Business Results Report of Hai Ha Confectionery Joint Stock Company for the Period 2017

(Source: Hai Ha Confectionery Joint Stock Company)

- General meeting of shareholders: Is the highest decision-making body of the company, consisting of all shareholders with voting rights. The general meeting of shareholders decides on issues related to the authority prescribed by law and the Company Charter.

- Board of Directors: Is the Company's management body, has full authority on behalf of the Company to decide, exercise the Company's rights and obligations that are not under the authority of the General Meeting of Shareholders.

- Board of Supervisors: Is an agency elected by the general meeting of shareholders, responsible for checking the reasonableness and legality in the company's business operations. The Board of Supervisors operates independently from the Board of Directors and the Board of Management.

- Board of Directors: The General Director is the executive, has the highest decision-making authority on all matters related to the Company's daily operations and is responsible to the Board of Directors for the implementation of assigned rights and duties. The Deputy General Directors assist the General Director and are responsible to the General Director for assigned work and duties.

- Functional departments: Perform professional functions and tasks assigned by the Board of Directors.

d) Business results of Hai Ha Confectionery Joint Stock Company in the period 2017 - 2020

Table 2.1. Business performance report of Hai Ha Confectionery Joint Stock Company for the period 2017 - 2020

Unit: billion VND

Target

Year				Compare growth rates (%)
2017	2018	2019	2020	2018/2017	2019/2018	2020/2019
1. Total revenue collect	867.36	1,000.80	1,101.42	1,471.82	15.38	10.05	33.63
2. Business net income	857.98	982.29	1,048.62	1,408.83	14.48	6.75	34.35
3. Cost of goods sell	682.68	748.43	816.05	1190.25	9.63	9.03	45.86

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finance charges

0.22	16.49	24.03	27.50	7395.45	45.72	14.44
5. Selling costs row	75.97	129.86	133.07	127.59	70.93	2.47	-4.12
6. Cost QLDN	60.68	51.72	50.25	48.01	-14.77	-2.84	-4.46
7. Profit after tax	42.26	53.22	51.44	48.85	25.93	-3.34	-5.33
8. Profit after tax	33.70	42.07	40.85	39.06	24.84	-2.90	-4.38

4. Branch

(Source: Financial report of Hai Ha Confectionery Joint Stock Company)

Comment:

Through the table, we can see that the company's revenue from 2017 to 2018 increased by 133.44 billion VND (equivalent to an increase of 15.38%) and the company's revenue in the period of 2018

- 2020 has increased gradually over the years, making it the 3rd consecutive year the company has reached a revenue milestone of over 1,000 billion VND. Specifically, revenue in 2020 reached 1,471.81 billion VND, the highest ever, equal to 133.63% compared to 2019 and 147.06% compared to 2018, maintaining a revenue growth rate of about 10 - 20% since the State divested into a 100% private joint stock company.

The company's net revenue in 2018 reached 982.29 billion VND, an increase of 124.31 billion VND, an increase of 14.48% compared to 2017. The company's cost of goods sold in 2018 increased by 9.63% compared to 2017, so the growth rate of cost of goods sold was lower than the growth rate of revenue, causing after-tax profit to increase. In 2018, financial expenses increased sharply by 7395.45%, selling expenses increased by 70.93%, and business management expenses decreased by 14.77%.

The company's net revenue in 2019 reached VND 1,048.62 billion, an increase of 6.75% compared to 2018. The cost of goods sold in 2019 compared to 2018 increased by 9.03%, so the growth rate of cost of goods sold was higher than the growth rate of revenue, causing the company's after-tax profit to decrease. Financial expenses increased by 45.72%, selling expenses increased by 2.47%, and business management expenses decreased by 2.84%. However, due to the high increase in cost of goods sold, the company's profit decreased by 2.90%.

The company's net revenue in 2020 reached 1,408,827.8 million VND, in 2019 it reached 1,048,622.6 million VND, an increase of 34.35%. Cost of goods sold in 2020 compared to 2019 also increased by 45.86%. Thus, the growth rate of cost of goods sold is higher than the growth rate of revenue, making

for the company's after-tax profit to decrease. Financial expenses increased by 14.44%, sales expenses decreased by 4.12%, and business management expenses decreased by 4.46%, causing the company's profit to decrease by 4.38%.

