Bau Duc "escaped death's door" thanks to unexpected short-term plants

(Dan Tri) - Ten years ago, burdened with a huge debt, Mr. Duc turned to short-term crops to improve cash flow for Hoang Anh Gia Lai. The thorny path after so many years has brought sweet fruit.

"People laugh at me for doing all sorts of things"

Admitting that he had no money, no experience, no connections, no prestige, Mr. Doan Nguyen Duc (Bau Duc) once rose to build Hoang Anh Gia Lai Group to become the leader in many fields, becoming a famous furniture brand in the mountain town at one time. He also soon became the richest person on the Vietnamese stock exchange, the first Vietnamese to own a private jet and did not hesitate to express his dream of being on the list of world billionaires.

Then from the peak, he fell downhill with the failure of Hoang Anh Gia Lai when it abandoned real estate to grow rubber. Rubber prices fell dramatically. The group incurred a debt of nearly 30,000 billion VND in the period 2016-2017. The slide caused the company to lose liquidity, and banks refused to lend.

Thinking back to those days, Mr. Duc once admitted the feeling of "having to face people who despised and looked down on him". He was hurt and chose to stay silent, thinking of ways to overcome it.

The owner of the famous Hoang Anh Gia Lai football team confided that he sees business like a football match. A football team is glorious today but can collapse in a flash tomorrow. After each successful match, football players will be praised, but if they fail, yesterday's heroes can immediately become sinners in the hearts of the audience.

The same goes for the business world. With the spirit of "as long as there is business, there will be failure, as long as there is business, there will be success", Mr. Duc led Hoang Anh Gia Lai to turn the situation around by investing in agriculture .

Mr. Duc changed direction many times, doing everything related to agriculture: sometimes growing sugar cane, sometimes growing passion fruit, chili; sometimes raising cows, growing bananas, growing vegetables and fruits in the Central Highlands, raising free-range chickens, raising sturgeon... The Chairman of Hoang Anh Gia Lai said he had to find every way to survive, admitting "people laugh at me because I do everything", but it was those short-term crops that helped the business overcome the most difficult years.

After a period of struggling with difficulties, passion fruit, chili, and cows were all gone, only banana trees remained. From banana trees, Mr. Duc repeatedly announced different pivot strategies such as "2 trees, 2 animals" (banana, durian, pig, chicken) then "2 trees, 1 animal" (banana, durian, pig). And most recently, the owner of the agricultural company introduced the model "4 trees, 1 animal" (banana, durian, coffee, and pig).

Bau Duc struggled with debt for nearly a decade (Photo: HAG).

The road is bumpy, with ups and downs.

Continuously changing direction is something that many people clearly see in Mr. Duc's agricultural work. "What animals to raise, what plants to plant"... also brings Mr. Duc extreme excitement.

When growing durian, Mr. Duc affirmed that the greatest value in the future of Hoang Anh Gia Lai lies in this tree that can generate 4 profits from 1 capital. When deciding to raise pigs, the mountain tycoon confided: "When I discovered the pig eating bananas, I couldn't sleep."

Mr. Duc is confident that he has an endless source of bananas, which are discarded bananas after export, to feed pigs. These bananas account for 40% of the feed, saving 30% of the cost. For Mr. Duc, raising pigs has no concept of loss.

He calculated that with the discarded banana output, Hoang Anh Gia Lai could raise 1 million pigs. The pork industry's revenue is up to 15 billion USD/year. "With all those reasons, I cannot lose," Mr. Duc said in a conversation with Dan Tri reporter in October 2022.

Recently, Mr. Duc continued to declare to plant new types of trees such as mulberry trees for silk export and coffee tea. In particular, Hoang Anh Gia Lai plans to plant 2,000 hectares of coffee this year and another 2,000 hectares next year, for a total of 4,000 hectares.

The difference is that Hoang Anh Gia Lai chooses the Arabica coffee variety, which is only found in Cau Dat (Da Lat) and some areas in Dien Bien, requiring an altitude of over 1,000m. The group will plant it on the red soil plateau of Laos.

According to Mr. Duc, Arabica coffee is currently priced at 9,000 USD/ton, double that of regular coffee and Vietnam only has 10% of the area planted with this type. Another reason is that strawberries or coffee have a short cultivation and harvest time (mulberry 7 months, Arabica coffee 2 years - only 1/3 of the time of durian), making it easy to create a continuous cash flow. If on schedule, from 2027 onwards, coffee trees will begin to be harvested and will bring a stable cash flow and high profits.

