Why does Minh Phu plan to make a profit of thousands of billions this year?
Minh Phu Seafood Corporation (UPCoM: MPC) has just announced its 2023 Annual Report. In 2024, MPC aims to bring in VND 15,805.8 billion in revenue, an increase of about 46% compared to 2023; after-tax profit reaches VND 1,021.5 billion.
Thus, after a heavy loss in 2023 (in 2023, Minh Phu Seafood's after-tax profit was negative 105 billion VND), MPC expects to regain growth momentum and this is also the highest profit since 2008. Minh Phu CEO Le Van Quang said that this is a plan to mark Minh Phu's return after a year of heavy losses.
According to information in the 2023 annual report, Mr. Le Van Quang - General Director of MPC said that the epidemic has made the already high cost of shrimp farming in Vietnam even higher in 2023. Meanwhile, Ecuador's shrimp farming output increased to 0.8-1.4 million tons, causing global shrimp supply to exceed demand, causing shrimp prices to drop sharply (only 50% of the farming cost).
We still suffer heavy losses from raising "3 clean" shrimp despite high productivity because the cost price and selling price of shrimp are too low. In 2019-2020, the price of 30 shrimp/kg was 280,000 VND/kg, but now it is only 80,000 VND/kg, because supply exceeds demand. While the cost price of 30 shrimp/kg is at least 100,000-120,000 VND/kg, with Minh Phu the cost is up to 150,000 VND/kg, but everyone wants to sell shrimp, even at a loss. That is why Minh Phu suffered heavy losses in 2023.
"Minh Phu's production and business situation encountered many difficulties, leading to the 2023 business results not reaching the plan set by the 2023 Shareholders' Meeting and suffering losses," Mr. Le Van Quang informed in the 2023 Annual Report.
In the whole year of 2023, Minh Phu Seafood's net revenue was recorded at nearly VND 10,688 billion, down 35% compared to the previous year. Gross profit was recorded at over VND 1,065 billion, down 61%. Finally, Minh Phu Seafood reported a loss after tax of VND 105 billion, while in 2022 it reached over VND 830 billion.
This is the third year that Minh Phu Seafood has recorded a loss and the year with a record low profit since 2008. With the above results, Minh Phu Seafood cannot complete the 2023 business plan of earning nearly 12,790 billion VND in revenue and 639 billion VND in profit after tax.
In 2024, Minh Phu has set a plan to produce and export 56,000 tons of shrimp, with revenue of VND 15,805.8 billion and after-tax profit of VND 1,021.5 billion.
Sharing about MPC's plans and orientations in the coming time, Mr. Quang said that MPC continues with the goal of developing the shrimp value chain towards a circular economy and a green economy on a digital platform.
Minh Phu has been digitizing the value chain and enabling traceability from hatcheries to farms, processing plants and distribution systems to consumers.
MPC's core strategy is that by 2030, the cost of Vietnamese raw shrimp will be equal to that of Ecuador and it has set out many solutions to achieve this goal.
In 2024, Minh Phu plans to produce and export 56,000 tons of shrimp with a turnover of 630 million USD. In the future, MPC sets a target of exporting 70,000 tons of shrimp with an export turnover of 720 million USD.
At the same time, the enterprise will complete and promote shrimp seed production using MPBiO biotechnology (Minh Phu BiO) with the goal that by 2035 MPC will be self-sufficient in 50% of raw shrimp demand.
In addition to focusing on the main export market, the company is looking for more orders in new markets such as China, Japan, Korea, Australia, New Zealand...
In addition, Minh Phu also increased its domestic shrimp market share this year, aiming to increase it to 5-10%.
Although shrimp exports in the first quarter showed positive signs, the difficulties of the Vietnamese shrimp industry have not been overcome.
Vietnam's shrimp exports continuously increased in the first 3 months of the year.
According to data from the Vietnam Association of Seafood Exporters and Producers (VASEP), Vietnam's shrimp export turnover in the first 3 months of 2024 is estimated to reach more than 620 million USD, an increase of 24% over the same period in 2023. Of which, shrimp export turnover to the US market is estimated to increase by 26%, while the Chinese market is estimated to increase by more than 140%.
Although shrimp exports in the first quarter showed positive signs, the difficulties of the Vietnamese shrimp industry have not been overcome.
That is: At the end of March, the US Department of Commerce (DOC) issued a preliminary conclusion in the anti-subsidy investigation of frozen warmwater shrimp (HS codes: 0306.17, 1605.21 and 1605.29) originating from Vietnam. DOC set the preliminary anti-subsidy tax rate for Vietnamese enterprises as follows: 2.84% for the only mandatory defendant enterprise and for all remaining enterprises; 196.41% for the only defendant enterprise not participating in the case.
Along with that, the risk of raw material shortage continues as at present in many farming areas, farmers are not interested in planting seeds.
In addition, the high cost of shrimp production has reduced the competitiveness of Vietnamese shrimp in the export market. According to Mr. Le Van Quang, Vietnamese raw shrimp is mainly produced on a small scale, and raw materials for food and medicine production are largely dependent on imports, so production costs are currently about 30% higher than in India and Indonesia and several times higher than raw shrimp from Ecuador.
In addition, Vietnamese shrimp is currently competing with other countries in the logistics segment. The route for Vietnamese shrimp products to the US and European markets is further and more costly than the transportation route for Indian and Ecuadorian shrimp.
In the context of shrimp exports facing a series of challenges, Mr. Le Van Quang said that to increase orders, businesses have actively participated in fairs and exhibitions. The most recent was the International Seafood Fair in Boston (Massachusetts, USA) to introduce the business's products to world importers.
In the upcoming plan, Minh Phu will continue to participate in exhibition programs to introduce products, expected to be in Japan and Korea... to reach consumers in these two countries.
Minh Phu is currently the number 1 seafood corporation in Vietnam and the leading one in the world. Minh Phu's products are currently present in more than 50 countries and territories, with a revenue of over 10,000 billion VND per year.
Mr. Quang said that Minh Phu has launched a biotechnology process called "Minh Phu BiO-MPBiO", which is a combination of 9 different shrimp farming technologies that Minh Phu has collected.
Accordingly, shrimp farming will no longer need to treat water like 3 clean technology but will use antagonistic microorganisms that Minh Phu can produce. Minh Phu has successfully tested 7 hectares of farming. In 2023-2024, Minh Phu will expand farming using BiO technology to 300 hectares, which has shown very good prospects, raising shrimp at a reasonable price and selling profitably.
Minh Phu has also signed many shrimp export contracts to the US and other countries. It is estimated that this year, Minh Phu's revenue will increase by 50-70% compared to last year, leading to this year's profits hopefully being very good.
However, there is also a lot of information that Vietnam's shrimp export industry is currently dependent on imported raw shrimp from abroad. Accordingly, Vietnamese shrimp processors import whole shrimp to process, peel and package, then export, so the profits earned domestically are not high. Not to mention, it does not encourage the development of domestic shrimp farming areas, helping farmers get rich and have more income.
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