Positive signals from the $7 billion system
Masan Group (MSN), chaired by Nguyen Dang Quang, has just announced its 2023 business results, with net revenue increasing slightly by 2.7% compared to the previous year, to nearly VND 78,300 billion. Profit after tax was at VND 1,900 billion.
This is a fairly positive result after a year of declining consumer demand in the country, as well as in the world. Many manufacturers and retailers in the domestic market have had to engage in a "bloody" price-cutting race.
The most notable point is that the core consumer business segment continues to record sustainable growth, while the retail business segment shows signs of achieving good profits in the medium term.
Thus, for the first time since the Covid-19 period, the WinCommerce retail system (WCM) has almost reached the EBIT break-even point (earnings before interest and taxes). This is an important milestone for Masan on the roadmap to reach the break-even point in after-tax profit of the entire network in 2024.
WinCommerce (formerly known as VinCommerce - VCM) is the owner of the VinMart and VinMart+ systems, which were acquired by Masan from Vingroup Corporation (VIC) of billionaire Pham Nhat Vuong. This system was later changed to WinMart.
VinCommerce used to be the great ambition of Vietnam’s richest billionaire in the battle with foreign giants in the domestic retail market. Over the past 5 years, Mr. Vuong has focused on the VinFast electric vehicle segment and expanded into international markets.
Up to now, there is no complete information about the total amount of money that Mr. Nguyen Dang Quang's company spent to buy this retail system, but there are some numbers showing the huge scale of the deal.
In the audited consolidated financial report for 2020, there is a notable piece of information, a transaction worth 1 billion USD with Vingroup. In June and August 2020, Masan spent nearly 23,700 billion VND to buy an additional 14.8% of The CrownX's equity from Vingroup and increased its ownership ratio to 84.8%. Previously, Masan spent a lot of money to build a retail and consumer empire for the group. In 2020, Masan used up to 25,200 billion VND of undistributed after-tax profit to spend on the VinCommerce merger.
The CrownX is a company established by Masan and Vingroup to hold capital at VinCommerce Development and Trading Services JSC and Masan Consumer Holdings (MCH - the company that owns the consumer goods manufacturing sector of Masan Group).
With subsequent transactions, CrownX was valued at 7 billion USD, higher than many corporations such as Hoa Phat (6.6 billion USD) of billionaire Tran Dinh Long or Masan itself (3.8 billion USD, as of February 7).
Continuing the retail dream with a retail-consumer empire
The M&A deal to merge a giant in the retail-consumer industry is considered a bright spot for Vietnamese retail after a decade of being overwhelmed by Korean, Thai and Japanese retailers recently. It also shows the desire of Vietnamese businessmen to conquer the top and reach out to the world.
Dr. Nguyen Dang Quang said that WinCommerce is on track to reap sustainable profits in 2024. Masan Consumer Holdings is returning to growth trajectory.
According to Mr. Quang, Masan's core consumer business segment continues to record EBIT growth of 40.1% in 2023 compared to the same period thanks to the record profit of Masan Consumer Holdings (MCH) and the sustainable profitability of WinCommerce despite weakening consumption affected by micro- and macro-economic conditions.
The CrownX (TCX) retail-consumer platform recorded a revenue growth of 2.6% to nearly VND57,700 billion in 2023. In the fourth quarter of 2023 alone, revenue reached nearly VND16,000 billion, up 3.1% over the same period.
WCM continues to grow its EBIT and record positive profit after tax for the grocery product group in the fourth quarter of 2023. This is an important milestone for WCM's roadmap to achieve break-even profit after tax for the whole year. In 2023, WCM recorded revenue of more than VND 30,000 billion, up 2.3% over the previous year. In the fourth quarter of 2023, revenue reached VND 7,653 billion, up 3% over the same period.
Since Vingroup's retail division was acquired by Masan, WCM has continued to open new stores while converting and upgrading its store model.
In 2023, WCM will prioritize renovating and upgrading stores with models suitable for consumers in rural and urban areas (Win and WinMart+ rural stores). By the end of 2023, WCM will have 3,633 stores and supermarkets nationwide. Of these, a total of 1,615 stores will be upgraded.
In fact, if it weren't for the Covid-19 pandemic, Masan's retail segment would have seen steady profit growth. Immediately after falling into the hands of billionaire Nguyen Dang Quang, the giant retail system began to make a profit. By the end of 2020, VinCommerce officially completed the first phase of the transformation process, recording a positive EBITDA (earnings before interest, taxes, depreciation and amortization) of 0.2% with an absolute value of VND16 billion.
Recently, Masan has also accelerated its journey to become a leading online-offline integrated retail consumer group. According to the 2023 unaudited financial report, Masan's global FMCG platform has shown positive results when Chinsu chili sauce is in the top 8 best-selling products on Amazon.
On the other hand, operating in many fields also makes it difficult for multi-industry corporations like Masan in the context of high global interest rates and geopolitical instability in many parts of the world, affecting input costs.
Recently, sharing on Nikkei Asia, Masan Group CEO Danny Le said that the WinMart supermarket chain is one of Masan's expansion steps and the group will create conditions for new business segments to achieve good profits in the medium term.
According to Mr. Danny Le, the era of cheap money and taking losses to gain market share is over. The period when international investors accepted losses in a multi-billion dollar company, in the context of high capital costs like today, is over.
In 2023, Masan's cash flow signal is also quite good. Bain Capital has invested in Masan. Masan can increase the investment from Bain and potential investors to 500 million USD. Korea's SK Group also committed to continue to accompany Masan for a long time, being a long-term partner.
Mr. Quang's business recorded strong growth in free cash flow, with a large cash position, reaching more than 14,000 billion VND.
Source
Comment (0)