VIM - Despite being one of the top three pangasius exporting corporations in the country and undertaking real estate projects spanning hundreds of hectares, the market price of IDI shares remains low when compared to others in the fisheries sector.
In addition to seafood processing, IDI is also involved in real estate
Profits drop due to pandemic and increased shipping costs
The financial report of I.D.I International Development & Investment Corporation (IDI) at the end of the third quarter of 2021 demonstrates that the business picture is not particularly bright in the context of commercial activities suffering from various bad effects of the pandemic.
In particular, in the third quarter of 2021, IDI's consolidated net revenue decreased by 26.64% year-on-year to VND1,110.9 billion, with the simultaneous decline in the two segments with the largest proportions in the revenue structure, which are goods & finished products of pangasius, and fishmeal & fish fat, with a decrease of 31.64% and 35.5% respectively over the same period. Animal feed was the only segment that recorded growth, with 11.87%, but not enough to compensate for the decline of the two segments mentioned above.
According to Mr. Le Van Chung, General Director of IDI, in the third quarter of 2021, the Corporation had to use the "4 on-site" manufacturing method and could only maintain from 30 to 40% of capacity when the Covid-19 pandemic broke out the greatest, especially in the southern provinces where they had to adopt social distancing for a long time.
When China, IDI's primary export market, tightens rules on imported seafood due to fears of the virus spreading through imported items, the situation becomes even more challenging.
On the other hand, the gross profit margins of all three main business segments have improved (the service segment had a loss but a low contribution rate), resulting in a consolidated gross profit margin of 8.97% in the third quarter of 2021, an increase of 1.46 percentage points over the same period last year, allowing the Corporation's gross profit to decrease only 12.4%, less than half of the decrease in revenue.
Animal feed, in particular, has increased to have the greatest gross profit margin at 14%, up from 1.5% in the same period previous year.
Due to the fact that export is a key business activity, besides difficulties from the pandemic, IDI also faced a galloping increase in international sea freight rates, making transportation costs increased by 75.3%, thereby, contributing to a decrease in profit even though administrative and financial expenses were generally reduced compared to the same period last year.
As a result, IDI only made a pre-tax profit of VND15.3 billion, down 56.7% from the same period last year. Due to the impact of higher corporate income tax charges, profit after tax fell 69.1% to VND 9.9 billion in the same time.
Accumulated in the first 9 months of 2021, IDI recorded consolidated net revenue of VND 4,311 billion, down 3.1% over the same period last year, while its profit after tax was VND 57.98 billion, down 20.2%.
At the 2021 Annual General Meeting of Shareholders, the Board of Directors of IDI submitted and approved the business plan this year at VND 6,900 billion in revenue and VND 162 billion in profit after tax. Thus, the prospect of reaching the target of the full-year business plan is a big question as at the end of two-thirds of the 2021 journey, IDI has only reached 62.5% of the revenue plan and 35.8% of the after-tax profit plan.
Prospects are getting brighter
IDI now maintains the almost 30-hectare Sao Mai Industrial Park, which includes a fishmeal and fish fat processing factory for export, a Sao Mai aquatic food processing factory, and a fish cooking oil factory. IDI has two factories with three processing workshops, with a total capacity of 450 tons of raw fish per day, and two frozen warehouses with a capacity of thousands of tons, in the fish processing area.
With the advantage of cold storage, the Corporation's financial report for the third quarter of 2021 shows that IDI stored VND 1,400 billion at the price of cheap pangasius (17,000 - 18,000 VND/kg, currently, increased to nearly 24,000 VND/kg). When the pandemic is under control, localities and social distancing are reduced, IDI's business prospects may improve in the fourth quarter of 2021, especially as demand for eating out and the price of export fish rise rapidly.
According to the Vietnam Association of Seafood Exporters and Producers (VASEP), the Latin American market has witnessed a positive signal for pangasius exports from the end of 2021.
The Mexican and Brazilian markets are particularly noteworthy. The entire value of pangasius exports to Brazil climbed by more than 1.5 times from the first half of October to mid-November 2021, reaching 47.44 million USD. Brazil's food import demand is expected to skyrocket in the latter months of 2021 and throughout 2022. Pangasius is currently sourced primarily from Vietnam. The Mexican market is growing at a comparable or even faster rate.
In these markets, IDI has a significant market share. In 2020, the Corporation's export turnover to the Mexican market stood for more than 22% of total exports. The Corporation's export orders have been signed till the end of the second quarter of 2022, according to Mr. Chung. Fish export prices in Latin America are currently at US$4/kg, roughly double what they were in the same period last year.
VASEP has estimated that Vietnam's pangasius price will continue to increase in the first 6 months of 2022 due to a possible shortage of raw materials on a large scale.
The pandemic of Covid-19 is still causing difficulties in the pangasius export sector in Vietnam and around the world. If a result, businesses that have enough of raw materials and are proactive in the input stage will have a huge advantage, especially as fish prices rise owing to a scarcity of supply. The pangasius industry's exports surged sharply in November, restoring what had been lost during the preceding three months of social distancing.
With a fish farming and associated farming area of up to 400 hectares (according to the annual report of the business), IDI can be proactive in delivering raw materials to factories as farmers are provided with seed, animal feed, biological goods, and purchased output products.
Due to the faster increase in the output selling price compared to the input material price, this fact may lead to the anticipation that the Corporation's gross profit margin will continue to improve in the future.
After nine months, IDI's operating cash flow achieved a surplus of VND 280.5 billion, reversing a negative VND 633 billion in the same time last year. On the one hand, this surplus supports the Corporation's investment needs, and on the other hand, it provides resources to assist the Corporation in debt reduction.
IDI's loan balance declined by VND 284 billion in the first nine months of 2021. The majority of IDI's huge loan balance is used to fund working capital requirements, with a particular focus on receivables and inventories. The Corporation's cash balance and cash equivalents were VND 520.7 billion by September 30, 2021, with VND 1,076 billion in bank deposits and bonds.
According to the annual report of IDI, the Corporation spent more than VND 400 billion to carry out site clearance for the Binh Long real estate project, Chau Phu District, An Giang Province with an area of nearly 130 hectares. As planned, in 2021, the Corporation completes all legal procedures to start the project in early 2022 and had products for sale in 2022.
In addition to the project in An Giang, according to Mr. Le Van Chung, IDI is carrying out site clearance procedures for Sao Mai New Urban Area project in Thoi Thuan Ward, Thot Not District and Vinh Trinh Commune, Vinh Thanh District (Can Tho).
The project has a scale of 180 hectares, with a total investment of nearly VND 2,470 billion. In addition, the Corporation is implementing legal procedures for the Residential Area project in Lap Vo (Dong Thap) with a scale of over 100 hectares.
IDI shares experienced a series of surprising price surges, rising from 10,000 VND/share to 25,000 VND/share, before plummeting after the news that the Corporation's Chairman had registered to sell 12.5 million shares.
Although Mr. Le Thanh Thuan had a put-through transaction at 19,000 VND/share shortly after the announcement, the quick rise and fall in stock prices of this Corporation in recent months, as is typically the case with highly speculative equities, has caused many investors to be concerned./.
