EVALUATION REPORT OF 2008

Transcription

1 SAIGON BEER ALCOHOL BEVERAGE JS CORPORATION (SABECO) No. 6 Hai Ba Trưng Street, Ben Nghe Ward, District 1, Ho Chi Minh City Tel: (08) Fax: (08) Website: sabeco@sabeco.com.vn Business Licence No issued by the HCMC Department of Planning and Investment on 17/04/2008. Ho Chi Minh City, 07 July 2009 EVALUATION REPORT OF 2008 To: The Annual Meeting of General Meeting of Shareholders Whereas: - Duties and functions of the Controlling Committee stipulated in the Charter of Saigon Beer-Alcohol-Beverage Joint Stock Corporation; and - Sabeco s operation and business performance, the Management team s report and the performance of the Controlling Committee; The Controlling Committee hereby would like to submit our evaluation report on the financial and operation performance of Sabeco in 2008 with details as follows. I. EVALUATION OF FINANCIAL STATEMENTS OF 2008 Summary of financial results Parent company s financial statement Currency VND Consolidated financial statement A Equity and total assets as at 31st Dec Total Assets: 10,546,013,406,119 13,027,343,565,860 Current assets: 2,444,810,636,037 4,681,117,234,844 - Cash and cash equivalent 458,667,101,070 1,787,333,051,162 - Short term investment 398,503,051, ,870,147,067 - Account receivables 995,705,975,565 1,161,920,670,517 - Inventory 402,454,147, ,529,175,266 - Other current assets 189,480,360, ,464,190,832 Fixed assets: 8,101,202,770,082 8,346,226,331,016 - Tangible assets 4,055,741,728,610 4,918,416,889,443 - Property investments 27,593,664,903 - Long term finance investments 3,456,412,990,954 2,275,672,434,379 - Other fixed assets 589,048,050,518 1,124,543,342, Liabilities 4,021,942,700,953 5,343,286,126,823 - Current liabilities 3,970,002,737,054 4,925,411,039,984 - Long term liabilities 51,939,963, ,875,086,839 Evaluation Report of 2008 of the Controlling Committee of Sabeco 1/7

2 1.3 Total equity 6,524,070,705,166 6,707,652,274, Owner equity 6,490,988,282,936 6,665,406,743,321 - Equity/Charter Capital 6,412,811,860,000 6,412,811,860,000 - Share reserves (33,204,392,456) - FEX reserves 2,174,670,549 - Development reserves 18,351,395,595 - Finance reserves 19,184,188,864 44,817,872,266 - Other shareholders reserves 212,508,699 - Undistributed earnings 58,992,234, ,242,828, Other equity 33,082,422,230 42,245,531,187 B 2008 Financial Statement Net Sales 3,849,999,906,682 7,165,075,737,172 Cost of sales 3,560,363,149,712 5,832,554,917,945 Gross profit 289,636,756,970 1,332,520,819,227 Financial income 653,566,573, ,034,461,666 - investment income 580,716,235,828 Financial expenses 242,220,529, ,282,212,394 - Provision for financial investment 196,767,920,000 Selling expenses 141,328,346, ,516,418,453 General and administration expenses 41,124,740, ,204,159,402 Operating profit 518,529,713, ,552,490,644 Other income 67,667,129, ,603,473,319 Other expenses 49,801,744,211 87,479,358,236 Profit/loss from associates/jv 70,863,248,412 Net profit before tax 536,395,098,168 1,018,539,854,139 Business income tax 174,169,476,861 Business income tax refund 4,301,704,968 14,823,334,358 Net profit after tax 540,696,803, ,193,711,636 Profit/(loss) for minority interest 103,621,589,733 Profit/(loss) after tax - Company 540,696,803, ,572,121,903 Sabeco s Financial statements was audited by KPMG (details refer to the financial statements enclosed with the GMS meeting documents). Business performance of the whole Corporation was reflected in the consolidated financial statements for the first financial year (for 8 months), which included the parent company and all subsidiaries. However, the Sabeco s financial statements was completed too late; the audited consolidated financial statements was completed on 07/07/2009, that has not given the Controlling Committee sufficient time for evaluation of data of the report. Evaluation Report of 2008 of the Controlling Committee of Sabeco 2/7

