140 years of developing. Saigon Beer
is recognized as National Brand and also honored to be the 351st member in Berlin
Beer Academy – one of the cradles of global beer culture. In 2017, Saigon Beer has
been over 142-year original history, 40-year brand building and development. Since
that 142 milestones, the yellow beer bubbles flow has continuously kept up the future
way, always made Vietnamese proud of their products.
With the slogan “Burst into internal strength before the games “, the unique taste
of Saigon Beer is the inspiring taste combined with the spirit of Saigonese’s generosity
and the rich of the Southern land, making it an in dispensable part of everyday life.
With 2 bottle of 610 ml Larue bottle and 330 ml bottle of beer in the first takeover
period. Until now, Saigon beer has developed 8 type of products such as Saigon Lager
450 bottle, Saigon Export Beer bottle, Saigon Special bottle, Saigon Lager 355 bottle,
333 Premium, 333 beer can, Saigon Special can, Saigon Lager can.
Over 145 years of establishment and development, with many difficulties and
challenges; up to now, although the market has appeared many famous beer brands in
the world, Saigon Beer and Beer 333 are still Vietnam's leading beer market in
Vietnam, on the way to conquer the markets such as Germany, the US, Japan, the
Netherlands and so on.
SABECO not only appreciates Vietnamese cuisine culture but also commits to
develop Vietnam beverage industry to World standards. Their business philosophy
about continuous improvement is “We are not satisfied with present and are always
dreaming of rising, learning, creating, and innovating to meet constantly changing
needs. Continuous learning, creativity and innovation is our style.” The company
advances the life quality through the provision of high quality, safe and healthy
beverage products and guarantees to bring the essential benefits to shareholders,
customers, partners, employees and society.

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2. Industry analysis
2.1. Strength
2.1.1. Economic environmental factors
The economic environment performs an important role within the movement and
development of the market. Its factors, such as economic growth or inflation, affect
purchasing power, consumer demand and therefore additionally directly have an
impact on business activities of the company. Understanding the economic
environment enables the employer to apprehend the needs of consumers and their
capacity to spend on the company’s products.

Vietnam’s GDP growth rate from 2010 to 2019 (in %) (Source: WorldBank)
In 2019, Vietnam's GDP growth reached 7.017%, exceeding the goal of 6.7% of
the National Assembly within the identical year. Moreover, in 2020, the minimum
wages are predicted to increase to VND4.18 million (US$180) from VND 2.92 million
(US$126) in 2019. In 2019, the minimum wage was increased by an average of 5.3%
by Vietnam’s National Wage Council. While the minimum wages in 2018 were
increased by 6.5 percent which ranged from VND 2.76 million (US$118) to VND 3.98
million (US$171) in 2017. With the above GDP growth, the demands for goods,

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services and product quality also increase, so the company need to expand the
producing scale to adapt with the current economic conditions.
2.1.2. Cultural & social factors
The current population of Vietnam is over 89 million and has a young population
structure which is very convenient for the consumption of SABECO products. Beer is
a beverage product in Vietnam whose output depends a lot on people's income as well
as the development of the economy. Along with the global economic crisis and a
slump, the decrease in economic growth has greatly affected beer consumption.
However, the people's living standard is increasing, so the budget is also used for
spending increase, then they are willing to spend more.
2.1.3. Natural factors
Vietnam has an important position in the East Sea, which is easy to trade with
other countries. The climate is deeply differentiated, affecting the inputs and
consumption of each season. Besides, Vietnam is a country with a hot climate so the
people here love to have a cool drink that reduce the summer heat. This has created
advantages for SABECO to develop its own beer brand.
2.1.4. Technological factors
In today's competitive era, product quality is a must Every business must have if
it wants to exist. Therefore, in order to be successful, it must be created outstanding
difference. Using modern production technology will help businesses achieve their
goals on. The investment in advanced technology and techniques in the world will
increasingly shorten the gap between Vietnam and developed countries.
Stemming from the need to improve the actual labor quality, the provision of
managerial staff Ministry of technicians and skilled technical workers for SABECO
system and for the society, SABECO boldly formulated a project to establish a
Training Center - Research on Beverage Technology and SABECO product submitted
to the Ministry of Industry and Trade and approved by the Ministry on 4/5/2007.
Saigon Beer - Alcohol - NGK Company (SABECO) always puts the top priority
on ensuring the quality, hygiene and safety of food in the production process of its
products. Additives and processing aids are always closely inspected by the
Corporation and must be certified by the Ministry of Health for use, or in the "List of
permitted additives for use in food". The water source used for brewing and brewing
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beer is the city's tap water that is treated by the system to ensure the standards of
brewing water and food hygiene and safety. The system of modern closed machinery
and equipment as well as the strict control in the production process will absolutely
ensure that the semi-finished products and the finished products always meet the
requirements of microbiological criteria. Bottles, cans, bottle caps, and cans, before
being put into the filling process, are also processed and checked to ensure that there
are no microorganisms entering the product. The Corporation has made the
announcement of quality standards, food hygiene and safety for its products and sent
every 6 months/time to send finished samples to check physicochemical and
microbiological criteria in China. Mind technical quality measurement standards.
2.2. Weakness
Beside the number of strengths, SABECO also has some weaknesses, which
must be improved to compete with others.
2.2.1. Rivals
Competitors have continued to invest heavily in marketing and sales to increase
market share in SABECO’s main markets. The mainstream beer segment which is the
strength of SABECO face fierce competition from high-end players.
In addition, the current consumption trend has many changes: The trend is to
consume more premium beer products for the past years because of the increasing
average income while SABECO is still lacking competitive products in the high-end
segment; High-income young people tend to consume foreign beer; Consumers are
increasingly concerned about health so they tend to consume more non-alcohol and
good-for health beverage products. These may lead to a change in competitive
dynamics in the beer market. Despite being in the leading position in Vietnam market,
SABECO has prepared plans for this market risk by improving product quality,
promoting R&D to diversify products and further increase the strength of Bia Saigon
brand in order to meet increased competition.
2.2.2. Product quality
The first one is the taste of beer is not delicious compared to competitive brands.
In specifically, Heineken and Tiger are more delicious than some kinds of SABECO’s
products. The second one is the design of package is not attractive in comparison to
Heineken and Tiger. Additionally, the most important weakness is behind in e-
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presence, which would obviously miss the amount of opportunities in sale and
promotion.
2.2.3. Product expense
Firstly, because of the characteristic of doing fuel business is a monopoly so
that the price of fuel is always increasing. Thus, the costs of deliveries for beer are also
increasing. This is a disadvantage effect on strategy business campaigns.
Secondly, Vietnam has joined to WTO so that SABECO have to compete with
many international competitive companies such as Budweiser. This could make a
decrease in prices or an increase in expenses of advertisement.
Lastly, if there were natural disasters taken place, the raw materials would be
affected by increasing the prices.
2.2.4. Pandemic and Vietnam Alcohol Policy
COVID-19 has dramatically reduced beer production and consumption around
the world, hitting craft and independent brewers extremely hard. Almost everywhere,
taprooms and pubs that provided a base of support for the majority of smaller
businesses have been shuttered or reduced to carry-out and delivery operations only.
And SABECO is not an exception when severely affected by the effects of Corona
virus. During the period, revenue dropped sharply, thanks to the sudden increase in
financial revenue, making profit lower. Pandemic makes people have social distance,
no meeting or event in public; additionally, they learn to live healthier by avoiding
alcohol and give preference to natural products. It can be seen that SAB's plummeting
business results are double affected by Decree 100 on restricting beer - alcohol when
participating in traffic, as well as the Covid-19 translation that has changed
consumption behavior.

