After bidding for low-priced rice, how did Loc Troi achieve an annual profit of 50 billion VND?

Despite heavy losses in the first quarter, Loc Troi still plans to make a profit of 50 billion VND in 2024

Loc Troi Group Corporation (Code: LTG) has just updated the documents for the 2024 Annual General Meeting of Shareholders (AGM). This year, the company aims for a profit after tax of VND50 billion, 3.1 times higher than the same period last year, but much lower than the profit of hundreds of billions of VND in previous years.

A new point in the 2024 Annual General Meeting of Shareholders document is that the company sets a dividend target for the period 2024 - 2025. Accordingly, the total value of dividends paid is 30% of after-tax profit each year in the form of shares. Thus, the company will not pay cash until the end of 2025 (the last cash dividend payment is in October 2022 for the 2021 dividend).

As the public knows, Loc Troi has won the bid to supply 100,000 tons of rice to the Indonesian State Logistics Agency (Perum Bulog), out of a total of 300,000 tons that Bulog bid for this time.

Of which, the parent company Loc Troi won the bid for 60,000 tons and this is the 6th bid since August 2023. The member company Dai Tai High-Tech Agriculture also won the bid for the first time with an output of 40,000 tons of rice exported to Indonesia.

The entire order will be delivered within 2 months, payment will be made via letter of credit (LC). Loc Troi and its affiliates will earn over 55 million USD (equivalent to over 1,300 billion VND) upon completion.

Loc Troi believes that the price of the above order reflects the current rice market situation, meets the required rice quality grade, is timely and does not affect the next bidding rounds as well as the export price.

Loc Troi has set a plan for after-tax profit of VND50 billion for the whole year of 2024, although in the first quarter of 2024, this enterprise is suffering a heavy loss of nearly VND100 billion (illustrative photo).

The question now is how Loc Troi can achieve the target of 50 billion VND in after-tax profit set for this year, 3.1 times higher than the same period in the context of the company's unfavorable business performance in the first quarter of 2024.

Specifically, in the first quarter of 2024, Loc Troi's net revenue reached VND 3,849 billion, an increase of 57% over the same period in 2023. Revenue growth mainly came from the food industry with a growth rate of 96% over the same period last year, reaching VND 3,284 billion.

Revenue increased rapidly but not as much as the increase in cost of goods sold, leading to the company's gross profit decreasing by nearly 10% to VND 245 billion. During the period, Loc Troi's financial revenue reached VND 33 billion, down 46% compared to the first quarter of 2023, mainly due to a decrease in interest on deposits and loans.

On the contrary, the company's financial expenses increased by more than 28% to VND188 billion, mostly due to interest expenses and exchange rate losses.

After deducting expenses, Loc Troi lost more than VND 96 billion in the first quarter of 2024, higher than the loss of VND 81.2 billion in the same period last year.

Explaining the profit difference, Loc Troi said that because the ratio of cost of goods sold to net revenue this year was higher than the same period (cost of goods sold increased by 65% while revenue only increased by 57%), plus interest expenses and losses due to exchange rates increasing faster than the increase in other revenue/income, the company's net profit has decreased sharply.

Just last month, Loc Troi Group resolved the rice debt scandal with farmers in the Mekong Delta. The Group had to coordinate with Tien Phong Commercial Joint Stock Bank (stock code TPB) to complete payment for the 2023-2024 Winter-Spring rice crop with an amount of about 472 billion VND.

Positive rice export, Loc Troi has high hopes in core industry...

Loc Troi believes that Vietnam's rice exports will continue to maintain positive growth momentum as demand from major markets remains high.

The Philippine government’s approval of a reduction in rice import tariffs from 35% to 15% for both in-quota and out-of-quota rice until 2028 will help importers buy more rice, an opportunity for the world’s leading rice exporters, including Vietnam – the largest rice exporter to the Philippines, accounting for 80% of the market share last year.

Besides, Vietnam's rice price is also on a downward trend and is quite competitive in the international market. Meanwhile, Indonesia will have to import more rice, expected to reach 3.6-4 tons this year.

Vietnam's rice exports in 2024 are expected to improve as major markets increase their import volumes. Countries are waiting to see if India will lift its export restrictions on rice exports due to El Nino, which may not be lifted until September, which is an opportunity for Vietnam.

Therefore, regarding the operational orientation from now until the end of 2024 and the whole year of 2025, with the foundation of core business activities and high growth in the food and agricultural materials industry..., Loc Troi will strive and be determined to conquer the highest possible revenue and profit targets for this year.

The Group will focus on improving cash flow from operations by shortening the collection cycle from customers, helping to pay for rice purchases from farmers and repay debts.

In 2024, the Group will increase sales of agricultural materials and increase sales of seeds. At the same time, it will balance the financial capital balance to ensure a harmonious capital structure, increase the efficiency of capital use, and increase equity through stock issuance.

Regarding investment and development activities, Loc Troi plans to mobilize long-term capital to build a rice factory with a capacity of 10,000 tons/day in Long An .

This project has an investment license and a clean site. When the factory comes into operation, the Group strives to increase the total capacity of finished rice production to 15,000 tons/day by 2028.

After completing rice payment for farmers in the Mekong Delta region after the cash flow incident, and restructuring finances to strengthen and stabilize capital flow for production and business activities, Loc Troi will participate deeply in the 1 million hectare high-quality rice project approved by the Government.

Loc Troi will participate deeply in the 1 million hectare high-quality rice project approved by the Government (illustrative photo).

According to Loc Troi, the biggest difficulty for businesses today is that the profit margin of the rice industry is very low, affected by many force majeure factors such as unusual weather, pests or unstable incidents related to world food security...

This is the cause of a significant increase in receivables, short-term debt and can create an imbalance in the financial balance, causing cash flow problems, as in the recent past.

Loc Troi said that to cope, the enterprise has completed the final steps in the loan agreement worth 90 million USD (equivalent to 2,200 billion VND) with FMO Bank under the Dutch Government; negotiated with domestic and foreign banks with the same orientation of sustainable agricultural development for long-term companionship, agreed on medium- and long-term funding and short-term capital flows, and minimized cash flow bottlenecks in the future.

According to Loc Troi, this year as of May 14, 2024, LTG has exported nearly 100,000 tons of rice, worth nearly 63 million USD (over 1,500 billion VND) and is completing other orders in the second half of the second quarter of 2024.

Source: https://danviet.vn/sau-dau-thau-gao-gia-thap-loc-troi-lam-cach-nao-dat-loi-nhuan-nam-50-ty-dong-20240625144624894.htm