Masan Group Corporation’s core net profit after tax post-minority interest (NPAT Post - MI) was worth VND2.307 trillion (US$98.88 million) in the first nine months of the year, up 90.2 per cent from the same period last year, its results released on Monday show. Its core NPAT Post-MI margin increased to 8.7 per cent in the January-September period from 4.4 per cent during the same period last year.
Core profit excludes net one-time gains (non-core) of VND1.472 trillion primarily from the “deemed disposal” of the company’s interest in Techcombank as a result of the lender’s recent equity issuances at a price higher than the company’s carrying value.
During this period the group’s combined earnings before interest, taxes, depreciation and amortisation (EBITDA) from its subsidiaries went up by 24 per cent year-on-year to VND7.718 trillion from VND6.241 trillion in the same period last year, mainly driven by SG&A (selling, general & administrative expense) rationalisation and operational efficiencies.
Masan Group posted net revenues of VND26.63 trillion in the period, down 3 per cent year-on-year, mainly due to the impact of the pig price crisis on Masan Nutri-Science’s topline. Excluding MNS, consolidated net revenues would have grown by 29 per cent in the first nine months.
Of the group’s subsidiaries, Masan Consumer Holdings continued to be the growth engine for Masan during the first half of 2018, backed by strong revenue growth in core consumption products and new growth drivers in seasonings, beverages, processed meat and beer.
MCH posted net revenues of VND11.907 trillion in the first nine months, a year-on-year increase of 33.3 per cent.
MCH is expected to achieve EBITDA of nearly VND4 billion in the 2018 fiscal year, up nearly 50 per cent from 2017.
As for MNS, lower pig prices in the first five months of 2018 coupled with a longer-than-expected delay pickup in commercial feed demand resulted in MNS achieving net revenue of VNĐ10.035 trillion in the first nine months, down 31.2 per cent year-on-year.
However, pig prices have held up at around VND50,000 per kilogramme since there is a structural supply deficit in Viet Nam currently. With swine flu issues emerging in China coupled with a spike in year-end demand due to the 2019 Tet holiday, prices are expected to stay strong over the near term.
Subject to a recovery in the pig feed market, MNS’s net revenue is expected to be down 20-30 per cent this year. However, the management expects a stronger recovery in 2019 if pig prices continue to hold up at around current levels.
Despite lower tungsten head grades resulting in 14.1 per cent reduction in tungsten equivalent units production, Masan Resources (MSR) recorded an EBITDA margin of 50.4 per cent, representing a 32 basis points increase over the same period in 2017.
MSR has already delivered $30 million in free cash flow during the first nine months, and is expected to deliver 30 per cent growth in free cash flow for 2018.
Techcombank, in which Masan is a sole shareholder, reported a profit before tax of VND7.77 trillion in the first nine months, a year-on-year increase of 61 per cent.
Its total operating income was VND13.29 trillion, an year-on- year increase of 25 per cent. In addition, the bank continues to diversify its revenue base, in line with its strategic direction.
Masan’s chairman and CEO Dr. Nguyen Dang Quang, said: “We continue to execute our medium-term growth plans. Masan Consumer’s premiumisation and beverage strategy is showing sustainable traction positioning us to grow 2-3x Viet Nam’s FMCG retail sales growth rate over the next few years. Masan Resources’ acquisition of the high-tech tungsten chemical plant is a strategic step to generate strong cash flows across commodity cycles.
“We aim to double the plant’s capacity to further consolidate ex-China tungsten market share. Techcombank’s customer and technology-centric business model has made it the fastest growing and most profitable bank. This trend will continue as the bank prioritises fee income and services over interest income.
“However, not all has gone according to our plan. Masan Nutri-Science is still feeling pain from the pig price crisis. The feed market has since been recovering, but our strategic bet is on meat not feed.
“We have started selling pig livestock with great results, but this will cease in 2019 as we begin to fully process our pig supply into branded meat products for consumers. We look forward to closing the year on a strong note and crystallising our foundation to deliver double digit top and bottom line growth for 2019 and beyond.”
Masan plans to **** interest expenses by approximately VND1 trillion a year starting in the fourth quarter. Gross debt to EBITDA is expected to decrease to 2.5x by 2018 year-end as a result of the planned paydown of over VND11 trillion in debt in the fourth quarter.
The company’s deleveraging is part of its effort to achieve a credit rating that is on par with Viet Nam’s long-term sovereign credit rating of BB- within the next 12 months.