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3. Balance sheet analysis

3.1. Total assets analysis

2018/2017 2019/2018
% %
Amount changed Amount changed
changed changed
Current assets 1,003,840,728,56 4,474,434,306,41
7.33% 30.46%
8 4
Cash and cash
198,792,767,095 4.66% (351,506,938,500) (7.87%)
equivalents
Short-term financial 4,849,038,329,50
985,387,189,495 15.02% 64.28%
investments 9
Short-term accounts
50,304,243,588 7.03% (197,022,219,086) (25.73%)
receivable
Inventories (189,780,876,441) (9.47%) 153,383,529,013 8.46%
Long-term assets (650,787,046,265) (7.82%) 121,298,995,418 1.58%
Fixed assets (441,009,401,478) (8.81%) 118,349,376,093 2.59%
Total assets 4,595,733,301,83
353,053,682,303 1.60% 20.55%
2
SABECO’s horizontal analysis table of total assets from 2017 to 2019 (in VND and %)
It is clear from the given table that current asset and total assets categories
showed an upward trend, while long-term assets saw a fluctuation between 2017 and
2019. First and foremost, 2017 is base to compare with 2018, as can be seen that
SABECO’s total asset went up 353,053,682,303 VND (1.60%), since the rate of
increase in current assets was faster than the rate of decrease in long-term assets. The
major factors for substantial growth of current assets were cash equivalents and short-
term financial investments, while the number of inventories declined slightly.
Therefore, SABECO took advantages of managing money through bank and had a
large held-to-maturity investments to make more benefit inflows to the enterprise. In
constrast, the amount of long-term assets dropped because the increase speed in
accumulated depreciation of fixed assets was much more than that in cost.
Moving to the change between 2018 and 2019, there was a soar in SABECO’s
total assets (4,595,733,301,832 VND ~ 20.55%) that came from the rise of both
current assets and long-term assets. To be more detail, short-term financial
investments, inventories and fixed assets saw an upward, which means the enterprise
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might extend the firm’s size. In addition, short-term accounts receivable reduced by
197,022,219,086 VND might approve that SABECO collected cash from credit sales
at the end of 2019.

2017 2018 2019

31/12/2017 % 31/12/2018 % 31/12/2019 %
Current 62.17 65.68 71.08
13,686,327,476,651 14,690,168,205,219 19,164,602,511,633
assets % % %
Short-term
29.79 33.73 45.96
financial 6,558,801,231,269 7,544,188,420,764 12,393,226,750,273
% % %
investments
Inventories 2,003,535,067,335 9.10% 1,813,754,190,894 8.11% 1,967,137,719,907 7.30%
Long-term 37.83 34.32 28.92
8,327,361,633,259 7,676,574,586,994 7,797,873,582,412
assets % % %
Tangible 18.37 16.16 13.88
4,044,747,362,200 3,614,850,885,054 3,743,642,558,190
fixed assets % % %
Intangible
963,353,118,472 4.38% 952,240,194,140 4.26% 941,797,897,097 3.49%
fixed assets
Total assets 22,013,689,109,910 100% 22,366,742,792,213 100% 26,962,476,094,045 100%

