Despite Macro Headwinds, MSN Delivered Stable 2022 Revenue and Core Profits

Masan Group Corporation (HOSE: MSN, “Masan” or the “Company”, today released its unaudited management accounts for the fourth quarter (“4Q2022”) and the financial year 2022 (“FY2022”).

“I am proud of how we have and are innovating our way out of a volatile macro and micro backdrop. In 2022, we solidified our integrated consumer-retail platform with the WIN store innovation. Digitalizing our entire consumer infrastructure, from product manufacturing to the end consumer, and developing an integrated MT-GT platform are Masan’s next defining innovations for 2023 and beyond. If we execute, we will be the consumer platform of choice by delivering a personalized consumer experience, while lowering the price of daily products and services by at least 5%. The speed and magnitude of our innovation is what give us confidence about our medium and long-term growth prospects” said Dr. Nguyen Dang Quang, Chairman of Masan Group.

In 2021, due to COVID-19 which resulted in consumer stockpiling and wet market closures, there was an abnormal surge in demand for products and services of WCM and MCH. To derive “normalized” financial results for MCH, management applied the run rate revenue pre-COVID of each category adjusted for seasonality. For WCM, management normalized 2021 performance by using the weekly sales prior to COVID-19 lockdown. 

Macro Highlights

In 2H2022, business operating environment became increasingly challenging due to higher inflation (primarily driven by rising food & housing and construction materials prices), tightening monetary policy, corporate bond issuance slowdown, and an overall weakening global demand which impacted Vietnam’s export (declined from $35 billion in August 2022 to $29 billion in December 2022).

Aforementioned macro headwinds and challenging business environment resulted in weaker consumer sentiment as consumers saw their purchasing power, income and personal wealth decline. Weaker global demand led to 117,000 jobs losses in 4Q2022 (85% in export related sectors) alone. Besides concerns over wages and salaries, consumers also felt poorer as the bond, equity and real estate market (most popular asset classes for retail investors) saw declines or stagnation. As a result, key consumer trends such as product premiumization and the shift from general trade (“GT”) to modern trade (“MT”) in 2022 also slowed down.

MSN expects the challenging macro environment and corresponding weaker consumer sentiment to continue to impact business operations in 1H2023. However, the Company believes a macro recovery to occur as early as 2H2023. China’s re-opening (both in terms of economic activity and tourism to Vietnam) combined with early signals of a less hawkish Fed have provided some positive macro catalysts to support consumer sentiments and therefore MSN’s business outlook.

Strategic Highlights

An expanding retail footprint with best-in-class store unit economics in Vietnam, which demonstrated Masan’s ability to scale up its offline presence to advance its Offline-to-Online (“O2O”) strategy:

WinCommerce (“WCM”) introduced its “Point of Life” retail concept with the launch of 102 WIN stores, a transformative retail concept where consumers access 60%+ of their daily needs in one location including grocery, F&B, health & well-being, telecommunication, and financial services. This is a model suitable for urban consumers looking for ultimate convenience. WIN stores delivered revenue uplift of 20%+ versus pure grocery model in terms of revenue per sqm providing management confidence to scale the concept further in 2023.

WCM piloted new low-cost rural store concept with an uplift in revenue between 15 – 30% at 20% lower Capex, demonstrating potential to serve 65% of the population residing in rural areas.

Masan’s in-house logistics arm, Supra, successfully launched and handled 45% of WCM’s ambient product volume and reduced 13% of WCM’s logistics costs per piece on normalized basis in its first year of operation.

Phuc Long Heritage (“PLH”) opened 44 flagship stores in 2022, heading to 2023 with strong momentum for scaling up. Despite PLH’s first year of mass store opening, 44 new flagship stores delivered store EBITDA margin[2] of 26% in 2022. PLH ended the year with 132 flagship stores, doubling the format’s store count since Masan’s acquisition of the business and closing the gap significantly with other industry players. Having already been the #2 in terms of revenue and #1 in terms of profit margin, PLH expects to become the #2 player in terms of store count by 2Q2023.

