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Business Performance Report of Lam Dong Minerals and Construction Materials Joint Stock Company


Table 2.5: Business performance report of Lam Dong Minerals and Construction Materials Joint Stock Company


(Unit: VND)


BUSINESS RESULTS REPORT


2005


2006

DIFFERENCE 2006 VS 2005

ABSOLUTE

(COPPER)

RELATIVE

(%)

Total operating revenue

68.903.197.392

69.637.697.621

+ 734500.229

101.06

Revenue deductions

19,773,917

40,646,095

+ 20,872,178

205.55

Net revenue

68,883,423,475

69,597,051,526

+ 713.620.051

101,035

Cost of goods sold

52,341,280,774

50,469,829,069

- 1,871,451,705

96.42

Gross profit

16,542,142,701

19.127.222.457

+ 2,585,079,756

115.62

Financial revenue

870.117.925

821.458.968



Financial costs

2,711,856,562

3,416,055,930



Including: interest expense

3,629,275,989

3,441,208,292



Cost of sales

3,341,741,920

4,278,027,092

+ 936.285.172

128,017

Business management costs

9.090.065.807

8.101.281.849

- 988.285.172

89.12

Net profit from business activities

2,268,596,337

4,153,316,554

+ 1,884,720,217

183,078

Other income

295,369,797

102.807.911



Other costs

181,867,948

601,433,743



Other profits

113,501,849

- 498,625,832



Earnings before interest and taxes

6,011,374,175

7,095,899,014

+ 1,084,524,839

118.04

Total accounting profit before tax

2,382,098,186

3,654,690,722

+ 1,272,592,536

153.42

Current corporate income tax expense

405,895,919

723.267.807

+ 317,371,888

178.19

Deferred corporate income tax expense





Corporate income tax expense

405,895,919

723.267.807

+ 317,371,888

178.19

Profit after corporate income tax

1,976,202,267

2,931,422,915

+ 955.220.648

148.33

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Business Performance Report of Lam Dong Minerals and Construction Materials Joint Stock Company

(Source: Business performance report of Lam Dong Minerals and Construction Materials Joint Stock Company)


2.2.3. Analyzing business efficiency through profit margin

Analyzing the Business Performance Report of companies allows to evaluate the performance of companies based on indicators such as: Revenue, costs, profits, etc. However, in reality, some companies do not just stop at comparing the fluctuations of indicators on the Business Performance Report, but also compare indicators with each other, for example, analyzing the ratio of profit after tax to net revenue. According to the trend, the higher this indicator increases, the better and vice versa.

The reason why mineral exploitation enterprises choose this indicator is because they believe that after-tax profit - the sum of all profits after deducting corporate income tax - will accurately assess the amount that the enterprise actually has for itself after excluding all cost factors in a business period. Based on this indicator, enterprises have also seen the movement in the relationship between the value of the efficiency of the calculated indicators.

Table 2.6: Analysis of business efficiency through profit margins of mineral mining enterprises

Target

Unit of measure


2005


2006


+/-

II. HA TINH MINERAL AND TRADING COMPANY

1. Net profit after tax

copper

6.124.017.953

5,278,533,878

- 845,484,075

2. Net revenue

copper

80.345.963.184

85.817.687.528

+ 5,417,724,344

3. Rate

net income

Profit

profit/business

%

7,622

6.15

- 1,471

I.BIMICO

1. Net profit after tax

copper

11,496,808,271

18,845,136,418

+7.384.328.142

2. Net revenue

copper

36,762,060,103

52,758,512,488

+15,996,452,385

3. Rate

net income

Profit

profit/business

%

31.27

35.71

+ 4.44

III. LAM DONG MINERALS AND CONSTRUCTION MATERIALS JOINT STOCK COMPANY

1. Net profit after tax

copper

1,976,202,267

2,931,422,915

+ 955.220.648

2. Net revenue

copper

68,883,423,475

69,597,051,526

+ 713.620.051

3. Rate

net income

Profit

profit/business

%

2,868

4.21

+ 1.34

(Source: Business performance reports of Ha Tinh Minerals and Trading Company, BMC Company, Lam Dong Minerals and Construction Materials Joint Stock Company)


From the data in Table 2.6, Ha Tinh Minerals and Trading Company reported that for every 100 VND of net revenue, the enterprise generated 6.15 VND of after-tax profit and decreased compared to 2005 by (-1.471) VND, based on the trend of the Company's business efficiency when comparing the ratio of after-tax profit to revenue, the ratio decreased when comparing 2006 with 2005. However, the ratio of after-tax profit to net revenue when comparing the data of 2006 with 2005 increased for Binh Dinh Minerals Joint Stock Company by 4.44 VND of after-tax profit and Lam Dong Minerals and Construction Materials Joint Stock Company also increased by 1.34 VND of after-tax profit. Based on the calculated data and following the movement trend of this indicator, Binh Dinh Minerals Joint Stock Company and Lam Dong Minerals and Construction Materials Joint Stock Company affirmed that their companies operated effectively in 2006.