SABECO’s vertical analysis table of total assets from 2017 to 2019 (in VND and %)
Looking at the table above, it can be seen that the percentage of current assets
took up more than a half in the proportion of total assets over the period from 2017 to
2019, which showed that SABECO’s assets had high liquidity. It is noticeable that
while this figure showed an increase in amount after 3 years, as a percentage of total
assets, it also witnessed a growth at the same time period. The reason for this is
because long-term assets data dropped moderately during the 3 years in term of
amount and proportion. Compared to the total assets, the percentage of tangible assets
and intangible assets experienced a downturn of 4.49% and 0.89% respectively during
2017 – 2019.
The proportion of SABECO’s receivables as well as their inventories slightly
fell in the period, which may indicate that they performed well in collecting cash and
selling products. The company also showed some interest in investing activities, as
their short-term financial investments, which account for 29.79% of total assets in
2017, went up after 3 years.

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3.2. Total resources analysis

2018/2017 2019/2018
% %
Amount changed Amount changed
changed changed
Current (1,475,887,671,172
(19.94%) 162,133,120,656 2.74%
liabilities )
Other short-term (1,550,642,172,586
(58.96%) (190,682,821) (0.02%)
payables )

Long-term
137,562,220,254 71.80% 469,258,692,981 142.57%
liabilities
Owner's equity 3,964,378,888,19
1,691,379,133,221 11.73% 24.61%
5
Retained profits 3,757,818,886,19
1,649,873,682,852 28.33% 50.28%
4
Total resources 4,595,733,301,83
353,053,682,303 1.60%
20.55%
2
SABECO’s horizontal analysis table of total resources from 2017 to 2019
(in VND and %)
Like total assets, SABECO’s total resources saw an upward trend throughout
the studied period. In particular, total resources rose by 353 billion VND (1.60%) from
2017 to 2018, as the growth of long-term liabilities and owner’s equity were greater
than the fall of current liabilities. The reason for the decline in current liabilities in the
first two years mainly came from other short-term payables of 1,550,642,172,586
VND, which means in 2018 it decreased 58.96% compared to 2017. However, the
amount of retained profits increased sharply by 1,649,873,682,852 VND, which was
the most significant rise between 2017 and 2018 and this covered the negative of
current liabilities and make total resources positive. Overall, during 2018, SABECO
had financial surplus to pay off short-term debts and at the same time made a profit,
this is a signal that the business operated effectively.
Comparing the figure between the end of 2018 and 2019, it can be seen that all
total indicators increased and the largest raise was still retained profits of about 3.8
trillion VND from 7,473,777,581,426 VND to 11,231,596,467,620 VND, this figure
was even higher than the previous period.
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2017 2018 2019

31/12/2017 % 31/12/2018 % 31/12/2019 %
Current 33.62 26.49 22.58
7,401,584,603,555 5,925,696,932,383 6,087,830,053,039
liabilities % % %
Payable to
2,020,399,662,484 9.18% 2,027,262,167,712 9.06% 2,427,067,853,887 9.00%
suppliers
Taxes
1,209,757,064,447 5.50% 1,100,614,318,513 4.92% 855,960,013,165 3.17%
payables
Other short-
term 2,630,180,684,051 11.95% 1,079,538,511,465 4.83% 1,079,347,828,644 4.00%
payables
Long-term
191,578,071,407 0.87% 329,140,291,661 1.47% 798,398,984,642 2.96%
liabilities
Owner's 14,420,489,034,94 65.51 72.03 20,076,247,056,36 74.46
16,111,868,168,169
equity 8 % % 4 %
Share capital 6,412,811,860,000 29.13% 6,412,811,860,000 28.67% 6,412,811,860,000 23.78%
Retained
5,823,903,898,574 26.46% 7,473,777,581,426 33.41% 11,231,596,467,620 41.66%
profits
Total 22,013,689,109,91 22,366,742,792,21 26,962,476,094,04
100% 100% 100%
resources 0 3 5
SABECO’s vertical analysis table of total of resources from 2017 to 2019
(in VND and %)
It can be seen from the table that most of SABECO’s debts was short - term.
The company’s current liabilities ratio began at 33.62% in 2017, then showed a
moderate decrease by 11.02% in the next two years. However, in the last two years of
this period, there was a gentle growth in amount of current liabilities, at approximately
1 million VND. Most of these were other short-term payable, payable for suppliers and
taxes payable, represented about three-quarter of total current liabilities. On the
contrary, long-term debts only took up an extremely small proportion of total
resources, which was around 3% in three years but its amount rose quickly, at four
times from 191,578,071,407 VND to 798,398,984,642 VND.
SABECO’s equity always accounted for the largest proportion in its total
resources. However, much as the amount of this company’s equity moderately went up
in three years, the ratio showed a volatility. To be specific, owner’s equity to total
resources ratio changed from 65.51% to 74.46% over the period of time. The main
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resources contributed to equity were share capital and retained profit, accounted for
over 80% of total equity. It is noticeable that the percentage of share capital had tended
to fall down from 29.13% to 23.78% with the unchanged figure of 6,412,811,860,000
VND over period of three years. This was explained by the change of capital
construction, with the remarkable growth of profit for the current year item from
7.54% to 17.6% between 2018 and 2019. As a result, SABECO company operated
more effectively to gain a large of profit, at about 4 million VND in 2019.

