FINANCIAL STATEMENT ANALYSIS

ANALYSING FINANCIAL STRUCTURE OF

PVOIL

Lecturer: Dr. Nguyen Tan Binh

Student: Nguyen Minh Thang
Date of Submission: 30 January 2021
 Financial Statement Analysis

Contents
CHAPTER 1..................................................................................................................................1

PVOIL OVERVIEW

I. OVERVIEW ON PETROVIETNAM OIL CORPORATION.............................................1

II. HISTORY OF DEVELOPMENT...........................................................................................1

1. From 1994 to 1996.............................................................................................................1

2. In 2008....................................................................................................................................2

3. In 2018....................................................................................................................................3

III. VISION AND MISSION........................................................................................................3

IV. ORGANIZATIONAL STRUCTURE.....................................................................................3

CHAPTER 2..................................................................................................................................4

FINANCIAL STATEMENTS OF PVOIL IN THE 2015 – 2019 PERIOD..........................4

I. BALANCE SHEET..................................................................................................................4

II. CASH FLOWS STATEMENT...............................................................................................8

CHAPTER 3................................................................................................................................10

ANALYSIS OF FINANCIAL STRUCTURE OF PVOIL.........................................................10

I. FINANCIAL STRUCTURE.................................................................................................10

II. FINANCIAL RATIOS ANALYSIS AND COMPARISON WITH THE US. GAS/OIL
INDUSTRY.................................................................................................................................11

References................................................................................................................................15
 Financial Statement Analysis

CHAPTER 1
PVOIL OVERVIEW

I. Overview On Petrovietnam Oil Corporation

PetroVietnam Oil Corporation (PVOIL) is a subsidiary of Vietnam Oil and Gas Group
(PVN), established on 6th of June 2008 based on the consolidation of PetroVietnam
Trading Company (Petechim) and PetroVietnam Oil Processing and Distribution
Company (PDC). PVOIL become a joint stock company from 01/08/2018.

The establishment of PetroVietnam Oil Corporation was in accordance with the

Government's policy on converting the independent accounting companies of the
State Corporations to operating under the model of Parent Company - Subsidiary
Company. It also aims at adapting to the trend of international integration and to
maximize resources, improving the competitiveness of the Industry in the field of
trading crude oil and oil products in the domestic and international markets.

II. History of Development

1. From 1994 To 1996:

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 Financial Statement Analysis

- PetroVietnam Trading Company (PETECHIM)

Petechim Company, formerly PetroVietnam Trading Company (trading as

PetroVietnam Trading Company – PVTC), was established on April 8th 1994. In
October 1994, PetroVietnam Trading Company was assigned to import-export crude
oil and equipment, spare parts for oil and gas industry, and given the international
trade name of Petechim from Oil and Gas Export and Import Company which had
been under the direction of the Ministry of Trade. On 27th September 2006,
Petechim Company was changed into PetroVietnam Trading One Member Company
Limited pursuant to the Decision No. 215/2006/QD-TTg of the Prime Minister.

- PetroVietnam Oil Processing and Distribution Company (PDC)

PetroVietnam Oil Processing and Distribution Company (PDC) was established in

1996 by restructuring Tuy Ha Petrochemical Processing Company and Lubricant
and Grease Company (VIDAMO). In April 2001, 2 petroleum trading enterprises of
PTSC Company were incorporated into PDC for the purpose of reinforcing technical
infrastructures, making PDC a core unit in oil and gas industry, distributing and
trading petroleum products nationwide. In 2007, PDC was changed into the model
of One Member Company Limited. In October 2007, PetroVietnam transfered its
equity in Petromekong Company to PDC.

2. In 2008:

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 Financial Statement Analysis

PetroVietnam Oil Corporation (PVOIL) is a subsidiary of Vietnam Oil and Gas Group
(PetroVietnam), established pursuant to Decision No. 1250/QD-DKVN dated June
6th 2008 of the Board of Members of PetroVietnam, by the merger of PetroVietnam
Trading Company (Petechim) and PetroVietnam Oil Processing and Distribution
Company (PDC).

