The sustainable development strategy of Kinh Do JSC (KDC) has completed ¾ of its journey, entering into last stage of growing both revenue and profit with a ready mindset.

 COMPLETING THE “PROFITABILITY THROUGH EFFICIENCY” STAGE.

At 2013 annual shareholders’ meeting last week, Mr. Tran Le Nguyen, Vice-chairman and CEO, revealed that despite being faced with many challenges and difficulties of the economy, KDC still successfully completed Stage 3 - Profitability Through Efficiency.”

During the past year, KDC Board of Directors had concentrated all resources on the company’s core business in the food sector with various measures. Firstly, the company restructured its product portfolio, focusing on key products with high profit margins and profit-maximizing potential. Additionally, from late 2012, KDC changed its mode of business operation for the entire distribution system. As a result, inventory had dropped by 20% while still meeting the market’s needs. Gross profit increased by VND 200 billion and gross profit margin grew from 39.8% in 2011 to 43.6% in 2012.

Secondary, KDC reformed the brand structure into 4 main categories: “Delight”, “Packaged Meal”, “Celebration”, and “Dairy”. After reformation and gaining sufficient strength, these brands have started and will continue to counter-influence the “Kinh Do” brand. In addition to developing Kinh Do products, the year 2012 also marked the success of KDC as Glico’s exclusive distributor in Vietnam.

To maintain revenue and pave the way for sustainable development, KDC continute continute to invest in its distribution system from the packaged and fresh baked goods to the cold channel with 300 distributors and 200,000 points of sale

Another important mission for Kinh Do last year was restructuring investment portfolio and cash flow management. Thus, debt-to-equity ratio decreased to 0.14 and the company demonstrated its effective use of capital by ensuring working capital, reduce account receivables, and extend paying period, reducing inventory and reducing business cycle from 49 days to 43 days. KDC’s amount of cash and cash equivalents are constantly kept at a high level, with nearly VND 830 billion at the end of 2012.

By implementing the three aforementioned solutions simultaneously, KDC’S operating profit margin went from 8.1% in 2011 to 11.9% in 2012 and EPS increased by 20%. 2012’s revenue’s modest rise of 0.9% is considered by KDC management to be prime progress, focusing on key products to create the premise for more substantial growth in the future.

READY FOR GROWTH PHASE

According to the evaluations of KDC management, the economic situation in 2013 remains difficult. Nevertheless, with the advantages of the company’s existing foundation and the food industry only mildly affected, KDC confidently deploys Stage 4—“Profitable Growth”. Specifically, KDC’s target for revenue in 2013 is VND 5,200 billion and pre-tax profit is VND 600 billion, increasing by 21.3% and 22.5% respectively compared to 2012.

Mr. Tran Le Nguyen shared that the focus of KDC is to implement all lessons learned from the past few years’, but with greater efficiency on a larger scale.

“KDC will keep effectively developing the new operational process, and efficient products that have high profitability will continue to be utilized. We will continue to methodically invest in the system, which will help us finish Stage 4—“ Profitable Growth” of the restructuring process, as well as building momentum for accelerated and sustainable development as the economic situation improves,” Mr. Tran Le Nguyen emphasized.

As for the “Food and Flavor” strategy, KDC will continue to develop key products and expand the business portfolio, manipulating the distribution system to let the product reach the hands of the consumer.

The company will launch a number of new products aiming to serve everyday needs such as instant noodles, seasoning, cooking oil, etc., in the forthcoming future. Concurrently, KDC will keep investing in branding, taking advantage of the company’s 20th year anniversary to enhance Kinh Do’s brand image, reposition brand labels, optimize the management system and supply chains, expand the management system to distributors as well as suppliers, creating a thorough supply chain and further shortening the business cycle.

In 2013, in addition to developing “Kinh Do” branded products, the company plans to seek and take advantage of external growth opportunities through merger and acquisition strategies. Potentially, KDC will distribute more of Glico’s popular product lines, in addition to stick snack products.

Dau Tu Chung Khoan