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4. Income statement analysis

2017 2018/2017 2018 2019/2018 2019

% %
31/12/2017 Amount changed 31/12/2018 Amount changed 31/12/2019
changed changed
34,193,390,554,23 1,755,162,007,70 35,948,552,561,94 1,950,506,939,34 37,899,059,501,29
Net revenue 5.13% 5.43%
9 8 7 8 5
25,327,872,489,66 2,536,540,899,88 27,864,413,389,55 28,348,430,809,28
Cost of sales 10.01% 484,017,419,730 1.74%
2 9 1 1
1,466,489,519,61
Gross profit 8,865,518,064,577 (781,378,892,181) (8.81%) 8,084,139,172,396 18.14% 9,550,628,692,014
8
Financial income 506,107,630,554 124,242,752,688 24.55% 630,350,383,242 259,502,122,053 41.17% 889,852,505,295
Financial expenses 25,805,674,678 48,829,278,191 189.22% 74,634,952,869 18,374,633,591 24.62% 93,009,586,460
Share of profit in associates
411,873,934,391 (56,908,910,451) (13.82%) 354,965,023,940 23,302,257,329 6.56% 378,267,281,269
and jointly controlled entities
Selling expenses 2,811,111,874,500 (80,021,015,009) (2.85%) 2,731,090,859,491 272,199,857,944 9.97% 3,003,290,717,435
G&A expenses 935,974,797,536 (23,269,484,670) (2.49%) 912,705,312,866 135,136,612,279 14.81% 1,047,841,925,145
Total operating expenses 3,772,892,346,714 (54,461,221,488) (1.44%) 3,718,431,125,226 425,711,103,814 11.45% 4,144,142,229,040
1,323,582,795,18
Net operating profit 6,062,218,632,164 (711,195,177,812) (11.73%) 5,351,023,454,352 24.74% 6,674,606,249,538
6
(70.65%
Results of other activities 14,873,022,970 24,543,164,002 165.02% 39,416,186,972 (27,845,811,548) 11,570,375,424
)
1,295,736,983,63
Profit before tax 6,077,091,655,134 (686,652,013,810) (11.30%) 5,390,439,641,324 24.04% 6,686,176,624,962
8
Current income tax expenses 1,140,540,458,945 (119,406,027,068) (10.47%) 1,021,134,431,877 326,037,221,117 31.93% 1,347,171,652,994
Deferred income tax expenses (12,048,055,675) (21,396,681,120) 177.59% (33,444,736,795) 2,302,000,221 (6.88%) (31,142,736,574)

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Net profit after tax 4,948,599,251,864 (545,849,305,622) (11.03%) 4,402,749,946,242 967,397,762,300 21.97% 5,370,147,708,542
SABECO’s horizontal analysis table of income statement from 2017 to 2019 (in VND and %)

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As can be inferred from the data, SABECO’s net income declined over 500
billion VND (11.03%) from 4,948,599,251,864 to 4,402,749,946,242 between 2017
and 2018. To be specific, cost of sales represented the majority of operating expenses
because it came from producing products, which is the main activity of SABECO. As a
result, the material might be substantial increase due to import price grew. Although
the revenue increased significantly, the sale growth was lower than the strong rise of
cost of goods sold which was registered the highest increase out of all items examined.
The reason for this might be due to the fact that SABECO had not managed well
production costs, i.e. waste of direct raw material prices or idle direct labor costs or
production overheads soared in 2018. Simultaneously, the figure of selling expense,
general and administration expenses fall by 80 billion and 23 billion VND
respectively, whereas finance income rose significantly by 24.55%. Contrary to cost of
sales, other operating expenses of SABECO might had a better management policy. In
addition, in 2018, SABECO had the major change in corporate management structure
and the successful divestment of the State capital was 53.59% at the end of 2017,
which made SABECO's share price plummet. At the same time in 2018, SABECO
invested but got losses in many associates, leading to provision for impairment of
trading securities and loss of investments in other entities. This is the main reasons
why financial expenses soared in 2018 at 189.22% and the share of profit in associates
and jointly controlled entities decreased significantly.
Learning from the experience in 2018, perhaps SABECO has adjusted the
production cost policy to help the financial situation of the business became better in
the fiscal year 2019. It is clear that there was an increase in SABECO's net revenue of
1.95 trillion VND, which is equivalent to the growth rate of the previous period.
Meanwhile, the cost of sales went up marginally by 1.74% compared to 2018. Perhaps
the enterprise has found new suppliers with competitive prices or purchased a
sufficient amount of raw materials to get a great discount in 2019. In addition, it can be
seen that there was a considerable rise in the data of selling and administrative
expenses of 272,199,857,944 and 135,136,612,279 VND respectively. The reason
might be that the business focused on advertising a new product, which is Beer 333
into the market. However, the increase of operating expenses was negligible compared

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to the growth of net revenue and financial income, so the amount of changed in net
profit after tax was still a positive number between 2018 and 2019.