3. In 2018:

On January 25th, 2018, PVOIL has successfully launched its initial public offering
(IPO); then its first general meeting of shareholders on July 30th, 2018, which has
set forth to transform the company to be a joint stock company from August 01st,
2018.

III. Vision and Mission

- To become the leading brand name in Vietnam in the field of importing,
trading crude oil and field, trading oil products.
- PVOIL constantly works for improvement of service quality, professionalism
and efficiency in the journey to grow to the future.

IV. The Organizational Structure of PVOil

The Board of Supervisors has a higher authority over the Board of Management,
which is followed by the Board of Directors. The Board of Directors is responsible
for subsequent categories: Branches, Subsidiaries, Affiliates and Divisions.

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 Financial Statement Analysis

Branches and Divisions work closely together, and the former has 10 while the
latter 12 in size. Divisions are varied in responsibilities, namely business and legal
affairs. For the Subsidiaries, the size is 29, divided into 2 types: domestic and
overseas. There are 25 domestic subsidiaries, and 4 overseas ones, which include
Singapore, Laos and Cambodia.

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CHAPTER 2

FINANCIAL STATEMENTS OF PVOIL IN THE 2015 – 2019 PERIOD

I. BALANCE SHEET
Table 01: Balance sheet Statement

PV Oil - OIL        
Balance sheet, bil. VND
ASSET 2016 2017 2018 2019
SHORT-TERM ASSET
Cash 6,193 5,109 3,216 2,966
Short-term investments 417 2,109 4,215 5,377
Short-term receivables 5,925 9,740 8,824 9,151
Inventory 2,385 3,102 1,607 2,448
Other current assets 212 214 144 164
Short-term asset 15,133 20,273 18,005 20,106
LONG-TERM ASSETS
Long-term receivables 10 46 46 39
Fixed assets 3,956 3,941 4,506 4,305
Real estate investment 113 110 120 117
Long-term unfinished assets 201 168 153 198
Long-term financial
1,058 979 835 786
investments
Other long-term assets 834 818 999 930
Total long-term assets 6,172 6,062 6,659 6,375
TOTAL ASSETS 21,304 26,335 24,664 26,481

PV Oil - OIL
LIABILITY AND EQUITY 2016 2017 2018 2019
Short-term liability 10,604 15,328 13,698 15,278
   Inside:
   + Short-term loans 1.10 2,477 1,707 2,561 4,710
   + Payables to suppliers 1.1 2,985 6,029 3,548 4,896
   + Prepaid buyers 1.2 67 108 69 43
+ Payables to staff 1.4 152 124 97 107
+ Payables to taxes 1.3 565 586 608 752

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   + Other current liability 4,358 6774 6,815 4,769

Long-term liability 288 275 309 330
Total liabilities 10,892 15,603 14,008 15,608
Equity
    Investment capital and
12,323 10,299 11,538 11,606
funds
    Retained earnings (1,912) 433 (882) (733)
Total equity 10,411 10,732 10,656 10,873
TOTAL LIABILITIES &
EQUITY 21,304 26,335 24,664 26,481

- From 2016 to 2019, the total assets of PVOil increased slightly from 21,304 to
26,481 billion VND, suggesting an increase by 24% in value. Besides, short
term assets were always more than twice as much as long term assets.

- Regarding the short term assets, the figures had a similar pattern with those
of total assets numbers, as is evidenced by a drop between 2017 and 2018,
but still had a growth in 2019.

- For long-term assets from 2016 to 2019, the figures were relatively
consistent, fluctuating in hundreds but remaining stable in thousands.

Table 02: Common-size Balance sheet Statement

PV Oil - OIL        
Balance sheet, bil. VND
ASSET 2016 2017 2018 2019
SHORT-TERM ASSET
Cash 6,193 5,109 3,216 2,966
Short-term investments 417 2,109 4,215 5,377
Short-term receivables 5,925 9,740 8,824 9,151
Inventory 2,385 3,102 1,607 2,448
Other current assets 212 214 144 164
Short-term asset 15,133 20,273 18,005 20,106

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 Financial Statement Analysis