Thus, when comparing after-tax profit with net revenue, enterprises cannot find ways to promote strengths and overcome weaknesses in their business operations. In other words, if only stopping at this indicator to evaluate the business performance of enterprises, analysts cannot see the intrinsic nature of the increase or decrease of these indicators. Although, the profit indicator is one of the most important goals that every enterprise aims for, and if said so, it also means that analyzing business efficiency is not only through the profit margin indicator, but it also depends on many other factors. Meanwhile, profit is determined on the basis of output results and input factors, so evaluating the business efficiency of enterprises requires considering the efficiency of using input factors. However, this analysis is very limited through the indicators that these companies calculate.

2.2.4. Analysis of business performance through asset utilization efficiency

The process of using modern equipment will give us the opportunity to access sophisticated machinery and equipment to ensure investigation work,

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Exploration, accurate assessment of resource reserves, determination of how much mineral reserves can be exploited in a mine, etc. To do this, investment is required, especially investment in equipment for the enterprise. Not only that, enterprises also have to invest in factories, means of transport, equipment and management tools, etc. However, the mine reserves in the process of assessment and exploitation, as well as the cost of use, or the seasonal nature, etc. have greatly affected the production activities of the enterprise and created a lack of initiative, as well as the enterprise itself has not promoted the efficiency of asset use to match the existing potential of the enterprise. This is a major issue that needs attention, especially in the impact of the trend of modernizing equipment and production technology to diversify production products from different perspectives.

However, through the process of studying and researching the actual situation of analyzing the efficiency of asset use of enterprises, this content is carried out very fragmentarily. Most of them only stop at considering the structure of short-term assets and long-term assets compared to total assets, that is, considering the fluctuations in the scale of assets (such as Lam Dong Minerals and Construction Materials Joint Stock Company - Appendix 03). If according to the analysis content requirements, the efficiency of asset use is assessed based on the indicators of productivity, loss rate and profitability of total assets and details for each type of asset; and this content has only been implemented quite fully at BMC Company.

2.2.4.1. Evaluation of asset productivity

According to Table 2.7, the Company calculated the productivity index of 2006 compared to 2005 and noted that: The productivity of total assets increased by 0.058 (the growth rate reached 6.49%), in which the productivity of long-term assets decreased by 0.1 (the growth rate was 2.29%), the productivity of short-term assets increased by 0.053 (the growth rate reached 3.98%). Although there was an increase in the productivity of assets when comparing the data between 2006 and 2005 for different types of assets,

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assets of the enterprise, but the growth rate is low and slow. Thus, the efficiency of using assets of the enterprise is not high, especially for long-term assets, the efficiency of using is tending to decrease.

Obviously, this is also consistent with the specific asset structure of this business sector. As industrial production enterprises themselves, the proportion of long-term assets in total assets is very large, enterprises must "deposit" a large amount of money into it when investing in new or repairing and upgrading equipment to serve the production process of the enterprise. Moreover, they believe that the net revenue target is temporary, while the compensation for the value of fixed assets is temporary, so when BMC Company expanded its market for exploitation, management and business in Phu My district, it reduced the efficiency of using this type of long-term asset, which is acceptable because their total net revenue still increased in 2006.

Table 2.7: Analysis of business efficiency through production capacity of BMC Company

(Unit: VND)

STT

Target

2005

2006

+/-

I. TOTAL ASSETS

01

-Total net revenue

36,762,060,103

52,758,512,488

+15,996,452,385

02

-Average total assets

41.125.850.224

55,451,863,493

+14,326,013,719

03

-Productivity of the total assets

product = (01)/(02)

0.893

0.951

+0.058

II. LONG-TERM ASSETS

01

-Total net revenue

36,762,060,103

52,758,512,488

+15,996,452,385

02

-Average asset value

long term

8,392,677,327

12,324,162,443

+3.931.485.116

03

-Productivity of assets

long term = (01)/(02)

4.38

4.28

- 0.1

III. SHORT-TERM ASSETS

01

-Total net revenue

36,762,060,103

52,758,512,488

+15,996,452,385

02

-Current asset value

average

27,651,960,995

38,151,788,269

+10.499.827.274

03

-Productivity of assets

short term = (01)/(02)

1,329

1,382

+0.053

(Source: Balance Sheet and Income Statement of BMC Company)

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Therefore, in the early stages of the investment process, the organization of production and business activities at the enterprise, the productivity index will not change, or decrease but the rate of decrease is also very low. In addition, the new investment process is carried out by the method of gradual replacement, so the productivity index of assets will depend on the productivity of old assets, as well as the skillful use of the values ​​of newly invested assets.