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5. Cash flows statement analysis

5.1. Evaluation of the sources and uses of cash
5.1.1. Major sources and use
2017 2018 2019
Net cash flows
from operating 5,067,819,308,909 4,514,785,881,491 5,005,012,555,348
activities
Net cash flows
from investing (2,820,518,088,654) (311,248,135,909) (4,109,043,881,626)
activities
Net cash flows
from financing (1,423,533,432,507) (4,004,733,772,665) (1,247,477,267,173)
activities
Net cash flows
823,767,787,748 198,803,972,917 (351,508,593,451)
during the year

SABECO is a mature company in the Vietnamese beer market. Nevertheless, it

can be seen from the chart that net cash flows had a negative trend from 2017 to 2019.
The majority of SABECO’s cash came from operating activities, while most of their
cash flows were spent on investing and financing activities. Operating cash flows were
consistently remained stable, around 4500 billion to 5000 billion, which is a good sign
because the company wouldn’t need to borrow much money or issue too many stocks
to fund the inadequacy. Furthermore, cash generated from operating activities can
either be used in investing or financing activities. Both of the cash flows from the
investing activities and financing activities were fluctuated, however, financing cash
flows reached the peek in 2018 while cash flows from investing activities had a
downward trend in the same year. In contrast, the company peaked at over 4 trillion
VND for this investing activity in 2019 based on the placement for term deposits at
bank. Because of the positive in net cash flows from operating activities, the company
had good opportunities to grow the business or other investment opportunities.

5.1.2. Primary determinants of operating cash flow

In the three years from 2017 to 2019, net cash flow from operating activities of
SABECO Company was fluctuated but in general it still had a positive trend, proving
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that the business solvency is satisfactory. Four of the major determinants that make
operating cash flow inconstant was inventories, receivables, payable and corporate
income tax paid. From 2017 to 2019 we can see that the receivables were increasing
due to the fact that net cash from receivables were decreased and because of that, the
firm may be in lack of cash. This concern has been proven through the net cash from
payables which affected by the factor above, changed from negative to positive. This
mean that the company were increasingly having more debt. While taxation payable
sharply decreased, inventories had a downward trend from 2017 to 2019. Compared to
2017, net cash flow from operating activities in 2018 decreased by 10,91% due to the
company’s profit making, so the profit before tax dropped nearly 1000 billions in one
year. However, in 2019 this cash flow bore the sign of positive and accounted for an
increase of 10,86% compared to the previous year, making a delightful business year
of the company. Besides, it is clearly from the chart that net cash flows from operating
activities is lower than net revenue from 2017 to 2019. This is a sign of poor earnings
quality, which means SABECO was excellent in increasing its income but the
company did not have an effective plan to generate cash for its business.
5.1.3. Primary determinants of investing cash flow
It can be seen that net cash flows from investing activities in 2018 decreased
88.96% over the previous year but increased 1220.18% in the following year. Firstly,
SABECO spend most of their money on additions to fixed assets and other long-term
assets, long-term deposits and investments in other entities. The placements for term
deposits at bank increase from 2017 to 2019 about nearly 100%t that makes the money
of the company decrease the same rate as increase. Secondly, the company received
money from some specific sources. Among investing activities, receipts of term
deposits at bank brought SABECO the largest cash (11.39%, 27,47%, 24,75% in 2017,
2018, 2019 of the net revenue respectively). Besides, receipts of interest and dividends
is also contributed a huge amount of money to the company’s investing cash flows
take about 1.98% ,2.60%, 2.52% in 2017, 2018, 2019 of the net revenue respectively.
In addition, the placements for term deposits at bank increased due to the increase of
the money receipts from the collections of term deposits at bank.

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5.1.4. Primary determinants of financing cash flow

Most of the nature of SABECO’s capital sources was shareholders’ equity. The
fact that net cash flows from financing activities, especially payment of dividends and
loans were negative indicated that SABECO was repaying capital for the last 3 years.
The cash flow from financing activities was negative from 2017 to 2019 due to
the fact that more and more dividends had been paid. The dividends paid in 2018 is
equal to five times in 2017 and four times in 2019. Standing at more than billions at
2017, it increased to nearly 4 trillion at 2018, net cash from financing is due to the
large number of payments for payments to settle loan principals, payments of
dividends. But it also decreased in the 2019 back to 1 trillion, which was a tendency
for a sharp decline, proving that the company's ability to manage cash flow from
financial instruments is not good. The company needs policies to use money more
effectively.
5.2. Common size analysis of the statement of cash flows

2017 2018 2019

12/31/17 % 12/31/18 % 12/31/19 %

Operating 12.56
5,067,819,308,909 14.82% 4,514,785,881,491 5,005,012,555,348 13.21%
activities %
Investing (0.87 (10.84
(2,820,518,088,654) (8.25%) (311,248,135,909) (4,109,043,881,626)
activities %) %)
Financing (11.14
(1,423,533,432,507) (4.16%) (4,004,733,772,665) (1,247,477,267,173) (3.29%)
activities %)
Net cash
flows
823,767,787,748 2.41% 198,803,972,917 0.55% (351,508,593,451) (0.93%)
during the
year
Net
revenue 34,193,390,554,239 100% 35,948,552,561,947 100% 37,899,059,501,295 100%

SABECO’ common size of cash flows from 2017 to 2019 (in %)

Firstly, among three sources of cash flows, operating activities represented the
largest proportion of SABECO’s net revenue from 2017 to 2019. Cash flows from
operating activities were more than 5000 billion VND and took up 14.82% of net
revenue in 2017, and then had a slight decreased to 12,56% in 2018, but it rose again