The company's after-tax profit in 2018 increased by VND 8.37 billion compared to 2017, equal to 24.84% compared to 2017. However, the company's after-tax profit in the period 2018-2020 decreased over the years, and the profit in 2020 decreased compared to 2019. Specifically, the company's after-tax profit in 2019 reached VND 40.85 billion, down 2.90% compared to 2018 and the company's after-tax profit in 2020 reached VND 39.06 billion, down 4.38% compared to pre-tax profit in 2019.

The reason for the company's profit in 2020 decreasing compared to 2019 and 2018 is due to the serious impact of the Covid-19 epidemic along with increased input costs, export costs, transportation costs, marketing costs, and product introduction costs, while the company still kept the selling price at a reasonable level without increasing prices following the increase in cost factors, causing the company's pre-tax profit to decrease slightly.

2.1.2. Factors affecting the improvement of business efficiency of Hai Ha Confectionery Joint Stock Company

a) Subjective factors

- The company's labor factor

Labor is one of the important factors that directly affects labor productivity, resource utilization level and directly impacts business efficiency of enterprises.

Table 2.2. Number and quality of employees of Hai Ha Confectionery Joint Stock Company in the period 2018 - 2020

Unit: person

Target

2018		2019		2020
Quantity	Ratio	Quantity	Ratio	Quantity	Ratio
Total number of employees	1330	100%	1393	100%	1397	100%
1. By level
PhD/University/College	205	15.41%	208	14.93%	207	14.82%
Intermediate	450	33.83%	470	33.74%	471	33.71%
Skilled workers	675	50.76%	715	51.33%	719	51.47%
2. By gender
Male	676	50.83%	710	50.96%	715	51.18%
Female	654	49.17%	683	49.04%	682	48.82%

(Source: Administration and Human Resources Department)

Comment:

According to the above table, we can see that the company's labor structure is quite reasonable and suitable for the specific product production (cakes, candies) and the nature of the work. Specifically:

In 2019, the company's number of employees increased by 4.74% compared to 2018. In 2020, the company's number of employees increased by 0.28% compared to 2019. The increase in the number of employees is due to the company's continuous expansion of production and business scale. All employees have qualifications from grade 12 to university and postgraduate. Of which, college, university and master's degrees account for about 15%, intermediate level accounts for nearly 34%, the rest are skilled workers accounting for over 50%. The skill level of workers is increasing. The company has a fairly equal number of male and female employees over the years, with the proportion of men being higher.

Male workers work in technical departments, female workers focus on packaging, canning, sales staff and office staff. Masters, University and College degrees are quite high, accounting for about 15%. Due to the nature of confectionery production, the company has many skilled workers, the level of workers is increasing and tends to be mostly at level 7/7.

Since its establishment, HAIHACO has always identified human resources as the most valuable asset of the Company, the key factor for the success and sustainable development of the enterprise. Therefore, HAIHACO pays great attention to the policies of treatment, training, development as well as the life of all employees.

With the goal of building a working environment that is “More and more developed, more and more professional”, the Company always focuses on attracting employees with the capacity to work, meeting the needs of expanding production and business. In addition, every year the Company also sends employees for training to improve their knowledge and professional skills.

In 2020, the company has implemented the following training contents: Vocational training, Salary increase training; Periodic training on occupational safety and hygiene, Fire prevention and fighting training. Updating training on laws, circulars, decrees of state management agencies in the fields of food safety and hygiene, labor and wages, tax policies, and environment. The company also focuses on training sales skills for the Sales Department; Training on new products for the sales work of the Sales Department. The total number of employees trained in the year of the Company is 939 people.

- The company's management system

The management apparatus of Hai Ha Confectionery Joint Stock Company has been performing tasks such as building business strategies, making production and business plans, approaching the market, organizing marketing activities, researching and building the company's business plans.

