NATIONAL ECONOMICS UNIVERSITY

Subject: Business Finance

Lecturer: Dr. Tran Tat Thanh

Assignment: Financial Statement Analysis of Vinamilk in the period

2019-2021

Name: Hoang Tue Linh

Student ID: 11202135
 Table of Contents
PREFACE..............................................................................................................................4
I. INTRODUCTION............................................................................................................5
II. ANALYSIS OF FINANCIAL STATEMENT................................................................6
1. Sources and Uses of Cash..........................................................................................................6
a. Period 2019-2020..........................................................................................................................................6
b. Period 2020 – 2021.......................................................................................................................................6
a. Standardized balance sheets.........................................................................................................................8
b. Standardized income statements...................................................................................................................9

3. Financial ratios analysis..........................................................................................................11

a. Liquidity ratios............................................................................................................................................11
b. Financial leverage ratios:...........................................................................................................................12
c. Turnover ratios:..........................................................................................................................................12
d. Profitability ratios:......................................................................................................................................13
e. Market value ratio:......................................................................................................................................14

4. Dupont analysis.......................................................................................................................15
III. CONCLUSION...........................................................................................................17
REFERENCES.....................................................................................................................18

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 TABLE OF FIGURES

Figure 1: Sources & Uses of Cash (2019-2020).............................................................................6

Figure 2: Sources & Uses of Cash (2020-2021).............................................................................7
Figure 3: Common-size Balance sheet (2019-2020).......................................................................8
Figure 4: Common-size Balance sheet (2020-2021).......................................................................8
Figure 5: Common-size Income statement (2019)........................................................................10
Figure 6: Common-size Income statement (2020)........................................................................10
Figure 7: Common-size Income statement (2021)........................................................................10
Figure 8: Liquidity ratios of Vinamilk..........................................................................................10
Figure 9: Financial leverage ratios of Vinamilk..........................................................................11
Figure 10: Turnover ratios of Vinamilk........................................................................................12
Figure 11: Profitability ratios of Vinamilk...................................................................................13
Figure 12: Market value ratios of Vinamilk..................................................................................14
Figure 13: Dupont analysis...........................................................................................................14

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PREFACE
Financial activity is one of the contributing parts to the company’s achievement of
its goals. The remainder of the department will be held back by poor financial
performance, which prevents the company from achieving its objectives.
Therefore, sound financial management is crucial to the expansion of an
enterprise's commercial activities. Financial analysis is essential for determining if
a company's financial performance is strong or weak. The company's financial
status will be revealed through financial analysis, and from there, steps will be
taken to rectify the situation.
Researching Vinamilk’s finance has helped me better understand the current
financial position, and determine the causes and extent of factors affecting
Vinamilk’s finances. From that information, make comments, evaluate, and
propose some solutions to boost the business’s operations.

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 I. INTRODUCTION
Vietnam Dairy Joint Stock Company (Vinamilk) is a Vietnam-based food
manufacturer. The company's primary business activities include the production,
marketing, and distribution of dairy products, particularly milk in all its forms and
other products produced from it, as well as healthy food and non-alcoholic drinks.
Additionally, it offers farmers other technical assistance for breeding and growing
operations, runs a polyclinic for medical treatment, and offers packaging and
transportation services. The business started out as the government-owned
Southern Coffee - Dairy Company in 1976, changing its name to the Vietnam
Dairy Company in 1993. Following its IPO on the Ho Chi Minh Stock Exchange in
2003, the business officially changed its name to Vietnam Dairy Products Joint
Stock Company.
Vinamilk is a prominent company in Vietnam at the moment, reaching over 31
countries and bringing in over 1.5 billion USD annually. It also makes important
contributions to the nation and its citizens. Vinamilk is the first business from
Vietnam to appear on Forbes Asia's list of the 200 Best Under A Billion, which
recognizes 200 of the region's best small and midsize businesses. Vinamilk has
grown into an economic success story in the wake of Vietnam's decision to join the
WTO after nearly 40 years of development with policies that encourage the use of
new technology and innovation.
Vinamilk desires to be one of the most favorite brands in every region and
territory. Their business philosophy is “We keep in our mind and our heart that the
quality and innovation are always our most important companions. We act with a
customer-centered approach and commit to responding to all their needs”. To
preserve its consistently leading position in the local market and increase
shareholder value, Vinamilk also keeps expanding its current geographic reach and
product line.

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 II. ANALYSIS OF FINANCIAL STATEMENT
1. Sources and Uses of Cash
a. Period 2019-2020

Figure 1: Sources & Uses of Cash (2019-2020)

The given graph shows how Vinamilk's sources and uses of cash have changed
over the course of three years, along with changes to its assets, liabilities, and
owner's equity. Overall, total assets, total liabilities, and total equity have grown
somewhat from 2019 to 2020.

