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Vinamilk surpasses 2016 financial targets thanks to soaring demand

Vietnam's leading dairy company moving into high-end, organic products targeting US, European markets

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Vinamilk's products are seen at a shop in Hanoi.   © Reuters

HO CHI MINH CITY -- Vietnam Dairy Products, known as Vinamilk, on Wednesday announced it has surpassed all financial goals this year thanks to increasing consumption of milk in the country.

According to a document filed at the Ho Chi Minh City Stock Exchange, Vinamilk forecasts its consolidated revenue to have grown 14.86% on the year to 46.2 trillion dong ($2 billion), 3.68% higher than its target. Its pretax profit rose 19.57% to 11.2 trillion, while net profit expanded 19.77% to 9.31 trillion dong, exceeding by 11.78% and 12.63%, respectively, its full-year targets.

"The initial analysis of the company's market sector reports that Vietnamese people buy more dairy products compared to past years," a Vinamilk representative told the Nikkei Asian Review. Details on each market are expected to be released later.

Vinamilk has shifted its product line to meet changing consumer demand, and this is one of the main elements that helped the company achieve the impressive results.

The Vietnamese government intends to develop the country's dairy industry to meet consumer demand. Per capita consumption of milk is estimated to rise to 27 liters by 2020 and 34 liters by 2025 from around 20 liters currently. The figure was about 15 liters in 2010.

Spending on dairy accounts for 10% of total food expenditures in Vietnam, which has helped the market grow 15% per year in the last five years. This is largely thanks to income growth, estimated at 14.2% per year in the same period, according to Vietnam Industry Research and Consultant. The population growth of 1.2% a year also offers huge potential for the dairy industry.

High-end product lines

Marking its 40th anniversary this year, Vinamilk launched the country's first-ever premium fresh organic milk product line which meets U.S. and European standards.

The organic milk is produced by cows raised on the open grasslands of the Central Highland outside Dalat city. The cows are strictly guarded to avoid exposure to genetically modified fodder, growth hormones, antibiotics, pesticides and chemical fertilizers.

Fresh organic milk is Vinamilk's first step on the journey to produce more high-end product lines that are nutritious, organic, natural and healthy, according to Vinamilk Managing Director Phan Minh Tien.

Earlier this month, Vietnam's State Capital Investment Corporation (SCIC) held its first public bidding to sell 9% of its Vinamilk stake, in keeping with the divestment of the biggest state-owned companies. Singapore-based Fraser & Neave (F&N) is the only investor registered to buy a 5.4% stake via its two subsidiaries, to bringing F&N's stake in the dairy producer to 16.35%, up from 10.95%.

The first auction result was far below market expectations, which underscored Vietnam's relative inexperience in the divestment methods.

SCIC has not confirmed the next divestment of Vinamilk or other potential candidates. SCIC Chairman Nguyen Duc Chi said the company needs more time to summarize the feedback from the market and consultants. The government, based on these reports, is expected to prepare legal documents in line with international practices allowing more flexible mechanisms in selling the majority stake held by the state.

Vinamilk shares closed at 126,000 dong on Wednesday, 6.3% lower than the day SCIC held the first public auction on Dec. 12.

(Nikkei)

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