2.2.4.2. Assessment of asset profitability


Table 2.8: Analysis of business efficiency through profitability of BMC Company

(Unit: VND)

S TT

Target


2005


2006


+/-

I. TOTAL ASSETS

01

-Net profit after tax

11,496,808,271

18,845,136,418

+7.384.328.142

02

-Average total assets

41.125.850.224

55,451,863,493

+14,326,013,719

03

-Return on total assets =

(01)/(02)


0.279


0.339


+0.06

II. LONG-TERM ASSETS

01

-Net profit after tax

11,496,808,271

18,845,136,418

+7.384.328.142

02

-Average value of long-term assets

8,392,677,327

12,324,162,443

+3.931.485.116

03

-Long-term asset profitability

limit = (01)/(02)


1,369


1,529


+0.16

III. SHORT-TERM ASSETS

01

-Net profit after tax

11,496,808,271

18,845,136,418

+7.384.328.142

02

-Average short-term asset value

27,651,960,995

38,151,788,269

+10.499.827.274

03

-The profitability of short-term assets

limit = (01)/(02)


0.415


0.493


+0.078

(Source: Balance Sheet and Income Statement of BMC Company)

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Combining information from the Balance Sheet and the Income Statement, BMC Company continued to calculate the asset profitability index (in Table 2.8), in 2006 it increased by 0.06 compared to 2005 (with a ratio of 21.505%), which shows that the ability to effectively use assets at the enterprise in 2006 was good, but this index still does not inform whether the Company has exploited its maximum capacity during the period or not. Next, the Company detailed the analysis content by examining the profitability of long-term assets and short-term assets and found that the profitability of long-term assets in 2006 increased by 0.16 compared to 2005 (reaching a ratio of 11.68%), and the profitability of short-term assets also increased, the achieved increase was 0.078 (18.79%). Through these figures, the Company is completely confident that the profitability of assets in 2006 was very good, meaning the Company's asset usage efficiency was high, but to what extent it was good is still inconclusive.

After reviewing its entire business process related to asset utilization efficiency, BMC Company was forced to consider the influencing factors, and after analysis, they came up with the following reasons:

- Firstly , a characteristic that is expressed in most mineral exploitation enterprises is the need for a large amount of business capital to serve the exploitation and processing process. Of course, with such a large amount of investment capital for long-term assets, the depreciation process and capital recovery time will be slow, especially the proportion of fixed assets. In the specific case of the end of 2005, this is the time when the Company re-evaluates the entire value of its assets, especially long-term assets, before equitization. The work of liquidating and determining the remaining value of machinery and equipment before equitization also occurs at the same time as the need to recover the production capacity of machinery and equipment. Some machines are old and fully depreciated, but the enterprise still uses them in the production process. On the other hand, the investment in new machinery and equipment for production organization and management in Phu My market has caused the scale of change of total assets to increase sharply - in which the characteristics of assets

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Long-term is depreciation. Therefore, the productivity of long-term assets in 2006 is low but the profitability of long-term assets is very high compared to 2005;

- Second , a mine that has been exploited sometimes does not have enough volume for a container of goods to export, so it must be stored and at this time the cost of exploitation, the money collected from the goods, along with the arising costs such as warehouse rent, customs fees that cannot be recovered, etc., leads to an increase in debt and inventory. This has reduced the profitability of short-term assets in particular and total assets in general. However, in 2006, items such as prepayments to sellers, receivables, inventories, etc. all had a significant decrease in value compared to 2005, while short-term assets increased thanks to the increase in the rate of money. Therefore, it not only increases the profitability of short-term assets, but also creates higher liquidity for the company when implementing payment methods, as well as diversifying investment types, or implementing joint ventures in business;

- Third , the harsh and ever-changing weather has greatly affected the exploitation and processing of mineral mining enterprises. Factors such as weather, exploitable underground mineral reserves, order contracts, etc. determine the output, forming revenue as well as profits for mineral mining enterprises;

- Finally , the scale of indirect labor with the old working mechanism has significantly affected the entire operating status of the Company. Therefore, the Company needs to plan, organize, arrange and manage its human resources when operating the business activities of the enterprise.

2.2.4.3. Assessment of asset depreciation rate

As above, we study through the current situation of business efficiency analysis through the productivity and profitability of BMC Company's assets, the productivity of long-term assets has decreased but the profitability has increased when comparing the data between 2006 and 2005. On the data table 2.9, it shows that the depreciation rate for total assets in 2006 decreased compared to 2005 by 0.067 (percent).

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