A closer look reveals that from 2019 to 2020, the total Asset increased by 3.723
billion VND. Vinamilk's sources of cash increased throughout the period as a
result of a decline in cash balance (by approximately 554 billion VND),
declining inventory (by about 78 billion VND), and decreasing net fixed assets
(by approximately 1 billion 40 billion VND). Additionally, there were notable
increases in Other Current Liabilities, Long-Term Debt, and Common Stock of
1.897 billion, 46 billion, and 3.915 billion VND, respectively.
Throughout the 2019–2020 year, Vinamilk's accounts receivable and other
current assets increased, which increased the company's cash uses. In the
instance of Vinamilk, the drop in Notes Payable by 1.544 trillion VND and the
decrease in Accounts Payable by 583 trillion VND also drove the uses of cash.

b. Period 2020 – 2021

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 Figure 2: Sources & Uses of Cash (2020-2021)

Looking over the balance sheets for Vinamilk during the period 2020-2021, we see
that quite a few things changed.

More specifically, throughout the time period, the Cash balance increased by 237
billion dong. Because Vinamilk really paid out 237 billion dong to boost the
amount in its checking account, this is a net usage. Additionally, the firm spent
1.868 billion VND to boost its inventory, 631 billion VND to grow its other
accounts receivable, and 3.310 billion VND to increase its other current assets.

Over the course of the year, fixed assets decreased by around 1.147 billion VND.
Due to Vinamilk's successful collection of roughly 1.150 billion VND from Net
Fixed Assets, this is a source of cash. By the end of the year, it had also borrowed
an extra 970 billion dong for accounts payable. The addition of 2.008 billion dong
and 2.202 billion dong to other current liabilities and common stock, respectively,
helped bring Vinamilk's total cash sources to above 6 trillion VND.

 General comments:
Overall, Vinamilk's total Assets, Liabilities, and owner's Equity expanded
gradually over the last three years from 2019 to 2021, resulting in a shift of
more than 8 trillion dong. The sources and uses of money are, however, around
1 trillion more in the 2019–2020 period than they are in the 2020–2021 period.
Because the pandemic COVID-19 started in later 2019, it may be feasible to
justify this by noting that the firm did not keep an extensive amount of
inventory on hand. As a consequence, its transactions may still be completed
rapidly between 2019 and 2020. Furthermore, Vinamilk’s financial situation
had not been severely affected by the breakout of the pandemic in 2019, which

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 helped the firm operate better than in the period of 2020-2021 when the
business was facing an increase in Expenses and Debts that ensure the operation
and competition with its rivals in the same industry. However, Vinamilk had
been still regarded as the top business in Vietnam’s dairy industry.

2. Standardized financial statements

a. Standardized balance sheets

Figure 3: Common-size Balance sheet (2019-2020)

Figure 4: Common-size Balance sheet (2020-2021)

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The given figures demonstrate how Vinamilk's assets, liabilities, and owner's
equity developed over the course of three years beginning in 2019. Keep in mind
that each line item on the balance sheet is expressed as a proportion of total assets
(or Total Liabilities & Equity).

Taking a closer look, despite a minor gain of 0.04% between the years of 2020 and
2021, the percentage of cash and cash equivalents decreased from 5.96% to 4.40%
in that time. Accounts Receivable (both short-term and long-term) increased
progressively, taking up 10, 1, 10, and 9, % of total assets over the years,
respectively. The increase in Accounts Receivable has led to an increase in the
company's net sales, showing that Vinamilk has put in place a suitable collection
procedure to increase its revenues.

Inventory as a percentage of total assets decreased between 2019 and 2020,

however data for that index dramatically rose by 2.6% in 2021. Inventory
decreased by 1.02% in the 2019–2020 year, which helped to increase the
company's total assets. On the other hand, the Inventory amount increased
significantly between 2020 and 2021. This is a result of the Covid-19 pandemic's
consequences as well as the rising demand for dairy products. The increase in other
Current Assets from 39.4% to 48.1% over the past three years is also noteworthy.
Over a period of three years starting in 2019, Net Fixed Assets had a significant
decline of 4.7%.