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by 13.21% in 2019. To explain for this case, it can be seen from the cash flows
statement that SABECO had to paid a huge of corporate income tax paid in 2018 and
2019 (3.17% and 3.69% respectively), which decreased the operating cash flow.
Secondly, net cash flow from investing activities had an erratic change. The
figures of this activities accounted for more than 8% of net revenue in 2017. It
decreased in the next year to 0.87%, because SABECO collected a large amount of
money from collections of term deposits at bank during the year of 2018. In 2019, the
collections of term deposits were decreased by 3% but the placements for term
deposits at bank increased to 37,63% of net revenue so that net cash flow from
investing activities reduced net cash from only 0.87% of net revenue to 10,84%.
By contrast, cash flows from financing activities had the opposite trend with
investing activities. As the amount of payments of dividends increased and decreased,
the proportion of this item in net revenue also increased and decreased in 2018 and
2019 respectively. It reduced net cash from 4,16% of net revenue in 2017 to 11,14% in
2018 and dropped to 3,29% in 2019.
5.3. Free cash flow to the firm and free cash flow to equity

2017 2018 2019

Cash flows from

operating activities 5,067,819,308,909 4,514,785,881,491 5,005,012,555,348
(CFO)
Interest expense
42,111,534,689 35,244,808,353 37,367,206,872
(Int)
Tax rate (t) 20% 20% 20%
Capital 166,021,039,701
292,448,757,437 273,836,657,543
expenditure
(FCInv)
Free cash flow to 4,935,487,496,959.20 4,250,532,970,736.40 4,761,069,663,302.60
the firm
Free cash flow to the firm of SABECO from 2017 to 2019 (in VND)

2017 2018 2019

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Cash flows from

operating 5,067,819,308,909 4,514,785,881,491 5,005,012,555,348
activities (CFO)
Capital
166,021,039,701 292,448,757,437 273,836,657,543
expenditure
(FCInv)
Debt repayment 191,578,071,407 329,140,291,661 798,398,984,642
Free cash flow to 5,042,262,277,203 4,478,094,347,267 4,480,450,228,249
the equity
Free cash flow to the equity of SABECO from 2017 to 2019 (in VND)
It can be seen that free cash flows are positive, which means that the company
has an excess of operating cash flow over amounts needed for investments for the
future and repayment of debt. This cash would be available for distribution to owners.
Additionally, it indicates the company could expand operations, bring on additional
employees or invest in additional assets, and it can be put toward acquisitions or paid
out in dividends to shareholders. It’s fully capable of supporting itself, and there is
plenty of potential for further growth.

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6. Financial ratios analysis

6.1. Activity ratios analysis
2018 2019
Working capital turnover 4.78 3.47
Fixed asset turnover 7.51 8.19
Total asset turnover 1.62 1.54
Inventory turnover 14.60 15.00
Days of inventories on hand 25 24
Receivables turnover 173.06 188.66
Days of sale outstanding 2 2
Payable turnover 13.67 12.80
Days of payable 27 29
Activity ratios of Saigon Beer - Alcohol - Beverage Corporation in 2018 and 2019
Working capital turnover: Working capital turnover indicates how efficiently
the company generates revenue with its working capital. It also shows the relationship
between the funds used to finance a company's operations and the revenues a company
generates as a result.
For the case of SABECO, the working capital in 2018 is 4.78, which is
acceptable and referred by the investors. It has decline to 3.47 in 2019, which shows
that the company seems to have some problems related to working capital
management.

Habeco Bia Sai Gon

2017 2018 2019 2017 2018 2019
Working capital 7.82 5.52 (5.03) (14.00)
turnover

Despite the fact that working capital turnover of SABECO decreased in 2019, it
is still acceptable since this is the trend of the whole industry. Additionally, SABECO
is also the company that can slow down this trend most efficiently. In particular, by
2019, the working capital turnover of SABECO decreased by 17%, while its 2 rivals
witnessed a decreased by 30% and 170% respectively.
Fixed asset turnover:

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Fixed asset turnover

9.00

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

Apart from the first ratio, SABECO’s activity is being more preferred than its
rivals since all other activity ratios is far superior.
For a manufacturing company like SABECO, fixed assets have a high proportion
in the total asset, which means that the fixed assets turnover is a highly relevant ratio,
is constructed to reflect how efficiently a company, or more specifically, the
company’s management team, has used these substantial assets to generate revenue for
the firm.
As for SABECO, the management team is doing a great job when the company
has a brilliant performance in terms of utilizing and optimizing its fixed assets to
generate revenue, and they even improved it in 2019.
This ratio, when compared to HABECO and SAIGON BEER, has shown that
SABECO has surpassed its competitors in this market, and if they can keep on their
work, no one can take over the position of SABECO at the time being.
Total asset turnover: Compared to FAT, the total asset turnover is much lower.
In general, the common reason that leads to this may be related to unsold inventory or
long outstanding receivables. However, SABECO does not have struggle with any
problems like this. The reason for a low total asset turnover is that SABECO maintains
a high balance of short-term financial investment, which even has a high proportion
than fixed assets. Although this amount can help to improve the liquidity of the firm,
SABECO should still consider to cut down on this investment since it is way to much
and it is not likely that the rate of return on short-term investment can be better than
investing in capital expenditure.
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Inventories turnover/DOH and Receivable turnover/Days of sales

outstanding (DSO):
SABECO HABECO SAIGON BEER
2018 2019 2018 2019 2018 2019
Inventory
14.60 15.00 7.76 9.39 11.38 10.66
turnover
Days of
inventories 25 24 47 39 32 34
on hand
Receivables
173.06 188.66 36.38 36.43 36.47 37.75
turnover
Days of
sale
2 2 10 10 10 10
outstandin
g