3 The Controlling Committee would like to point out the followings, which may affect the result of the financial statements, in addition to the auditor s opinions: - Sabeco had not finalized the state-owned capital at the time of equitization in accordance with the present regulations, which are compulsory for application. In the meantime, Accounting Department had not confirmed the amount payables to SCIC as at 30/04/2008. It is very possibly that the finalization for the state-owned capital may change the information provided in this financial statements; - At 30/04/2008 (date of equitization), Sabeco had neither re-evaluated nor confirmed the value of the long-term investments into other enterprises in accordance with the Circular No.106/2008/TT-BTC dated 18/11/2008 of the Ministry of Finance nor made provision for those investments. This resulted in an additional provision of VND billion, instead of an original provision of VND billion, made at 31/12/2008 for two listed investments in Chuong Duong Beverage JSC and Petrol Vietnam Insurance (PVI) JSC, meaning the profit of Parent company for 8 months of 2008 had been substantially reduced; - Sabeco had not made preparations for the tax finalization within 45 days after the equitisation as stipulated at the Circular No. 60/2006/TT-BTC dated 28/06/2008 of the Ministry of Finance. It is very possibly that Sabeco may be subjected to a penalty of 0.05% per late day on the late tax payment and an administrative penalty on the late submission of the tax finalization; - Account preparation has been often late with inaccurate figures and followed by a lot of adjustments, that does only not meet the requirements in accounting management but also is a great concern, especially the accuracy of accounting figures; - Sabeco had included the remaining profit of Satraco into the profit of Parent Company but did not follow the procedures. This results in the fact that KPMG qualified this transaction and suggested excluding it from the consolidated profit. The Corporation had also included the 2007 undistributed profit of VND billion of Satraco which was belonged to the Government, that was a result of no state-owned capital finalization made at the time of equitization. II. EVALUATION ON THE MANAGEMENT ACTIVITIES 1. The Board of Management ( the Board ) has re-structured the management organization of Sabeco, that consists of the Board Chairman, who is the legal representative of Sabeco that was approved by the General Meeting of Founding Shareholders, the General Director and other managing directors. Some noticeable restructures are (1) the separation of the Accounting and Finance Department into Finance Department and Accounting and Statistics Department leaded by Financial Managing Director and Chief Accountant who are at the same level in the organization, (2) the separation of the Technical and Quality Control Department into Technical Department and Quality Control Department, aiming to separate the responsibilities in Evaluation Report of 2008 of the Controlling Committee of Sabeco 3/7

4 the management of quality standards and quality policies and the quality control in order to ensure the independence of quality control body, and (3) the decision on transforming the two dependently book-keeping breweries at 187 Nguyen Chi Thanh and at Cu Chi each to a cost-center operation in order to evaluate the efficiency of the management of usage rates and costs of goods produced. 2. The Board has appointed managing directors in different sections and implemented decentralized administration and authority, that allows managing directors to be proactive in managing their business. 3. The Board has decided changing the sale structure from one price (pay commission to each level) into different price levels, which helped to solve the problem in imposing SST on the selling prices including selling expenses and commissions. This change has brought a considerable increase in the profit of Sabeco. 4. The Board has reviewed and issued various resolution and decisions meeting the production, business operation and management requirements. 5. The Management team has solved problem in supplying enough key raw materials to stabilize the production under the global shortage of malt and hops as well the increasing fluctuation of raw material prices. 6. Satraco has achieved all targets in sales and distribution of Bia Sai Gon products of Sabeco with total sales volume of Sai Gon branded beer products of 775million litres, which increased by 20% over This was an impressive increase, especially achieved in the very difficult 2008 of high inflation and economical recession. 7. Sabeco has completed the re-structure of distribution system into 09 regional trading joint stock companies under Satraco to distribute Bia Sai Gon products, following a scheme in which Satraco owns 90% of charter capital of these companies and applies a standard sales policy throughout the country. Bia Sai Gon branded products are presently available in nationwide, from the South to the North. 8. The major breweries are located at different regions. Excepting Nguyen Chi Thanh and Cu Chi breweries which are 100% owned by Sabeco, the others are organized and operated under the model of joint stock company, in which Sabeco either holds 51% of charter capital or controls Sabeco s beer brands, and located in Mekong Delta, the Southern East, the Southern Central, the Central and the North. These companies have been commencing operation that shall ensure adequate supply appropriately to each region and transportation cost savings. Although there were a lot of difficulties in 2008, Sabeco is determined to catch opportunities and ensure a supply of 01 billion litres in 2010 to meet the market demand. This will bring great profit to Sabeco once the economy is recovered and the SST reduced to 45% in It is a correct business strategy set forth in the previous years and has been well implemented in On 21/06/2009, we have attended the opening ceremony of a can factory at Nghe An which is a modern one in Asia. This establishment is very important in the present Evaluation Report of 2008 of the Controlling Committee of Sabeco 4/7