Regarding Total Liabilities & Equity, Accounts Payable of Vinamilk reduced by

1.88% from 2019 to 2020, followed by a slight increase of 1.19% in the 2020-2021
course. Other Current Liabilities rose remarkably, accounting for 13.4%, 16.3%,
and 18.6%, respectively. The date for Long-term Debt remained stable at 1.18%
over the year 2019-2020 before declining to 0.78% in 2021. Additionally, having
increased by 2.96%, the Common Stock of the firm fell to 66.5% during the
research period.

b. Standardized income statements

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 Figure 5: Common-size Income statement (2019)

Figure 6: Common-size Income statement (2020)

Figure 7: Common-size Income statement (2021)

For the income statement, each item is calculated as a percentage of net sales.
Overall, managers and investors anticipate that throughout the period, Expenses as
a percentage of net sales will decline and Profit as a percentage of net sales will
rise.

Examine the income statement for Vinamilk in more detail. The cost of doing
commercial activities, which includes selling, general and administrative, and
finance costs, falls by 1.9% over time. Additionally, the figures for Cost of Goods
Sold (COGS) increased significantly between 2019 and 2021 by 3.6%. COGS,
which includes the cost of finished goods sold as well as the cost of services, is a
significant factor in total profitability. The consequences of COVID-19 in late
2019, the rising customer demand, the growth of manufacturing scale, and better

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production standards are to blame for the company's increase in COGS. The
business's revenues have increased as a result of lower expenses and higher COGS.

The progressive drop in the Earnings before Interest and Taxes (EBIT) number,
which is 1.7% over the course of three years, has also been caused by the increase
in COGS and the decrease in Expenses. Interest Expenses saw a slight fluctuation,
reducing to 0.14% after this index rose by 0.03% between 2019 and 2021, which
led to the decrease in Taxable Income. The research period witnessed a moderate
fall in Taxes, from 3.91% in 2019 to 3.66% in 2021. This has caused the Net
Income to decline over the period.

3. Financial ratios analysis

a. Liquidity ratios
LIQUIDITY
RATIOS
2019 2020 2021 Ind
Current ratio = CA/CL times 2.06 2.43 2.38 2.08
Quick ratio =
(CA-Inventory)/CL times 1.72 2.09 1.98 1.43
Figure 8: Liquidity ratios of Vinamilk

- Current ratio: The current ratio is a liquidity ratio that measures a

company’s ability to pay short-term obligations or those due within one
year. Generally, it can be seen that current ratios experienced a gradual
upward trend from 2.06 in 2019 to 2.38 in 2021. The solvency of Vinamilk
was always guaranteed at around 2 and the company had a greater ratio
compared to the industry average in 2021, which means that the company
was effective in paying short-term debts by its current assets during the
period.

- Quick ratio: The quick ratio measures the dollar amount of liquid assets
available against the dollar amount of current liabilities of a company. The
quick ratio of Vinamilk climbed from 1.72 in 2019 to 2.09, which was
because of a slight decline in the Inventory. However, in the following year,
the increase in Inventory resulted in a reduction in the quick ratio. Besides,
the quick ratio was greater than the industry average in 2021; therefore, the
business was able to pay its short-term debts with its liquid assets.

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 b. Financial leverage ratios:
FINANCI
AL
LEVERA
GE
RATIO
2019 2020 2021 Ind.
Total Debt ratio = TD/TA times 0.335 0.305 0.328 1.23
Equity Multiplier (EM) =
TA/TE times 1.50 1.44 1.49 1.78
Figure 9: Financial leverage ratios of Vinamilk

- Total Debt ratio: Total debt to total asset is a ratio used to visualize how
financially stable a company is. During the period from 2019 to 2020,
Vinamilk’s debt to assets remained stable at a safe level, below 1 and below
the industry average. It shows that the company’s financial autonomy was
relatively high, and most of the business’s assets are financed by its equity.
Hence, investing in Vinamilk was not as risky as in other firms.

- Equity Multiplier (EM): The equity multiplier is a ratio that measures the
portion of a company’s assets financed by stockholder’s equity. This ratio of
Vinamilk was greater than the industry average in 2021, which indicates that
the corporation relied more on financing from debt and other liabilities. It
means that the firm had a lower debt burden, and it would be able to sustain
a healthy business with its own cash flow.

c. Turnover ratios:

TURNOVER
RATIO
2019 2020 2021 Ind.
Receivables Turnover = Sales /
Account Receivable times 12.7 11.80 10.71 17.31
Total Asset Turnover (TATO) = Sales/
TA 1.283 1.268 1.172 1.37

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 Inventory Turnover = COGS /
Inventory times 5.97 6.52 5.11 30.83
Figure 10: Turnover ratios of Vinamilk

- Receivables Turnover: The receivables turnover ratio measures the

efficiency with which a company is able to collect on its receivables or the
credit it extends to customers. This ratio of Vinamilk saw a steady decline
from 12.7 in 2019 to 10.71 in 2020, and it was lower than the industry
average. This leads to the fact that the company’s collection of accounts
receivable was not efficient and Vinamilk had a low proportion of quality
consumers that pay their debts quickly.

