Many listed consumer goods companies earned huge profits in the third quarter owing to efforts to cut costs, with several of them beginning to make profits again after suffering losses for a period of time.
In explanatory reports to shareholders, many companies stated their Q3 profits were good as they had cut financial costs and restricted borrowing bank loans by rotating efficient cash flow to bring down the borrowing cost.
For example, Vietnam Dairy Products Co. (Vinamilk) in the third quarter gained over VND1.39 trillion in profits, a rise of VND333 billion year-on-year. The company’s net profit in the first nine months is more than VND4.17 trillion, up 31.3% over the same period last year.
Mai Kieu Lien, CEO of Vinamilk, attributed such a profit increase to a year-on-year sales growth of 16.23% and financial cost reduction of 18.57% in the third quarter. Its financial costs plummeted as much as 90.57% in the first nine months.
Similarly, Dien Quang Lamp JSC reported its Q3 revenue fell by nearly 10% against the same period last year but profit picked up 72.89% to VND14.88 billion. After-tax profits in nine months reached VND26.02 billion, a rise of 4.87% over the year-ago period.
Nguyen Thi Kim Vinh, deputy general director of the company, said the main reasons for its Q3 profit growth were stable exchange rate and lower lending rates. In addition, the company efficiently used its cash flow for business operations and thus the borrowing cost was minimized.
Specifically, financial costs in the third quarter stood at VND8.5 billion, a drop of some VND11 billion over the same period last year. The borrowing cost, in particular, amounted to VND6.3 billion, down nearly VND5 billion, according to the consolidated financial statement of Dien Quang.
Meanwhile, many companies recorded tidy profits for lowering costs of sales, advertising and business management and boosting labor productivity.
For instance, Kinh Do Corporation in the third quarter earned a gross profit of VND841 billion, up 21.7% year-on-year. The cumulative gross profit in nine months grew 17.4% over the same period in 2011 as input costs fell year-on-year.
In addition, cost control was tightened, reflected in a decline in the ratio of costs of sales, advertising and business management to net revenue. Therefore, the company reaped an after-tax profit of VND318 billion in the third quarter after a loss in the second quarter, resulting in the nine-month profit of VND311 billion, surging 21.4% year-on-year.
Similar to Kinh Do, Bibica achieved profits in the third quarter after incurring a heavy loss in the preceding quarter. The company’s Q3 after-tax profit reached VND14.91 billion, up 25% over the same period last year.
The high profit growth in the third quarter is a result of Bibica’s sales policy adjustments, including cutting marketing costs and reducing sales staff. Therefore, the sales cost went down in the quarter and the ratio of sales cost to net revenue dipped year-on-year.