With important functions and tasks, the corporate governance apparatus plays a particularly important role in the existence and development of the enterprise. The company's management apparatus is quite suitable and each department performs its functions quite well. For example, the company's Office department has the following tasks: arranging and distributing labor reasonably, developing plans for management staff and scientific and technical staff throughout the Company, developing salary, fines, insurance regimes... The Finance Department has the task of collecting, processing, and providing financial and accounting information to the General Director and the Company's Board of Directors to serve management work...

The company's management team has good leadership skills and extensive experience. Department staff are fully equipped with knowledge and professional skills that play an important role in improving the company's business efficiency.

- About the product

Hai Ha is one of the leading companies in the domestic confectionery industry, with a tradition of 60 years of formation and development, the Company's products have been trusted by domestic consumers. The Company pays special attention to product quality, investing in technological innovation based on utilizing existing production lines to create new product lines with quality and economic efficiency.

The company focuses on producing and developing two main product types: Candy and Cake, including the following product groups:

+ Candy Group includes: Chew Candy including the brand "CHEW HAIHA"; "GOODMILK"; soft sponge candy; Toffee candy, Jelly candy "CHIP HAIHA"; Hard candy with filling, candy bar "HAIHAPOP"...

+ Cake group includes: biscuits, sponge cakes, MINIWAF roll sponge cakes, SOZOLL custard cakes, crackers, moon cakes, boxed cakes, Long-pie, Long-cake, Lolie, rice cakes, bread, fresh cakes...

After 60 years of striving and growing, the Company has grown steadily, with a production scale of up to 20,000 tons/year. The Company has made efforts to shift its product structure, increasing the production output of Bakery products. Bakery products with skyrocketing revenue are soft cakes of all kinds, bread and fresh cakes. The Company's products are not only trusted by domestic consumers but also exported to 15 countries around the world such as Russia, the US, Japan, Korea, Myanmar, Mongolia, China...

- Technical facilities

Due to the nature of confectionery production and business, Hai Ha Confectionery Joint Stock Company has large assets of machinery and equipment, modern technology. The company has developed a number of new quality product lines based on investment in innovation of technology and equipment on existing production lines, bringing economic efficiency. The system of machinery and equipment of

The company has modern advanced technology and is equipped with synchronous equipment. HAIHACO's products are always of high quality and competitive in price with existing products on the market.

b) Objective factors

- Raw material input factors

Raw material costs always account for more than 80% of the Company's cost of goods sold, in which sugar is the raw material accounting for nearly 15% of the total input material costs of the products. Therefore, fluctuations in sugar prices in recent years have significantly affected HAIHACO's raw material costs.

In addition, the company also uses raw materials such as glucose, flour, fat, etc. These raw materials are purchased by the company from reputable domestic manufacturers and suppliers. Some raw materials such as flavors and food additives that cannot be produced domestically are imported directly by the company from manufacturers in the US, Europe, Australia, and some Southeast Asian countries. Packaging is provided by large and reputable suppliers in Vietnam.

Besides, the prices of other raw materials have fluctuated strongly over the past year, mainly due to the impact of seasons and weather.

Cost of goods sold is the cost that has the greatest impact on the profit margin of Hai Ha Confectionery Joint Stock Company. The cost of goods sold of the Company includes the price of raw materials, so the Company needs to choose suppliers with quality, safe raw materials as well as reasonable costs.

- Legal environment

A political institution and a strict legal system will create conditions for healthy competition for businesses to conduct business activities smoothly and ensure economic development. Hai Ha Confectionery Joint Stock Company was established and operates in accordance with the provisions of the law on labor, tax, advertising, factory location, and environmental protection... The company is organized and operates in compliance with: Enterprise Law, Securities Law, tax regulations, legal documents and other relevant laws as well as the company's charter.

Enterprises in the confectionery industry in general and HAIHACO in particular are subject to legal constraints mainly related to food safety and consumer rights protection. To control this risk, HAIHACO always updates changes in the legal environment related to the Company's operations as well as specifies in the Company's internal regulations and policies, thereby developing appropriate business development plans.

The company recognizes the advantages of political stability and policy priorities as well as other favorable conditions in Vietnam, so the company has continuously promoted strategies to capture the market and maximize profits.