LONG-TERM ASSETS
Long-term receivables 10 46 46 39
Fixed assets 3,956 3,941 4,506 4,305
Real estate investment 113 110 120 117
Long-term unfinished assets 201 168 153 198
Long-term financial
1,058 979 835 786
investments
Other long-term assets 834 818 999 930
Total long-term assets 6,172 6,062 6,659 6,375
TOTAL ASSETS 21,304 26,335 24,664 26,481

- Regarding the structure of Total assets, the percentage of short-term asset

was greater than long-term asset’s (specifically 77% compared to 23% in
2017). The trend of short-term and long-term assets stabilized over the 2016-
2019 period. In short-term assets, the short-term investment accounted for
the largest proportion, reaching its peak at 35.8% in 2018. Long- term assets,
on the other hand, had the largest proportion in the fixed asset category with
18.6% in 2016.

Table 03: Income Statement

PV Oil - OIL        
Income Statement, bil. VND
  2016 2017 2018 2019
Revenue 39,297 59,766 23,631 79,872
Cost of goods sold 36,562 57,236 22,556 77,089
Gross profit 2,735 2,530 1,075 2,783
Selling expenses 1,452 1,521 668 1,690

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 Financial Statement Analysis

Administration expenses 726 641 374 808

(Income) expenses of financing 272 142 88 267
Profit (loss) in associated company 16 5 (8) (14)
Earnings from operating activity 300 231 (63) 4
Other (cost) profits 63 56 25 48
Earnings before tax 364 287 (39) 51
Corporate income tax 56 41 12 64
Deferred corporate income tax 4.8 9.5 53.7 0.8
(104
Net Income 303 236 ) (14)
Net income attributable to non-
controlling interests 67 61 (16) 117
Net income attributable to
sharehowners of PLX 236 176 (88) (130)

The business state of PVOil from 2016 to 2019 is as below:

- Net revenues: from 2016 to 2019, net revenue reduced dramatically from 303
billion VND to -14 billion VND, suggesting a severe downward in money
making of this business.

- Gross profits: Gross profit increased just a small amount. Moreover, gross
profit was only about 7% in 2016 compared to revenue and decreased in half
to 3.5% in 2019.

- Income before tax decreased from 364 to -39 billion VND from 2016 to 2018,
but managed to climb back to 51 billion in 2019. However, in the structural
rate, if compared to net revenue, from 2018 and 2019, the income before tax
had been relatively stable. The percentages did not fluctuate outside 1%,
except for the year 2018, whose figure was a negative of 0.2%.

Table 04:Comman-size Income Statement

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 Financial Statement Analysis

PV Oil - OIL        
Income Statement, bil. VND
  2016 2017 2018 2019
Revenue 39,297 59,766 23,631 79,872
Cost of goods sold 36,562 57,236 22,556 77,089
Gross profit 2,735 2,530 1,075 2,783
Selling expenses 1,452 1,521 668 1,690
Administration expenses 726 641 374 808
(Income) expenses of financing 272 142 88 267
Profit (loss) in associated company 16 5 (8) (14)
Earnings from operating activity 300 231 (63) 4
Other (cost) profits 63 56 25 48
Earnings before tax 364 287 (39) 51
Corporate income tax 56 41 12 64
Deferred corporate income tax 4.8 9.5 53.7 0.8
(104
Net Income 303 236 ) (14)

II. CASH FLOWS STATEMENT

Table 5: Indirect cash flows from 2016 to 2019

PV Oil - OIL        
Cash flow statement (VND
2016 2017 2018 2019
billion)
Net Income 303 236 (104) (14)

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 Financial Statement Analysis

Adjustment of depreciation 374 366 165 385

(Profits) loss from investing (338
activity ) (419) (121) (300)
Adjustment of changes in working
capital:
(528
    Receivables ) (3,834) 261 (439)
    Inventory (3) (716) 910 (747)
    Payable 615 4,881 (467) 538
(268
    Other ) 375 (166) (231)
(I). Cash flow from operating
activities 155 890 477 (807)
(II). Cash flow from investing (317
activities ) (1,413) (1,099) (999)
(III). Cash flow from financing (114
activities ) (743) (598) 2,154
Total net cash flow (= I + II + (277
III) ) (1,266) (1,220) 348

The cash flow PVOil from 2016 to 2019 is as follows:

- The cash flow from operating activities was mostly negative, as it can be seen
that only in 2019 PVOil had a positive cash flow with 348 billion VND.