- Total Asset Turnover (TAT): The asset turnover ratio shows how
efficiently the firm uses its assets to produce revenue compared to other
businesses in the same industry. Between 2019 and 2021, this ratio of
Vinamilk fell from 1.283 to 1.172, lower than the industry average ratio
(1.37), which illustrates that the company worked less efficiently in this
period.
f
- Inventory Turnover: Inventory turnover measures how efficiently a
company uses its inventory. Despite its rise from 2019 to 2020, this ratio
declined significantly to 5.11 in 2021. In addition, the inventory turnover
ratio of Vinamilk was much lower than the industry average, which implies
a sign of weal sales of the company.

d. Profitability ratios:

PROFITABILITY
RATIO
2019 2020 2021 Ind.
Profit Margin (PM) = Net Income / 12.99%
Sales % 18.40% 18.29% 17.01%
Return on Assets (ROA) = Net Income
/ TA % 23.61% 23.20% 19.94% 6.97%
Return on Equity (ROE) = Net Income
/ TE % 35.50% 33.39% 29.66% 12.03%
Figure 11: Profitability ratios of Vinamilk

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 - Profit Margin: By calculating the profit margin, we can compute the
percentage figure that indicates the percentage of profit the business has
generated for each dollar of sale. In the case of Vinamilk, the company’s
profit margin went down over the period, from 18.40% in 2019 to 17.01% in
2021. This may imply that Vinamilk’s ability to transfer sales into profit
decreased because much as the firm’s revenue was high, it also had a large
amount of expenses. Although there was a reduction in this ratio, Vinamilk
still remained this ratio greater than the industry average. Hence, Vinamilk
seems to manage the business efficiently.

- Return on Assets (ROA): This ratio indicates the effectiveness of using

assets to generate revenues. Even though there was a gradual fall over the
three-year period, compared to the average ROA of the industry which is
12.42%, Vinamilk’s ROA was still considered a high rate and the firm had
been managing its assets effectively.

- Return on Equity (ROE): ROE is used to measure the profitability of a

corporation in relation to stockholders’ equity. Compared to the average of
the food industry, Vinamilk’s ROE was rated to remain high, but it can be
seen that the business’s ROE decreased steadily from 35.5% in 2019 to
29.66% in 2021. The reason for this reduction is that the company’s equity
went up continuously while net profit after tax stayed relatively unchanged.

e. Market value ratio:

MARKET
VALUE
RATIO
2019 2020 2021 Ind.
Price earnings ratio (P/E) = Price per
share / EPS times 21.27 22.81 19.13 14.41
Price to book ratio (P/B) =
Price per share / Book value per share times 6.82 6.76 5.04 3.17
Figure 12: Market value ratios of Vinamilk

- Price earnings ratio (P/E): P/E ratio is the ratio for valuing a company that
measures its current share price relative to its per-share earnings. Overall,
there was a fall of 2.14 times in the price earnings ratio during the period.

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 Additionally, this ratio of Vinamilk was higher than that of the industry
average, which means that investors had to pay more to purchase a share of
the company’s earnings.

- Price to book value (P/B): The P/B ratio measures the market’s valuation
of a company relative to its book value. Generally, the price to book value
ratio of Vinamilk saw a remarkable decrease from 6.82 to 5.04 between
2019 and 2021. It is obvious that in the case of Vinamilk, this ratio was quite
high and was much greater than the industry average. This may be because
the company’s development had been highly expected for the future, so
investors had been willing to pay more for the book value of the business.

4. Dupont analysis
DUPONT
ANALYSIS
2019 2020 2021 Ind.
PM = Net income / Sales 18.40% 18.29% 17.01% 12.99%
TATO = Sales / TA 1.283 1.268 1.172 1.37
EM = TA/TE = 1 + TD/TE 1.5 1.44 1.49 1.24
ROE 35.50% 33.39% 29.66% 22.21%
Figure 13: Dupont analysis

The fact that the company's Profit Margin, Return on Equity, and Return on Assets
indices have all declined over the past 3 years, demonstrates that Vinamilk is
unable to generate more profits. This is a negative development for the business,
and they must raise these figures to draw in additional financiers for new
endeavors. Additionally, Total Assets Turnover has declined during the previous 3
years, which indicates that the company's liquidity has diminished and its danger of
running out of money has grown. These might result in a decline in the number of
risk-taking investors, and if this scenario persists, it will be difficult for the firm to
obtain money in the future. On the other hand, the Equity Multiplier ratio tends to
stay unchanged, proving that Vinamilk is still managing its equity and debt
effectively to finance the purchase of assets.

