The difficult situation of Dabaco – the “giant” of raising pigs in the North

This year, Dabaco Vietnam Group Joint Stock Company (DBC) targets a revenue of 22,559 billion VND and a profit after tax of 918 billion VND. Compared to last year’s performance, this plan doubles revenue and profits by more than 10%. However, the set profit target is still 34% lower than the level achieved by this business in 2020.

Mr. Nguyen Nhu So – Chairman of Dabaco Group said that the announced business targets were based on the growth momentum of internal resources and market factors in a prudent and reasonable manner. In 2022, Dabaco predicts it will continue to be a difficult year when Covid-19 is still complex, accompanied by disruptions to supply chains, production, processing and consumption. In addition, outbreaks of avian influenza and African swine fever are showing signs of revival in many places, directly affecting livestock rearing organizations.

The careful business plan of the “giant” of raising pigs in the North was deemed appropriate in the face of many difficult situations around him.

First of all, the burden of declining purchasing power in the second half of 2021 will continue. Last year, Dabaco’s revenue reached more than 10,800 billion dong, a slight increase of 8% over the same period. This growth is only roughly on par with 2019 – the period when African swine fever flared. Purchasing power in the market declined sharply, and the circulation of goods was slow, pushing the business results of livestock companies to fall sharply.

According to the Export-Import Department (Ministry of Industry and Trade), after the Tet, public demand for pork declined sharply. Meanwhile, pork production continued to recover, thereby increasing supply in the market. In addition, the slow recovery of out-of-home catering services has also made it difficult for people’s purchasing power to grow properly. A recent report by Yuanta Securities predicts that market recovery demand will weaken as per capita income may only increase by 2% by 2022. Thus, pork consumption per person will also increase by only 0.7% over the same period. .

Purchasing power has also dragged the pork price chart down for some time. From the beginning of the year until now, live pig prices have tended to move sideways or down, recently trading around VND50,000-54,000 per kg. This price has recovered from below 37,000 VND in October last year, but is still lower than the price range above 60,000 VND that lasted from the second half of 2019 to the first half of 2021.

According to Yuanta Securities, the average price of pigs this year will reach around VND 60,000-61,000 per kg but will have to wait until the second half of the year. Setting expectations higher, VnDirect expects pork prices to increase in the short term and reach 55,000-60,000 VND per kg. However, the unit believes that by 2022, the average price of live pigs will fall by 5.8% compared to VND 61,600 last year. With the above assumptions, VnDirect estimates that revenue from Dabaco’s agriculture and food segment will decrease by 9.7%.

The output faces many obstacles, but the input from the production line is Dabaco’s main difficulty. With the 3F (Feed – Farm – Food) business model, with both livestock and nine feed brands, business is greatly affected when raw material prices fluctuate.

According to Yuanta Securities, input material prices are likely to increase strongly from early 2021 to now as rising transportation costs encourage manufacturers to increase imports of raw materials for storage. Currently corn prices are up 50 percent, soybean prices are up 38%, wheat prices are up 62% compared to the beginning of last year. However, domestic animal feed prices, although increasing, only reached 30% over the same period. This unit estimates that the price of animal feed is difficult to keep pace with the price of input materials.

Meanwhile, VnDirect believes that the Russia-Ukraine conflict will have a negative impact on the animal feed industry in the short term. These two countries are the world’s largest and third largest exporters of wheat, respectively, accounting for nearly a third of the total trade of this commodity. In addition, Ukraine is also the fourth largest corn exporter, accounting for 22% of the world’s turnover. Prices of wheat and catch increased by almost 18% and 8.5%, respectively, from pre-conflict levels. Therefore, the unit predicts that input material prices will continue to be high in the short term and gradually decline in the last 6 months of 2022.

High input costs combined with a weak recovery in consumer demand and possibly flat pork prices, further eroded Dabaco’s profits. In fact, last year, revenue grew, but the business has a deficit of nearly 42% of after-tax profit. Gross profit margin after peaking in 2020 also fell to around 17%, on par with the average level of previous years. By 2021, the cost of the feed and food segment is already 85% of the revenue of this segment.

However, Dabaco has long ceased to be a pure agricultural company, but has actively participated in many business areas such as hotels, consumer goods production, construction and real estate. The company is implementing the Huyen Quang (Bac Ninh) project with a scale of 458 apartments, which is expected to be handed over in the second quarter of this year. This project, according to VnDirect calculations, will generate revenue of VND 802 billion and net profit of almost VND 100 billion this year.

In addition, the company recently added a new industry to promote its plans to commercialize an African swine fever vaccine that it is working on. Dabaco completed 95% progress of testing in December last year and returned positive results. This year, the company plans to invest in a vaccine production plant in Bac Ninh, but was only able to start production in the fourth quarter of this year. However due to the lack of clear information, the vaccine segment may not make a small contribution or contribution to Dabaco’s revenue this year.

Siddhartha

at Blogtuan.info – Source: vnexpress.net – Read the original article here