- The other years, on the other hand, witnessed negative figures. Starting at a
loss of 277 billion VND in 2016, the figure then dropped significantly to 1,266
billion in the next year, suggesting a six-fold decrease. In 2018, the situation

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 Financial Statement Analysis

was not mitigated, as PVOil encountered another negative figure, which was
1,220 billion VND.

- The reason for considerable loss in cash flow from 2016 to 2019 can be that
cash flow from investing activities and from financing activities were much
higher than those of from operating activities. Cash flow from operation alone
could not offset the other negative numbers, hence a negative umber in total
net cash flow.

CHAPTER 3

FINANCIAL STRUCTURE ANALYSIS OF PVOIL

I. FINANCIAL STRUCTURE

Table 7: The Industry Financial Structure

PVOIL 2016 2017 2018 2019

Financial structure
Debt/Assets 51% 59% 57% 59%
Equity/Assets 49% 41% 43% 41%
Debt/Equity (times) 1.0 1.5 1.3 1.4
Assets/Equity (times) 2.0 2.5 2.3 2.4

The debt to assets ratio in 2019 was more than the previous fiscal years. It remained
higher than 50% during the period. It means that the industry’s assets are financed
by liabilities, or debts, rather than its equity.

Moreover, the debt to equity ratio increased over time during the four-year period.
It appears that the industry’s high leverage ratio indicates high risk. However,
different industries have different capital needs and growth rates, a relatively high
debt to equity ratio may be common in the gas and oil industry which is intensive
industries.

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 Financial Statement Analysis

Besides, a relatively high ratio (indicating lots of assets and very little equity) may
indicate PVOil has taken on substantial debt merely to remain its business but a high
asset to equity ratio can also mean the return on borrowed capital exceeds the cost
of that capital.

II. FINANCIAL RATIOS ANALYSIS

PVOIL 2016 2017 2018 2019

(1) Cash 6,193 5,109 3,216 2,966
(2) Short-term investments 417 2,109 4,215 5,377
(3) Cash flows from operating 155 890 477 (807)
Current liabilities (CL) 10,424 14,668 13,580 15,341
Cash flows liquidity ratio
0.6 0.6 0.6 0.5
[=(1+2+3)/CL]

This table considers cash flow from operating activities. As can be seen from the
table, the cash flows liquidity ratios over 4 years of operation did not vary. From
2016 to 2018, the ratio stood at 0.6, but in 2019 it dropped to 0.5.

If the ratio is less than 1, the company generated less cash from operations than is
needed to pay off its short-term liabilities. This signals short-term problems and a
need for more capital.

PVOIL 2016 2017 2018 2019

1. Inventory period (days) 24 20 26 12
2. Collection period (days) 55 59 136 42
3. Payment period (days) 30 38 57 23
Cash Conversion Cycle (days) [=1+2-
49 41 105 30
3]

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 Financial Statement Analysis

Cash Conversion Cycle is one of several quantitative measures that help evaluate the
efficiency of a company's operations and management. As the table suggests, only in
2018 did the company witness an unprecedented number, with 105 days of cycle as
compared to those of other years.

Normally, a trend of decreasing or steady CCC values over multiple periods is a good
sign while rising ones should lead to more investigation and analysis based on other
factors

PVOIL 2016 2017 2018 2019

Sales 39,297 59,766 23,631 79,872
Account receivable AR 5,925 9,740 8,824 9,151
Account receivable turn over
7 6 3 9
[=Sales/AR]

Cost of goods sold-COGS 36,562 57,236 22,556 77,089

Inventory 2,385 3,102 1,607 2,448

Inventory turnover
15 18 14 31
[=COGS/Inventory] (times)

The account receivable turnover is used to evaluate the ability of a company to

efficiently issue credit to its customers and collect funds from them in a timely
manner. Here, only 2018 had the fewest cash collection of 3 times, while for the
other years, cash collection was 7, 6, and 9 in 2016, 2017 and 2019 respectively.
Similarly, the inventory turnover also shares a similar pattern, with 2018 having the
lowest number of 14 times, followed closely by 2016 of 15 times. 2019 witnessed
the highest times of the Inventory turnover.

