Masan (MSN) marching towards building a leading consumer-retail platform

Masan (MSN) marching towards building a leading consumer-retail platform

Masan Group, one of the largest private conglomerates in Vietnam, has just released its management accounts for the third quarter as well as the first nine months of the 2020 financial year, with upbeat business results across diverse segments.

A VinMart+ store of Masan in Ho Chi Minh City

Along with this, the group (MSN) eyed double-digit growth in revenue and operating profits across consumer-related business segments. VinCommerce (VCM) expects to break-even with earnings before interest, taxes, depreciation and amortization (EBITDA) in this fourth quarter.

On a like-for-like (LFL) basis, which assumes consolidation of VCM’s results from the first nine months of 2020, MSN’s topline and EBITDA grew 19.6 and 16.1 per cent, respectively. LFL EBITDA margin improved by 3.1 per cent to 13.7 per cent in the third quarter of 2020, against the corresponding period of the year prior.

VCM’s profit turnaround game plan validated with EBITDA margin has been improving since the beginning of the year, from 5.1 per cent in the first quarter to 8.5 per cent in the second due to the COVID-19 lockdown, and 2.8 per cent in the third quarter, with momentum to achieve break-even EBITDA in the fourth quarter.

A wide assortment of MCH products

Meanwhile, Masan Consumer Holdings (MCH) delivered three consecutive quarters of nearly 30 per cent topline growth while inventory stock levels at distributors remained below 20 days.

The robust innovation pipeline contributed 55 per cent of third-quarter revenue growth, which management believes set the foundation for similar growth rates in the medium term.

“We believe in breakthrough transformation that results in breakthrough value for consumers. We are brave enough to openly share our vision, which many may not agree with or understand before the transformation is completed. I believe our integrated consumer retail strategy is starting to bear fruit as we hit our first strategic milestone in the fourth quarter, with VCM breaking even. This is just the very beginning of what we envision on the way to grow into an on-to-offline consumer-retail champion,” said chairman Nguyen Dang Quang.

Early this month, Masan MEATLife (MML) has broadened protein portfolio by signing agreements to acquire 3F VIET, a leading domestic poultry player. Assuming the consolidation of 3F VIET, Masan Group now has a VND3+ trillion ($130+ million) revenue meat business, which will further unlock significant synergies with MSN’s modern grocery retail business where fresh is a key driver.

MHT’s plant in Sarnia, Canada

For its part, Masan High-Tech Materials (MHT) recently signed agreements to become a strategic partner of Mitsubishi Materials Corporation (MMC). MMC will invest $90 million via a primary capital injection to own 10 per cent of MHT on a fully diluted basis. The partnership validates MHT’s strategy to shift its business model from a predominant mining operation to a vertically integrated high-tech industrial platform. Post completion of the equity investment, the partners shall discuss developing a separate business unit to strengthen each parties’ mid-stream tungsten platform.

In terms of business performance, MHT’s net revenue improved by VND1.508 trillion ($65.5 million) in the third quarter of 2020 against a year prior, mainly due to the consolidation of HCS’s global tungsten business. On a like-for-like basis, MHT's third-quarter revenues were up 5.6 per cent versus the third quarter of Q2019 mainly due to the ability to export copper concentrate this year.

MHT’s priority is to pay down $200-250 million of long-term debt over the course of the next 18-24 months to ensure that MHT is profitable throughout price cycles and to ensure a stable dividend policy.

Meanwhile, The CrownX, MSN’s integrated consumer-retail platform which consolidates MSN’s interests in VCM (modern grocery retail) and MCH (branded consumer products), delivered both revenue and EBITDA growth on an LFL basis.

Net revenue reached VND13.948 trillion ($606 million) in the third quarter, up 16 per cent on-year on an LFL basis. EBITDA margin expanded to 9.2 per cent in the same quarter, improving by 4.6 per cent compared to the third quarter of 2019.

For the first nine months, The CrownX delivered VND40.037 trillion ($1.7 billion) in net revenue and posted an EBITDA margin of 6.3 per cent.

Fresh products are a key factor attracting customers to VinMart stores

VCM’s strategic initiatives, such as optimising its footprint (through the closure of non-performing locations), redefining its product assortment, pricing policy, and consumer proposition started to yield results with EBITDA margins improving to 2.8 per cent in the third quarter versus 6.7 per cent in the same period in 2019. Main drivers included a 2.4 per cent improvement in gross margin and a 1.3 per cent reduction in operating costs.

For its part, Masan Consumer Holdings (MCH) delivered three consecutive quarters of strong double-digit growth in net revenue which reached VND6.084 trillion ($264.5 million) in the third quarter, up 32 per cent compared to 2019.

MSN’s member unit Techcombank (TCB) continues to post impressive results with profit before tax growing by 18.9 per cent to reach VND10.711 trillion ($465.6 million) in the first nine months versus VND9.006 trillion ($391.5 million) in the previous year.

MSN plans to de-leverage over the next 12-18 months to achieve a net debt to EBITDA ratio between 2.5-3.0x, which will include paying down debts, not just EBITDA growth. The management believes this initiative will uplift net profit growth to be on par with the company’s EBIT growth.

VIR