HO CHI MINH CITY -- Shareholders in Vietnam Dairy Products (Vinamilk) approved changes to corporate governance at the annual general meeting on Saturday, including the adoption of management committees that are common among listed companies in the West.
While Chair Le Thi Bang Tam and Chief Executive Mai Kieu Lien remain in place, the new arrangements will see three independent directors joining the board. Each will head a subcommittee -- for auditing, personnel, and remuneration. Vinamilk's inspection committee, for example, will be recast as an internal auditing committee answering to the board of directors.
Part of the company's purpose is to attract investment, and also to facilitate expansion overseas. Vinamilk is the first Vietnamese public company to adopt this sort of management structure since Vietnam amended the Law on Enterprises in 2014, which governs state, private, and foreign businesses.
"The independent directors will protect the rights of shareholders, and balance and supervise other directors to ensure further transparency in all company operations," Chief Executive Lien told the Nikkei Asian Review.
The number of board directors for 2017-2021 has been increased to 9 from 7. Three come from Vietnam's State Capital Investment Corporation (SCIC) and two from Vinamilk's biggest foreign investor, Singapore-based Fraser and Neave.
As of December 2016, SCIC retained a 39.33% stake. Fraser and Neave owned 16.35% through subsidiaries F&N Dairy Investments (13.67%) and F&NBEV Manufacturing
Vinamilk is aiming for annual growth of 12.3% in the next five years to achieve 80 trillion dong in annual revenue by 2021.
Lien said at the 2016 AGM that overseas sales would be pushed to generate 50% of total sales by 2020. Overseas sales increased 9% to $258.5 million last year, generating 18.5% of the company's total turnover. At the latest AGM, however, the overseas target was cut back to 25% of gross sales by 2021. This means Vinamilk will continue looking to Vietnamese consumers for the bulk of its business. Domestic sales are expected to grow at 10% annually until 2021, and overseas sales by 7%, according to Euromonitor.
The company dominates the domestic dairy product market, with 54.5% of liquid milk, 84.7% of yogurt, 34% of drinking yogurt, 41% of powdered milk, and 85% of condensed milk sales.
Vinamilk's sales expenses rose 71% last year to 10.7 trillion dong as it stepped up marketing efforts. Lien said the company will retain its dominant position, improve distribution channels, and continue with mergers and acquisitions. "We are studying some local and overseas cases, ranging from 3 trillion dong to 20 trillion dong [to secure our] growth targets," she said.
Vinamilk products are sold through 220,000 outlets including 200 of the company's own stores. Vinamilk already has over 200 products, having launched 30 more in 2016. It has plans for another 160 by 2021. Convenience stores are expected to spread rapidly, and there are also new opportunities in e-commerce.
In the first quarter, preliminary reports show that Vinamilk's sales and net profit were up 16% and 34% respectively year on year. At the AGM, shareholders approved dividends for 2016 at 6,000 dong per share, which represents 83% of net profit -- slightly lower than 89% in 2015.
For 2017, the company will set aside 10% of net profit for a community and charity development investment fund, and another 10% for a bonus and welfare fund. Dividends will be paid 50% in cash.