3.

3:Assessment
3.3.1: Vinamilk financing in short term
Advantages:
-Saving borrowing costs: Borrowers will not have to pay too high
interest rates, due to the short term of the loan.
In 2022, the short-term lending rate of the State Bank of Vietnam is
4.5% - 5.5%, while the long-term lending rate can be up to 8-9%. The use of
short-term capital helps Vinamilk save borrowing costs and increase profits for
the company.

-Flexible negotiation: Short-term funding is often easier to negotiate and

flexible than long-term, short-term loans.
In 2020, Vinamilk signed a short-term loan contract with Vietcombank
with a loan term of 12 months and an interest rate of 4.5% per annum. This
allows Vinamilk to renegotiate short-term loan contracts with better interest
rates if there is an opportunity in the future.

-Increase liquidity: Vinamilk can use short-term capital sources to

quickly meet the company's short-term financial needs without having to sell
assets or take other measures to increase liquidity.
According to Vinamilk's Q4/2020 financial report, the company has an
amount equivalent to more than 8,500 billion VND. This provision allows
Vinamilk to easily use short-term capital sources to meet the company's short-
term financial needs.

-Effective financial management: Using short-term capital helps

Vinamilk manage its finances more effectively, because the company does not
have to accept high risks from long-term borrowing or investing in long-term
loans.
According to Vinamilk's financial statements for 2021, the company
used Short-term Capital to finance its business activities, helping Vinamilk
achieve a higher profit in that year.
Disadvantages:
-Higher interest rates: When Vinamilk uses short-term capital, they have
to pay higher interest rates than using long-term capital. This can affect the
company's bottom line.
According to Vinamilk's 2019 financial report, the average interest rate
of short-term debt is 4.2%, while the average interest rate of long-term debt is
only 3.5%. This shows that Vinamilk has to pay higher interest rates when
using short-term capital.
-Pressure to pay debt: When using short-term capital, Vinamilk will
have to repay the debt in a shorter time. This can put financial pressure on the
company, especially if sales or profits drop.
Vinamilk's total short-term debt at the end of 2019 was 5,828 billion,
accounting for about 49.5% of the company's total debt. This shows that
Vinamilk is facing great debt repayment pressure in a short time.
 -Lower borrowing capacity: When Vinamilk uses too much short-term
capital, it may have difficulty in obtaining long-term loans. This may affect the
company's ability to expand or grow in the future.
Vinamilk has used most of its short-term loans to invest in its business,
however, this may reduce the company's ability to borrow long-term capital to
invest in development projects. long-term development.
-Financial risks: Excessive use of short-term capital can increase
financial risks for Vinamilk. Failure to pay debts on time or increase interest
rates can affect the company's ability to operate.
With a large amount of short-term debt, Vinamilk will face higher
financial risks if it is unable to repay the debt on time. In addition, in the event
of an increase in interest rates, the company will have to pay higher interest
rates on short-term liabilities, affecting the company's ability to operate.
- Risks from suppliers, commercial credit creditors: suppliers will set
requirements and conditions for the application of trade credit to Vinamilk.
For example:
+The supplier may request Vinamilk's consent to use the brand name,
logo, image or any information related to Vinamilk in the application of
commercial signals.
+ Suppliers can request the right to use images and information about
Vinamilk's products for use.

3.3.2: Vinamilk financing in long term

Advantages:
-Increase investment and development capacity: When using long-term
capital, Vinamilk can invest in large projects and prolong the payback period.
This helps Vinamilk to develop products, expand production scale, improve
product quality and launch new products to serve market needs.
Issuing new shares can help Vinamilk increase the company's charter
capital, thereby increasing the company's ability to implement investment and
development plans.Vinamilk issued more than 42 million new shares in 2019,
thereby increasing the company's charter capital to VND 10.6 billion (up
14.5% compared to 2018).
Issuing bonds can help Vinamilk meet the company's capital needs
without having to sell shares or increase charter capital. The bond issuance in
2019 helped Vinamilk raise a large amount of capital to invest in production
and business activities and promote a strong development strategy in the future.
In 2019, Vinamilk issued bonds worth 2,000 billion with a fixed interest rate of
6.1% per annum, with a term of 5 years.
In 2020, Vinamilk has invested in many new projects, including a dairy
factory expansion project in Hung Yen, a project to develop a cow's milk
supply chain in Vietnam, and a number of projects in other regions. foreign
markets such as Myanmar and China. The total investment cost of these
projects has reached more than 5,500 billion VND, and are all financed by
long-term capital. As a result, Vinamilk achieved revenue at VND 61,774
billion and profit after tax at VND 10,360 billion in 2020.
 -Reducing financial pressure: When using long-term capital, Vinamilk
can reduce financial pressure on interest and debt repayment. This enables the
company to focus on growing its business and enhancing its competitiveness in
the market.

-Increasing competitiveness: Using long-term capital helps Vinamilk

increase its competitiveness with other competitors by improving products and
services, strengthening management, and investing in research and
development.
Vinamilk has invested in research and development of new products and
improved customer service to increase competitiveness in the dairy industry in
Vietnam. In 2020, Vinamilk has become the most favorite dairy brand in
Vietnam with 39.7% market share.

-Increased stability: When using long-term capital, Vinamilk can ensure

stable capital in the long run, helping the company avoid negative impacts from
the financial market.

-Increase the reliability of partners: When Vinamilk uses long-term

capital, partners, investors and customers will feel more secure when
cooperating with the company, because the company has the ability to repay
debts and develop long-term development.
According to the financial statements of 2020, Vinamilk's total long-
term debt balance is VND 8,929 billion, accounting for about 50% of the
company's total assets. This shows that Vinamilk has used a large part of its
long-term capital to invest in production and business development.

-Increase stock value: When Vinamilk uses long-term capital for

development investment, the company's value will increase, thereby increasing
the stock value and attracting the attention of investors.
In 2020, Vinamilk shares have increased in value by 32% compared to
the previous year, from 106,000 VND/share to 140,000 VND/share. Investment
in projects to develop and expand the market has helped increase the value of
Vinamilk shares.
Disadvantages:

-High financial costs: Using long-term capital may require higher

financial costs than using short-term capital or owning it. Therefore, this may
affect Vinamilk's profit.
Example: According to Vinamilk's 2021 financial statements, the
average interest rate the company has to pay on long-term debts is about 5.5%.

-Financial risk: The use of long-term capital may lead to higher financial
risks, especially if Vinamilk is unable to repay its debt on time. This can affect
the image and reputation of the company in the financial markets.
 -Asset regime: Using capital with a term may limit Vinamilk's ability to
own assets. Therefore, if Vinamilk is unable to repay the debt on time, the
company may face the loss of important assets or have to liquidate assets to
repay the debt.
According to the financial statements for 2021, the ratio of long-term
assets to total assets of the company is only about 23%, which means that the
company only owns a small part of long-term assets. This provision may affect
Vinamilk's financial ability in case the company faces financial risks.

-Effect on stock price: If Vinamilk issues shares to raise long-term

capital, this may reduce the value of the company's shares. This may affect
investors' interest and affect Vinamilk's share price on the stock market.
In 2021, Vinamilk issued 13 million shares to raise capital with an
average price of 108,000 VND/share. The issuance of these shares has reduced
the value of Vinamilk's shares on the stock market.

https://www.investing.com/equities/vietnam-dairy-products-jsc-ratios
https://www.vinamilk.com.vn/en/financial-information
https://www.vinamilk.com.vn/en/mobile/investor-relations/financial-
reports