However, it must be admitted that Mr. Duc's strategy is constantly changing and not winning on all fronts. A typical example is the pig story, from thinking that "it is impossible to lose", Hoang Anh Gia Lai encountered difficulties right in this area.

Since 2020, pig farming has brought in revenue to the group, although not significant, only 12 billion VND. By 2021-2022, revenue from this segment increased sharply, several times higher each year, with gross profit margins of several dozen percent. By 2023, pig farming revenue growth slowed compared to previous periods. The increase was only nearly 14%, up to 1,964 billion VND. Gross profit margin decreased sharply, to 3.4%, explained by the sharp drop in pork prices, which is a common situation in the industry nationwide.

By 2024, pig sales will still bring in nearly VND1,004 billion for Hoang Anh Gia Lai, but have decreased by 49% compared to the previous year. Gross profit margin is about 10%. However, in the fourth quarter of this year, pig sales revenue decreased sharply (down 66%) and for the first time recorded a gross loss of VND49 billion. This year, Hoang Anh Gia Lai did not build new pig farms to feed bananas but focused on herd restoration.

Recently, Mr. Duc revealed that pig farming in 2024 will face difficulties due to capital problems, making it impossible to develop the sector. While pig prices are very good, the group's sales are very low.

Due to difficulties in mobilizing capital, Hoang Anh Gia Lai cannot plant an additional 2,000 hectares of bananas as planned in 2024, even though this is its main product.

He also had high expectations for durian, even predicting that the profit from durian would surpass that of bananas. Sometimes he thought that the future of Hoang Anh Gia Lai would be durian orchards. Because Mr. Duc once evaluated it as a super profitable tree, with a cost price of only 5,000-10,000 VND/kg, and no matter how much was sold to China, it would be sold out. But recently, speaking to shareholders, he admitted that this year, China - Hoang Anh Gia Lai's main market - was affected by durian.

What to do if you are out of debt?

By continuously pivoting his strategy to agriculture, Mr. Duc has gradually reaped sweet fruits. Since 2022, he has confidently declared that he will pay off all his debts by 2025. After nearly 3 years, Mr. Duc is close to reaching that burning desire to ease the "pain" he has carried for nearly a decade.

Bananas and durians are gradually asserting their position. In 2024, fruit sales will be the main contributor to Hoang Anh Gia Lai's business picture. The group's banana growing area will reach 7,000 hectares, and durian will reach 2,000 hectares.

In the first quarter of this year, fruits brought in a large amount of revenue, accounting for 72% of the revenue structure. The Group earned a profit of more than 360 billion VND, an increase of 59% over the same period last year.

Making a profit this quarter helped Hoang Anh Gia Lai reduce its accumulated loss, from nearly VND423 billion to nearly VND83 billion as of March 31. As of March 31, Hoang Anh Gia Lai had financial debt of more than VND7,504 billion, of which short-term debt still accounted for a large proportion.

To settle the debt, Mr. Duc's company plans to issue up to 210 million shares to convert the bond debt. Mr. Duc expects Hoang Anh Gia Lai to reduce its debt by up to 4,000 billion VND.

Soon to be relieved of two burdens on his shoulders, Mr. Duc is confident that the group's financial report at the end of this year will be "extremely beautiful". And according to him, "from this year onwards, it will be quite difficult to find bad things about Hoang Anh Gia Lai".

3 years ago, when asked if Mr. Duc wanted to return to the position of the richest man on the stock market if he was debt-free, he said that it no longer had any meaning. What he wanted was to build a solid Hoang Anh Gia Lai, take care of the lives of those who had followed him for decades, and fulfill his promise to shareholders who trusted him.

Keeping this promise, Mr. Duc has just introduced a special treatment policy for employees who have contributed for more than 10 years. These officials will receive shares in the issuance of 12 million bonus shares for employees (ESOP).

Speaking to shareholders, he said that the group develops farms and ranches in remote areas, in difficult and isolated places. Workers have to accept a life far from their wives and children, without vehicles, and without work for a whole year... There were difficult times when they did not receive their salaries for 5-6 months but did not leave the company. The boss thanked them and acknowledged that without their silent contributions, Hoang Anh Gia Lai would have been wiped out.

"Hoang Anh Gia Lai is transforming, restructuring and investing in things that are strategic and have real value, not just doing it for the sake of it or following inspiration. I pledge that everything I said today has been done, is being done and will continue to be done with the highest determination," Mr. Duc affirmed to shareholders in a recent meeting.

Source: https://dantri.com.vn/kinh-doanh/bau-duc-thoat-cua-tu-nho-nhung-loai-cay-ngan-ngay-it-ai-ngo-toi-20250624071857945.htm