Since our country joined Free Trade Associations such as FTA, TPP, EVFTA... According to the Decree on Special Preferential Import Tariff - Free Trade Agreement (FTA) signed, from January 1, 2018, confectionery products are subject to a reduced import tax rate of 0%. With the accession to the ASEAN common market, Vietnam has completely opened its doors to many industries, fast-moving consumer products, especially confectionery from Indonesia, Thailand, Malaysia are easily processed and imported to Vietnam. This opens up more opportunities than challenges for the company because it will create favorable conditions for HAIHACO products to be exported to ASEAN countries.

- Economic environment

The government has continued to implement many measures to stabilize the macro environment, improve the business environment and enhance the competitiveness of the entire economy, which has brought advantages to businesses in general and HAIHACO in particular. Our country's deep integration into the world economy has created conditions for the company to expand its export markets. The company's products have been exported to 15 countries and territories.

- Sociocultural factors

Along with economic development, changes in socio-cultural factors have increasingly had a strong impact on the company's operations. Products manufactured by HAIHACO serve the regular consumption needs of Vietnamese consumers. As the population increases, the consumption level increases, so the company regularly updates the results of population surveys, thereby proposing appropriate business strategies to promptly meet the consumption needs of the people.

The company also pays great attention to food safety and hygiene and improving the lives of workers, food safety and hygiene as well as the environment to ensure sustainable development.

- Competitors

Currently, Vietnam has about 20 relatively large manufacturing enterprises, hundreds of small manufacturing establishments and a number of import companies participating in the confectionery market. Famous enterprises such as: Mondelez Kinh Do, Bibica, Huu Nghi, Trang An, Hai Chau, Biscafun, Hanobaco, Pham Nguyen,... are estimated to account for 60 - 65% of the market share. Some foreign direct investment confectionery companies also participate in the Vietnamese market such as Kraff (USA), Meiji (Japan), Orion, Lotte and a series of fast food chains such as KFC, Lotteria, Tous Les Jours,... The company proactively faces challenges to improve the quality of its products.

- Client

Customers are the deciding factor for the success or failure of any business and HAIHACO is no exception. The Company's customers can be divided into two categories: intermediary customers (agents) and end consumers.

For end-users, the company divides its market into two main areas: urban areas (where income is high and customers often choose high-quality products with beautiful designs); rural and mountainous areas (where income is medium and low, requiring good quality and affordable prices).

With customers being intermediaries (wholesale and retail agents) being important customers of the company, consuming the majority of the company's products. HAIHACO owns a distribution system across the country with 115 exclusive distributors and 50,000 retail stores. The company is also a major supplier to large supermarket systems such as Vinmart, Coop mart, Lanchi... with hundreds of large supermarkets and thousands of convenience stores and bookstores. The distribution network is one of the important factors of the industry, thanks to this network, the company's customers can access products in the most convenient way, this is also a barrier for other competitors when they first enter the industry. Besides, with the discount policy, paying commissions to agents, the pressure on distributors is insignificant.

For end consumers, customers always tend to want to buy more products than they spend, customers can easily switch to buying products from other brands because of low switching costs, so consumers put a lot of pressure on the company, requiring the company to constantly develop products to meet customer needs.

2.2. Analysis of the current situation of improving business efficiency of Hai Ha Confectionery Joint Stock Company

2.2.1. Analysis of the current status of indicators for measuring and evaluating the overall business performance of Hai Ha Confectionery Joint Stock Company

Table 2.3. Indicators reflecting the profitability of Hai Ha Confectionery Joint Stock Company in the period 2017 - 2020

Target

Unit

2017

2018

2019

2020

1. Net revenue

Ratio

copper

857.98

982.29

1048.62

1408.83

2. Profit after tax

Ratio

copper

33.70

42.07

40.85

39.06

average

Ratio copper	507.92	761.19	1080.85	1169.09
4. Average equity army	Ratio copper	339.56	372.50	412.06	449.98
5. Return on total assets (ROA) = ((2)/(3))*100	%	6.63	5.53	3.78	3.34
6. Return on equity (ROE) = ((2)/(4))*100	%	9.92	11.29	9.91	8.68
7. Return on Sales (ROS) = ((2)/(1))*100	%	3.93	4.28	3.89	2.77