A winning portfolio of branded consumer products with sustainable growth prospects to entice consumers into Masan’s ecosystem:

Masan Consumer Holdings (“MCH”) maintained revenue and profit margin despite inflationary pressures due to its strong power brands, early hedging efforts, and control of logistics and sales expense. Additionally, to unwind distributor’s high inventory levels as a result of miscalculation of demand, management temporarily sacrificed short-term topline gains and helped distributors reduce days of inventory back to healthy levels. The healthier inventory levels at distributors position MCH to weather the potentially challenging 1H2023- environment and increase the success rate of new innovation launches.

Masan MEATLife (“MML”)’s price became increasingly competitive with wet market via organic price reduction and exclusive price for WIN members. Specifically, WIN member’s price was applied to MML’s meat products at 113 stores, leading to volume increase of 30% – 60% during the pilot phase, demonstrating synergy between WCM and MML. This pricing strategy not only enhanced consumer awareness and consumption of our high-quality meat but also increased volume, leading to higher processing plant utilization and lowered unit production cost. This sets the business up for long-term margin uplift.

The digitalization foundation for Masan to realize O2O strategy and truly become a consumer – tech ecosystem:

MSN rolled out WIN membership program nationwide with benefits for consumers shopping at WCM network since 6 January 2023. The program reached 1.8 million registered members up to date. WIN membership is the cornerstone membership platform that connects consumers with MSN’s ecosystem of consumer products & services. This allows MSN to connect directly with our consumers to develop a deeper understanding of their daily needs to ultimately personalize on communication and offerings for each consumer. Starting with benefits at WCM, MSN aims to integrate benefits from other MSN’s consumer brands gradually in 2023.

In partnership with Techcombank (“TCB”), MSN’s new cashless and cardless payment solutions (“TPay”) at 266 WIN stores and WinMart+ (minimarket, “WMP”) stores has gained significant traction – To date, WCM has been able to open accumulatively ~41,000 TCB bank accounts inside its stores and % of transactions in store have been paid via TPay in Ha Noi, Ho Chi Minh, Hai Duong, and Can Tho is 24.4%, 16.5%, 18.2%, and 5.4%, respectively.

Masan continues to strengthen the balance sheet with manageable leverage and liquidity ratios while enhancing the duration of its debt profile. Particularly, MSN successfully closed a USD600 million syndicated loan with a five-year-duration at a competitive interest rate. The loan was oversubscribed by nearly 40 financial institutions. This transaction highlights Masan’s strong credit profile and unique ability to raise capital at attractive terms, particularly during the current volatile global market conditions. Subsequently, MSN is also exploring different options to extend debt maturities, improve interest rates, and unlock earnings via deleveraging.

Consolidated Financial Results

Net Revenue: Excluding 2021 feed revenue for a like-for-like comparison due to its deconsolidation, Masan’s net revenue reached VND76,189 billion in 2022, an increase of 2.6% versus VND74,224 billion in 2021. On a reported basis, revenue decreased by 14.0% in 2022 and 13.4% in 4Q2022.

EBITDA: On a like-for-like basis, 2022 consolidated EBITDA reported slight declined by 1.2% YoY to VND14,437 billion as EBITDA margin only reached 18.9% in 2022 versus 19.7% in 2021 while revenue is flat. On a reported basis, consolidated EBITDA decreased 11.8% in 2022 and 28.1% in 4Q2022.

Net Profit After Tax (“NPAT”): NPAT Post-MI (after minority interests) declined by 58.3% to VND3,567 billion in 2022 on a reported basis due primarily to one-off financial income gains from deconsolidation of feed business in 4Q2021 and lowered MML and MHT in 2022 NPAT. However, on a LFL Core NPAT Pre-MI [1]  basis, MSN recorded VND3,852 billion in 2022, up 1.1% YoY. NPAT Pre-MI posted VND4,754 billion, down 52.9% on a reported basis. The 52.9% decline is primarily due to the loss of feed business NPAT.

Balance Sheet Highlights: Net Debt to LTM (Last 12 Months) EBITDA reached 3.7x at end of 2022 compared to 2.2x at the end of 2021. The higher debt and lower cash balance were driven by capital expenditures and investments in new companies. In light of the current volatile capital market, Masan’s solid cash flow generative consumer-focused businesses has been able to access the local and international debt markets at very favorable cost and terms. The non-cyclical nature of Masan’s businesses gives management confidence in the ability to further advantageously manage the Company’s liquidity in the upcoming months:

Cash and cash equivalent balance reached VND17,512 billion as of the end of 2022, lower compared to VND22,638 billion the end of 2021, mainly due to the acquisition of PLH and Nyobolt.