As mentioned above, SABECO does not have to struggle with any problem
related to slow moving inventories or aged receivables. With the inventory, SABECO
has a high turnover than its rivals, as a result of a better control in raw material, in both
purchasing and maintaining process. Higher inventory turnover also means that
SABECO will have a shorter inventory day, which reduces the risk of slow-moving
and obsolete inventory.
As for receivable, SABECO seems not to make a lot of credit sales. Looking at
the receivables turnover of this company, this is simply extraordinary. It can be implied
from these two latter ratio that while HABECO and SAIGON BEER have to rely on
credit sales policy to enlarge their market share, SABECO is maintaining a stable
customer group. At the time being, it is undeniably a good sign. However, in the
future, SABECO should have a more flexible policy on credit sales or else it may have
encounter a risk that its customers will choose other providers.
Payable turnover and number of days of payable: The payable turnover of
SABECO has decreased by 6% in 2019, but it may not a problem if we combine this
ratio with the liquidity ratio which will be mentioned in the next part. A reasonable
explanation for this decrease may be because the company has negotiated different
payment arrangements with its suppliers.
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6.2. Liquidity ratios analysis

2017 2018 2019
Cash ratio 1.46 2.03 2.71
Quick ratio 1.56 2.16 2.81
Current ratio 1.85 2.48 3.15
Liquidity ratios of Saigon Beer - Alcohol - Beverage Corporation from 2017 to 2019

Current ratios: This ratio reflects the number of times short-term assets cover
short-term liabilities and is a fairly accurate indication of a company's ability to service
its current obligations. With the case of SABECO, we can see that the current ratio is
better over the time as it has increased by 70% after 3 years. In 2019, current assets of
SABECO can even cover its current liabilities 3 times, which means that in the short-
term, SABECO will not have to encounter financial difficulty.
The current ratio of SABECO, when comparing with its competitors, is much
better. The table below illustrates this ratio of 2 main rivals of SABECO which are
HABECO and SAI GON BEER.
HABECO SAIGON BEER
2017 2018 2019 2017 2018 2019
Current ratio 1.18 1.39 1.80 0.27 0.47 1.03
Quick ratio 0.90 1.09 1.39 0.06 0.22 0.28
Cash ratio 0.82 0.98 1.23 0.003 0.08 0.21

As can be seen, SABECO is doing better than these 2 companies. Especially with
the case of SAIGON BEER, this company had to struggle with some financial
difficulty before being able to recover in 2019.
Quick ratio: Current ratio can reflect the company’s ability to service its current
obligations, however, it is not likely that the users can rely 100% on this ratio,
especially when the company is holding a large quantities of inventories and there is a
risk of slow moving. Quick ratio, also known as acid test ratio, will be a more reliable
figure in this case. This ratio, also known as the acid test ratio, measures immediate
liquidity - the number of times cash, accounts receivable, and marketable securities
cover short-term obligations.

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With SABECO, when removing the effect of inventory, prepaid expenses, and
other less liquid current assets, this company is way much farther from the safe point.
The quick ratio of SABECO is respectively 1.56, 2.16 and 2.81 in the period of 3 years
from 2017 to 2019. The thing makes this figure more inviting to the users is that is
acceleration is even higher than the current ratio. In 2019, the quick ratio has
increased by 80%, while it is only 70% increase in current ratio.
This amount, when combined with cash ratio of 2.71 in 2019, one more time,
has shown that SABECO is doing a good job in the short-term, and it outperforms
HABECO and SAIGON BEER – its two main rivals
6.3. Solvency ratios analysis
2017 2018 2019
Debt to assets 0.34 0.28 0.26
Debt to capital 0.34 0.26 0.26
Debt to equity ratio 0.53 0.39 0.34
Financial leverage ratio 1.45 1.36
Interest coverage 137.74 149.80 182.21
Solvency ratios of Saigon Beer - Alcohol - Beverage Corporation from 2017 to 2019
Firstly, we will have a look at the financial leverage ratio. The financial leverage
ratio (also called the ‘leverage ratio’ or ‘equity multiplier’) measures the amount of
total assets supported by one money unit of equity. In the case of SABECO in 2019,
each 1 VNĐ of equity will support 1.36 VNĐ of assets, which is acceptable and
SABECO is quite financially independent.
We can reinforce this assumption when looking at the interest coverage of
SABECO. This ratio illustrates that in the case a company cannot make any profit in the
future then how many times the company can pay it current interest expense through
it current EBIT. As for SABECO, it is 138 times, 150 times and 182 times in 2017, 2018
and 2019, which is a fantastic sign when examining the solvency ratio of this
company.
In order to see how well SABECO is doing, we should try to have a comparison
with HABECO and SAIGON BEER one more time:
HABECO SAIGON BEER

2017 2018 2019 2017 2018 2019

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Financial leverage 2.0 1.7 1.5 1.5