When comparing Vinamilk’s Dupont indexes with the dairy industry average, most
indices including Profit Margin, Total Assets Turnover, and Return on Equity are
higher than the industry average. It is not difficult to understand why Vinamilk,
despite its gradual decline in profit margin over the years, is still higher than the

15
dairy industry in general. Vinamilk has achieved success in becoming the firm with
the greatest market share in the dairy sector thanks to the finest milk quality in
Vietnam, national distribution, coupled with the largest scale of milk production in
the country. The industry's biggest income is produced by Vinamilk, whose
products are consistently consumed at the highest rates. Additionally, one of the
things that helps Vinamilk consistently keep its net income at the top of the sector
is the company's development plan. Vinamilk constantly increases the quantity and
variety of its goods to become one of the 30 largest dairy enterprises in the world.
As a consequence, the business can grow its business and boost sales, making it
more successful than its rivals.

 Problems:
According to the Dupont research, changes in Total Assets Turnover (TAT) and
Equity Multipliers are to blame for the declining ROE (EM).

When we take a deeper look at TAT's analysis, we can say that the company's
Current Assets, specifically its Accounts Receivable and Inventory, are the key
areas of concern. The DSO of Vinamilk is excessive in terms of Accounts
Receivable. The issue of customers misappropriating funds has lasted for far too
long since the company did not implement the payment discount policy to its full
potential to recover money more quickly. Vinamilk's inventory expanded as a
result of the Covid-19 pandemic's effects and market changes, which also
increased the cost of Inventory storage. Additionally, because dairy products must
be stored under extremely strict conditions and have a limited shelf life, the
company's inventory suffered significant damage during the Covid-19 period,
resulting in a decrease in net income and, subsequently, ROE. The company has
also not developed any campaigns to move inventory more quickly or efficiently
organized management to carefully monitor and avoid loss and damage to the
inventory.

In terms of Equity Multiplier, we can see from the data for Vinamilk’s finance that,
the Total Debt (equals Total Assets – Total Equity) of this firm experienced a
significant increase over the 3-year period. This indicates that the company
borrowed more money and it used more debt to purchase assets, which rose the
Equity Multiplier remarkably, and consequently, ROE.

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 III. CONCLUSION
For the purpose of studying the company, financial analysis is crucial. The
company is able to study the growth of its industry and assess how effective its
strategy for competing with other rivals is by going through the processes of a
business analysis step by step. In addition, the organization's financial performance
is assessed to ascertain profitability and how well the company is run in order to
provide a sustainable plan for the future.

All in all, the analysis shows that Vinamilk's financial indices are largely in a good
direction. Vinamilk has one of the best financial performances of any company in
its sector. Because the majority of the company's resources are backed by its own
stock, it can pay its debt in cash, and it has a positive free cash flow to equity, both
of which are encouraging indicators for investors. Furthermore, Vinamilk’s
operating cash flow and sales have both been rising quickly over the year. So far,
the entity is doing very well but still cannot avoid making difficult choices even
when everything is calculated and evaluated. Therefore, the business needs to limit
the potential risk by reducing costs, focusing more on the value of the item to build
customer confidence, and the creating a sustainable development firm.

So far, the company is doing

very well but still cannot avoid
making difficult choices even
when everything is calculated
and
17
evaluated. Therefore, the entity
needs to limit the potential risk
by reducing costs, focusing
more
on the value of the item to build
customer confidence, and then
creating a sustainable
development
firm.

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REFERENCES
1. The company’s background: https://www.vinamilk.com.vn/en
2. Vinamilk’s financial statements:
- 2019:
https://www.vinamilk.com.vn/static/uploads/documents/bctc/1588397927_B
%C3%A1o_c%C3%A1o_t%C3%A0i_ch%C3%ADnh_h%E1%BB
%A3p_nh%E1%BA%A5t_Q4-2019-EN_%C4%91%C3%A3_so
%C3%A1t_xet.pdf
- 2020:
https://www.vinamilk.com.vn/static/uploads/documents/bctc/1614600464_B
CTC_Hop_Nhat_31.12_.20_-_EN-FN_.pdf
- 2021:
https://www.vinamilk.com.vn/static/uploads/documents/bctc/1646046854_C
onsol_31.12_.2021_-_EN_.pdf
3. Vinamilk’s annual reports: https://www.vinamilk.com.vn/en/annual-reports
4. The industry average: https://www.stockbiz.vn/IndustryOverview.aspx?
Code=3500

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