Net debt was VND53,481 billion at the end of 2022, compared to VND35,540 billion at the end of 2021, mainly due to a lower cash balance.

Capital expenditures in 2022 reached VND4,165 billion, compared to VND2,805 billion in the same period last year. The higher level of capital expenditures was mainly driven by the investment in capacity expansion for MCH and store openings for WCM.


FY2023 Forecast

On a preliminary basis, subject to customary corporate approvals and macro conditions, Masan’s FY2023 financial forecasts expects a base case consolidated net revenue to be between VND90,000 billion and VND100,000 billion, which presents a growth of 18% and 31%, respectively, compared to VND76,189 billion in 2022. TCX is still expected to be the key driver for revenue growth with more than 70% contribution to 2023 net revenue. Core NPAT Pre-MI (excluding one-off) is expected to be within the range of VND4,000 billion and VND5,000 billion, achieving a growth rate between 4% to 30% compared to VND3,852 billion in 2022. In the downside scenario where macro conditions are tougher than expected and negative consumer sentiment persists, management projects top line to grow between 10% and 15%.

TCX: expects to deliver net revenue within the range of VND65,000 billion to VND 72,300 billion, up 16% to 29% compared to 2022.

WCM is expected to deliver net revenue within the range of VND36,000 billion and VND40,500 billion in 2023, up 23% to 38% YoY. Key drivers of this growth are continued successful new store openings and store level revenue uplift. WCM targets to open 800 – 1,200 stores in 2023. The company will focus on minimart / minimall models with multi-format ranging from WinMart+ urban, WIN, WinMart+ rural to consolidate urban and rural.  Additionally, WCM will focus on bringing value to consumers via its WIN membership and private label development, targeting to serve 4-6 million members with exclusive value-for-money offerings that drive more traffic to the store. WCM will continue to work with our its suppliers to invest in its consumer offerings to ensure a competitive offering. These initiatives are expected to drive 5-10% LFL store revenue growth.

MCH’s net revenue is expected to reach VND30,500 billion and VND33,500 billion in 2023 by focusing on R&D efforts, up 15% to 30% compared to previous year. To achieve these growth levels, MCH would need to reignite its innovation revenue and focus on winning underperformed geographies. Convenience food, beverage, home personal care are expected to be key growth drivers for MCH, accounting for ~2/3 of total revenue growth in 2023. This reflects MCH’s strategy to grow into larger market size, higher growth categories where MCH is relatively less penetrated than seasonings to sustain 20% annual growth over next few years. The company reorganized itself in 4Q2022 to develop a more specialized operating model by categories and sales channels.

PLH is expected to deliver VND 2,500 billion to VND3,000 billion, a solid growth of 58% to 90% compared to 2022 driven by successful opening of 75 to 90 flagship stores and maintaining new store revenue performance as existing stores. Phuc Long will also begin loyalty integration into Masan’s WIN membership, giving its members more benefits when frequenting Phuc Long, which is another revenue driver. Finally, Phuc Long will look at menu innovations in latter half of the year to provide consumers with new exciting “Hero” products. To prepare for international expansion in 2024 / 2025, Phuc Long’s new CEO with an international F&B franchising background, will develop international standardized processes and operating systems starting this year.

MML projects to deliver net revenue within VND8,500 billion and VND9,000 billion, up 78% to 88% YoY driven by expanded pork and chicken product portfolio, especially in processed meat, and increased distribution via WCM channels (reduced price gap to wet market by WIN membership would induce trial and convert consumer from general trade to modern trade). Profitability is expected to be improved by higher utilization rate, increase in processed meat sales, and aggressive cost control. Effort to optimize on logistics and sale indirects cost would continue to happen in 2023.

MHT is expected to deliver net revenue of VND16,500 billion to VND18,200 billion, increased by 6% to 17% compared to previous period. Key initiatives would be to focus on cost optimization, integration with Nyobolt, and ongoing preparation for tungsten scrap and black-mass recycling. MHT will continue to explore international and domestic options to sell copper inventory.

Balance sheet: Masan will continue to actively explore alternatives in the capital market to extend its debt maturities, improve interest rates, and unlock earnings via deleveraging.



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