How does "Shrimp King" Minh Phu make huge profits?

Minh Phu's after-tax profit in the third quarter of 2024 reached more than VND 198 billion, the highest in the past 7 quarters thanks to dividends received from subsidiaries.

Financial revenue increased dramatically, Minh Phu Seafood (MPC) reported the highest profit in 7 quarters

Minh Phu Seafood Corporation (Code: MPC) has just announced its third quarter financial report with net revenue of VND2,700 billion, up 35% over the same period. However, due to the high cost of goods sold, the gross profit margin decreased from 9% to 7%.

Financial revenue was nearly 32 times higher than the same period last year, reaching VND319 billion due to Minh Phu receiving dividends from its subsidiaries. The largest dividend the company received came from Minh Phu Hau Giang Seafood JSC with VND270 billion, followed by Minh Phu Seafood Supply Chain LLC with VND27 billion.

This period, Minh Phu's financial expenses increased by 48% to VND147 billion, mainly due to provisions for investment losses in subsidiaries. Other expenses such as sales and business management increased compared to the same period.

After deducting all expenses, Minh Phu reported a profit after tax of more than VND 198 billion, a significant improvement compared to the loss of VND 13.2 billion in the third quarter of 2024. This is also the highest quarterly profit in the past 7 quarters of Minh Phu.

In the first 9 months of the year, parent company Minh Phu Seafood recorded net revenue of VND6,207 billion, up 33% over the same period last year. Profit after tax in the period reached VND135 billion, 19 times higher than the same period.

Minh Phu's profit after tax in the third quarter of 2024 reached more than 198 billion VND, the highest in the past 7 quarters.

At the 2024 annual meeting, Minh Phu set a target of 70,000 tons of production this year, bringing in VND18,569 billion in revenue. In addition, after-tax profit is estimated at VND1,266 billion. This is the third time in the past 5 years that the company has set a pre-tax profit target of over a thousand billion.

As of the end of the third quarter of 2024, Minh Phu's parent company's total assets were approximately VND8,159 billion, an increase of VND588 billion compared to the beginning of the year. The company had approximately VND2,638 billion in liabilities, most of which were short-term items. Owner's equity increased slightly compared to the beginning of the period, reaching VND5,521 billion. Undistributed profit after tax was more than VND1,242 billion.

On the stock exchange, MPC shares are currently at VND16,300. This code has lost 14% compared to the highest price of the year recorded in June 2024 (VND18,900). With about 400 million shares outstanding on the UPCoM exchange, the company's market capitalization is more than VND6,535 billion.

Minh Phu's target of trillion-dong profit in 2024 still faces many challenges

According to Minh Phu Seafood's board of directors, Minh Phu's target of a trillion-dollar profit in 2024 is still facing many challenges from economic fluctuations. Specifically, Minh Phu recognizes that high inflation may continue to reduce demand for seafood consumption and increase prices of farming and processing materials. Minh Phu chooses a strategy of diversifying products, focusing on deep processing to create value-added products and maintain the quality of input materials to face this challenge.

The second issue mentioned by Minh Phu's management is the crisis in energy prices and transportation costs. Accordingly, Minh Phu said it will monitor the market and adjust its business plan flexibly, promoting expansion to Asian countries to reduce transportation costs and find niche markets as well as increase its ability to serve the domestic market. Specifically, Minh Phu said it will soon strongly exploit the domestic market again with the goal of increasing the total proportion of domestic revenue from the current 1% to 5-10%.

Minh Phu pointed out that high production costs make it difficult for Vietnamese shrimp to compete, especially in the context of declining global shrimp demand due to the economic recession.

Minh Phu said it will soon strongly exploit the domestic market again with the goal of increasing the total proportion of domestic revenue from the current 1% to 5-10%.

Up to now, the Vietnamese shrimp industry and the agricultural industry in general are facing many challenges, such as high labor costs, expensive wastewater treatment costs, substandard shrimp seed quality and unsustainable farming methods.

Many small-scale shrimp farms have not met international quality standards, such as BAP and ASC, leading to low shrimp prices. In addition, the success rate in shrimp farming in Vietnam is only 40%, much lower than Ecuador (90%) and India (60-70%).

Farming methods are also ineffective when high stocking density makes shrimp susceptible to stress and disease.

In the shrimp value chain, Vietnamese enterprises have a competitive advantage in processing, but in shrimp farming and distribution, it is difficult to compete with other competitors. In the coming time, other countries will be able to catch up and surpass Vietnam in processing because their governments and enterprises are also making great efforts to invest in processing technology.

Minh Phu is facing two major problems: low export prices of Vietnamese shrimp to markets due to competition with products from Ecuador and India.

Another problem is that the disease in farmed shrimp is complicated and has not been completely overcome, potentially causing a shortage of raw materials for processing in the second half of 2024. Shrimp processing enterprises such as Minh Phu want to achieve business profits and must be flexible with the market in the last months of 2024.

In the US market, inflation remains high. Shipping rates have also increased due to war in the Middle East and China's stockpiling of empty containers to stockpile for shipments to the US.

In China, Ecuador, India and Indonesia will focus more on this market due to high tariffs imposed by the US. Therefore, Vietnamese shrimp exported to China will face price pressure, especially whole black tiger shrimp and whole whiteleg shrimp...

Minh Phu Seafood Corporation still expects strong growth in business results in the second half of this year, helping to offset the decline in the first half of last year.

Minh Phu Seafood's Board of Directors said that the company aims to become one of the world's leading seafood suppliers in the near future with two key tasks.

Firstly, it will not compete with shrimp products from India and Ecuador through price aspects, but will focus on increasing the quality of shrimp products and creating differentiation in the market.

Second, we will focus on completing and promoting shrimp seed production using MPBio Biotechnology to lower the cost of Vietnamese raw shrimp.

Assessing the prospects of the shrimp industry, Minh Phu Seafood's board of directors said that currently, Vietnamese shrimp products are facing fierce competition from many other countries in key export markets such as the US, China and Japan.

In particular, Vietnamese shrimp is under pressure from both supply and demand. Specifically, when supply increases, demand decreases, leading to a decrease in export value. At the same time, high input material costs also make Vietnamese shrimp competitive in price and less attractive in the international market.

To achieve its business goals, Minh Phu plans to promote shrimp farming and production using MPBiO biotechnology. The company expects to produce 15 billion shrimp by 2035 and supply 50% of raw shrimp demand for processing plants.

Source: https://danviet.vn/vua-tom-minh-phu-lai-dam-nho-dau-2024102720000554.htm