PVOIL 2016 2017 2018 2019

Working capital size:
Receivable/Sales 15.1% 16.3% 37.3% 11.5%
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 Financial Statement Analysis

Inventory/Sales 6.1% 5.2% 6.8% 3.1%

Payable/Sales 7.6% 10.1% 15.0% 6.1%
Non-cash WC/Sales -4.2% -0.3% 4.6% 2.3%

Let us now compare the statistics from PVOil with that of the Oil/Gas Distribution in
the USA over the course of 4 years. It can be seen that the statistics of PVOil
fluctuates more wildly than the given proportions in the US, and the former tended
to leave the latter by a considerable gap.
To be more specific, for instance in the year 2016, the proportion of receivable over
sales of PVOil was 15.1%, 1.5 times as much as that of the US, which was 9.8%. The
same logic can be applied to other years as well.
Oil/gas distribution (USA)
Years 2016 2017 2018 2019
Working capital size:
Receivable/Sales 9.8% 9.3% 10.1% 8.4%
Inventory/Sales 5.0% 3.1% 2.6% 2.6%
Payable/Sales 8.1% 9.2% 8.8% 6.6%
Non-cash WC/Sales 6.6% 4.2% 4.2% 3.7%

Another notable point of the difference between these two tables is that in 2016,
while the Non-cash WC/Sales of PVOil stood at a negative number of 4.2%, USA on
the other hand was at 6.6%, leaving a large gap between the two ratio. It is also in
this same category that PVOil had statistics that was smaller than that of the US.

PVOIL 2016 2017 2018 2019

Total assets 21,304 26,335 24,664 26,481
Total liabilities 10,892 15,603 14,008 15,608
Debt ratio (Debt to Assets) 51% 59% 57% 59%
[=Total lia./Total assets]

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 Financial Statement Analysis

A ratio greater than 1 shows that the company has more liabilities than assets. A
high ratio also indicates that a company may be putting itself at a risk of default on
its loans if interest rates were to rise suddenly.
The table above suggests that the debt ratio of PVOil was high among 4 years of
operation, with no years having its ratio less than 50%. The highest proportion was
59%, which belonged to the year 2017 and 2019, followed closely by 57% in 2018.

PVOIL 2016 2017 2018 2019

Sales 39,297 59,766 23,631 79,872
Gross profits 2,735 2,530 1,075 2,783
Gross profits Margin of PVOil 7.0% 4.2% 4.5% 3.5%
Gross profits Margin In USA 38% 35% 41%

If a company's gross profit margin wildly fluctuates, this may signal poor
management practices and/or inferior products. The gross profits margin of PVOil
was considerably lower than that of the USA, because the former was approximately
centering around 4-5%, the latter on the other hand stood at around 35-41%.
PVOIL 2016 2017 2018 2019
Equity 10,411 10,732 10,656 10,873
(104 (14
Net profits (Net income) 303 236
) )
Return on Equity (ROE) 2.9% 2.2% -1.0% -0.1%
Test: ROE=ROS*Assets turn-
2.9% 2.2% -1.0% -0.1%
over*FL

ROE can be a good starting place for developing future estimates of a stock’s growth
rate and the growth rate of its dividends. In 2016 and 2017, the negative rates
suggested that the company suffered from difficult development obstacle.
Meanwhile, for the next two years, the situation had got better, as is evidenced by
the positive growth.

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References

Báo cáo tài chính 2017. (2018). From PVOil:

https://www.pvoil.com.vn/Data/Sites/1/media/tai-lieu/cbtt-truoc-cph/
baocaotaichinhcongtyme-2017.pdf

Tổng Công ty Dầu Việt Nam - CTCP. (2021, Jan 25). Retrieved Jan 25, 2021, from
https://s.cafef.vn/bao-cao-tai-chinh/OIL/IncSta/2019/0/0/0/ket-qua-hoat-dong-
kinh-doanh-tong-cong-ty-dau-viet-nam-ctcp.chn

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