Interest coverage 13.03 13.07 21.35 11.04 17.55 29.06

As can be seen, both 2 companies have to rely more on debt to finance its assets
while its ability to cover the interest expense is much more limited.
On examining the solvency ratio, we also use some other key ratios which are
Debt to Assets, Debt to Capital and Debt to Equity. All three ratios indicate the
proportion of debt and the corresponding balance. The higher these ratios are, the
weaker solvency of the company is. However, it is not the case of SABECO when the
company has lowered them over the time and SABECO also maintain an amount
below 0., which is preferred by every investor.
6.4. Profitability ratios analysis

2017 2018 2019

Gross profit margin 26% 22% 25%
Operating profit margin 18% 15% 18%
Net profit margin 14% 12% 14%
ROE 29% 30%
ROA 20% 22%
Profitability ratios of Saigon Beer - Alcohol - Beverage Corporation from 2017 to 2019
Overall, the profitability of SABECO is quite stable in this period. Although the
company had experienced some downtrend in 2018, it managed to recover right in
the next year.
The main reason for the decrease in 2018 has been mentioned in the income
statement analysis, which was because of the increase in the cost of raw material in
this year. And it seems that all company in this industry had to encounter with this
problem in 2018. HABECO and SAIGON BEER also had to experience a decrease in the
margin in the same period.
HABECO SAIGON BEER
2017 2018 2019 2017 2018 2019
Gross profit margin 26% 25% 26% 18% 17% 20%
Operating profit margin 9% 7% 7% 14% 15% 18%
Net profit margin 7% 5% 6% 13% 13% 16%
ROE 10% 10% 22% 27%

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ROA 5% 6% 14% 18%

Apart from the decline in margin in 2018, the profitability of SABECO is still
satisfactory, when comparing with its rivals. In particular, except for HABECO which
has an identical gross profit margin with SABECO, all other profitability ratios of
SABECO is outperforming its competitors. SABECO is better at cost management,
which lead to the fact that it has a higher operating margin and net profit margin than
HABECO. However, when placing SABECO and SAIGON BEER on the scale, the ratio of
SABECO is a little bit lower, but this is not really a problem since the market share of
SABECO in this industry is 10 times larger than SAIGON BEER.
Since we cannot conclude too much if we only base on the return on sales,
there is another ratio that all investors want to notice, which is the Return on Equity.
ROE is considered a measure of how effectively management is using a company’s
assets to create profits. However, the ROE itself has some limitation rooted from its
formula: ROE = Net Income / Average total equity.
According to the equation, a high ROE might not always be positive. An outsized
ROE can be indicative of a number of issues—such as inconsistent profits or excessive
debt. Also, a negative ROE due to the company having a net loss or negative
shareholders’ equity cannot be used to analyze the company, nor can it be used to
compare against companies with a positive ROE. Given that ROE is a powerful tool to
assess the performance of a company, a framework named Dupont analysis has been
commonly used to analyzed factors that drive the ROE.
The Dupont analysis is an expanded return on equity formula, calculated by
multiplying the net profit margin by the asset turnover by the financial leverage.

ROE = Net profit margin x Total asset turnover x Financial leverage

2018 29% 12% x 1.62 x 1.45
2019 30% 14% x 1.54 x 1.36

By dividing the ROE into 3 drivers, we can have a better understanding about
the ROE of SABECO and also understand whether it is good or bad. In the case of

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SABECO, we can see that this company is having an ideal ROE ratio and they have
even improved it in 2019. To be specific, the thing that contributed to this increase of
ROE is the increase in the net profit margin, which means the company has a better
cost management. Also, SABECO has made an effort to be less financially
independent, which is proved by a decrease of the financial leverage. The total asset
turnover is decreasing, but this is not due to any problem related to inventory or
receivable, the company just simply have a high proportion of cash and short-term
investment which are dragging down this ratio. Because of that, total asset turnover is
not the thing that make the investors worry.
To have a better evaluation on the performance of SABECO, let’s have a look at
the breakdown of ROE of the 2 rivals in this industry, which are HABECO and SAIGON
BEER.

SABECO HABECO SAIGON BEER

Year 2018 2019 2018 2019 2018 2019
Total asset turnover 1.62 1.54 0.97 1.10 1.10 1.17
Financial leverage 1.45 1.36 2.0 1.7 1.5 1.5
Net profit margin 12% 14% 5% 6% 13% 16%
ROE 29% 30% 10% 10% 22% 27%

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In general, this industry is flourishing in the period from 2017 to 2019, but
SABECO is the company having the best result. HABECO is being left to the back. And
for SAIGON BEER, this company is gradually improving its performance.

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7. Conclusion
In conclusion, SABECO is showing a positive result and setting out a promising
future for the investors. It has confirmed the position of a leading company in this
industry with an exceptional financial performance. The capital structure of the
company is far higher than the safe point with high liquidity, sufficient ability to pay
the debt and a well-structured source of capital. The cash flow of the company is
negative, but it is not a problem since the operating cash flow is positive enough to
cover the dividends and the debt. This negative amount was also because the
company is investing more, which means that in the future, it is very likely that
SABECO can even grow more than it is doing at the moment. 2020 is also a milestone
for SABECO when the divestment of the state capital will be 100% completed, more
people will want to invest on the company and a bright prospect is opening. However,
the appearance of newcomers, the issuance of Decree 100 and the emergence of
COVID 19 pandemic are some threats that can hold SABECO back. If the company can
overcome all these obstacles, SABECO will be not only a leader in Vietnam but also a
challenger in the foreign market.

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