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After the rice export ban by India, UAE, and Russia, there is a great opportunity for Vietnam when prices and demand suddenly increase. Major domestic exporters are expected to record increased profits. Most notable is Loc Troi Group, as a famous long-time exporter of the Mekong Delta.
Interest burden
In the first quarter of 2022, Vietnam’s Loc Troi recorded a 4.5% revenue growth, but profit after tax decreased by VND 265 billion, a loss of VND 81 billion compared to a profit of VND 184 billion. This decrease was attributed to increased interest costs and high input costs.
Rice exports in Vietnam recovered after the COVID-19 pandemic, with 7.1 million tons of rice worth $3.52 billion exported, up 14% and 6.7% respectively. VNDirect Securities Company estimates an 8.5% increase in total revenue for listed rice producers in 2022.
However, most businesses experienced a decrease in gross profit margin due to cost pressure, including increased inputs like fertilizer costs and rice purchasing prices.
The agricultural industry is seasonal and delayed, with fertilizer prices declining since November 2022. The decrease in fertilizer prices and domestic interest rates will affect the new rice price level for the summer-autumn crop.
Trust gives credibility
The rice purchasing price in Vietnam has been positively impacted by export market demand, with summer-autumn rice having the highest prices this year.
Loc Troi’s profits improved in the second quarter, with a profit of VND 424 billion compared to the previous year’s loss of VND 44 billion.
However, revenue only recorded a modest increase of 3.7% over the same period last year. The most notable increase was the recorded increase of VND 326.8 billion in profit from affiliated companies. In 2023, Loc Troi plans to reach VND 400 billion in profit after tax, a slight decrease of 3% compared to 2022.
The Group’s two core business segments are plant protection drugs and food business, accounting for 37% and 54% of total revenue of VND 11,900 billion, respectively.
Plant protection drugs account for more than 1/5 of the market share and have high profit margins. The company aims to gradually complete the agricultural value chain, from seeds, pesticides, and rice products.
Since 2019, the company has focused on more resources for the food segment, which accounts for a large proportion in Loc Troi’s revenue structure.
Loc Troi is leading the domestic-branded rice market share with the Ngoc Troi brand. The EVFTA Agreement helps reduce tariff barriers when exporting rice to member countries. However, businesses must sign new contracts and have rice in stock to benefit from the ban on rice exports from India, Russia, and the UAE.
Loc Troi’s strength lies in its long-standing growing area, connecting with good farmers, and creating a wide reputation. However, business operations cannot avoid risks, such as weather fluctuations and price fluctuations in the world market.
