Interest expenses "pull back" Bao Ngoc Company's (BNA) profits

Bao Ngoc Production Investment Joint Stock Company (HNX: BNA) is the predecessor of Bao Ngoc high-end bakery private enterprise, established in 1986. BNA became a public company in May 2018. Main products are traditional sandwich bread, paket, fried green rice, coconut sesame, industrial bread with sweet and salty fillings, moon cakes...

Recently, Bao Ngoc Company announced its consolidated mid-year financial report for the first half of 2023, recording net sales revenue of approximately VND 467 billion, down 14% compared to the first half of 2022.

Looking at Bao Ngoc Company's revenue structure in the past period, it shows that semi-finished product sales earned about 466 billion VND, down more than 13% compared to 2022. Revenue from selling goods reached more than 6 billion VND, up about 1 billion VND. Revenue from providing services was less than 20 million VND, while in the same period it reached more than 3 billion VND.

In addition, Bao Ngoc's financial report shows that in the first half of 2023, the company's cost of goods sold reached 409 billion VND, down 12% over the same period, gross profit was 59 billion VND, down 22%.

During the period, Bao Ngoc's financial expenses reached 19 billion VND, an increase of 215% compared to the first half of 2022, mostly interest expenses of 18 billion VND. Sales expenses were nearly 16 billion VND, an increase of 7%. Business management expenses were more than 11 billion VND, unchanged compared to the same period last year.

As a result, Bao Ngoc Company reported a profit after tax of about 7 billion VND, down 81% compared to the first 6 months of 2022.

Bao Ngoc's business results in the first 6 months of 2023 compared to the same period. Photo: Phuong Anh

Explaining the fluctuations in business results, Mr. Le Duc Thuan - Chairman of the Board of Directors of Bao Ngoc Company - informed that due to the impact of the global economic crisis and prolonged inflation in 2023, the food industry's consumption market also decreased sharply, purchasing power was not much, reducing the company's profits.

In addition, the company has stepped up research on new products, leading to many damaged and defective goods, pushing up the cost of capital. Not to mention, the interest rate in 2023 is higher than in 2022. Although the government has had a policy of reducing interest rates in the first 6 months of this year, it is still high, leading to an increase in capital costs, affecting business results.

At the same time, the company was taxed more than 3 billion VND after the tax settlement period, causing other expenses to increase and profits to decrease.

It is known that in 2023, Bao Ngoc plans to achieve revenue of 1,011 billion VND, after-tax profit of more than 60 billion VND. At the end of the first half of the year, the enterprise has completed 47% of the revenue target, but is still far from the profit target.

As of June 30, 2023, the total assets of Bao Ngoc Production Investment JSC were about VND 945 billion, an increase of VND 65 billion compared to the beginning of the year.

Of which, the company's cash reserves are about 55 billion VND, an increase of 67% after 6 months. Including nearly 8 billion VND in cash, 14 billion VND in non-term bank deposits and 33 billion VND in term deposits. In addition, Bao Ngoc's inventory is nearly 575 billion VND, an increase of more than 43% compared to the beginning of the year.

On the other side of the balance sheet, Bao Ngoc's payables reached VND502 billion, an increase of more than VND53 billion after 6 months. This fluctuation mainly comes from the company's short-term debt increasing rapidly from VND326 billion (January 1, 2023) to VND415 billion (June 30, 2023).

As mentioned above, high debt is the main reason for the sharp increase in corporate interest expenses, causing a decline in corporate profits in the last financial reporting period.

At the end of the market session on September 22, 2023, BNA shares of Bao Ngoc Production Investment JSC were trading at VND 13,200/share, down 3.65% compared to the previous session.

Source