5 competition in the market in manufacture and supply of packaging materials to the beer and beverage industry, giving advantages to our production, in taking up market share in the North and in enriching Sabeco brands. 9. In general, Sabeco has well implemented the policies and provisions of law and the resolutions of the General Meeting of Founding Sharehodlers, especially in the basic construction investments Sabeco has implemented all procedures in investment, strictly following the Law on Tender and project finalization. REMARKS: 1. The Board should speed up the issuance of the key working regulations required to ensure a smooth management and operation of Sabeco such as Board working regulations, financial management regulations, etc. Drafts of these regulations have been discussed for a long time and not yet issued, that translates for the unstableness of our organization. Furthermore, if these regulations are for short-term implementation purpose, Sabeco will not be able to meet ISO9000 periodical evaluation on management that required by the independent consultant. 2. Accounting and Finance are two functions that cannot be separated in a business operation, as financial management function reflects right at the payment stage which is managed by Accounting Department. Financial management function can be fulfilled when information is provided by the Accounting Department in a timely manner and at the highest level of accuracy. In most of the cases requesting a financial information analysis, it shall require a full co-operation in data management and processing which is one of daily duties of Accounting Department and of an accountant and that should be under common instructions of one leader in both finance and accounting areas. The separation of accounting and finance departments then being independent in operation would surely cause problems in information flow between the two sections. Different minds then less support to each other in exercising their responsibilities and fulfilling their duties, even the accounting data can be kept close quoting the requirement of information security, etc., is a matter of course, and Finance Department shall hard to be able to fulfill its duties. In reality, we have never seen any organization setting their finance department and accounting department apart from the other. In foreign companies and some Vietnamese companies operated under foreign organizational structure, there is a finance director leading and taking full responsibility for both finance and accounting sections. In Vietnam, there are no provisions of law for the position of finance director but for only Chief Accountant. 3. The Board should pay further attention to the Parent company s finance and accounting departments, enforcing and improving the finance and accounting organization. Keeping you warned of a lot of risks that Sabeco will have to face with in very near future due to actions of less accuracy, differences, repeats, overlooks, missing, unclear and incompliance with the accounting standards and the reporting deadline in preparation of financial reports, if there is no timely improvement. This is not only a Evaluation Report of 2008 of the Controlling Committee of Sabeco 5/7

6 management risk in the quality of accounting information and reports but also a legal risk. How can we meet the requirement for a public company in providing clear, fair and transparent information? How can the listing in stock market can be proceeded when a listed company is required to release financial reports within 25 days after a quarter end, according to Article 4 of Circular No. 38/2007/TT-BTC dated 18/4/2007 governing the listed company. 4. Listing in stock market is the need in order to help our finance position and business performance to appear transparent to the public, improving liquidity of Sabeco share, changing management policy in order to improve the business performance of Sabeco. The timing to list at the HCMC Stock Exchange however should be carefully looked into, in all necessary and sufficient conditions. From our point of view, we are not ready and prepared enough for the listing that are right at our Head Office. 5. Sabeco should speed up the review and evaluation of all external investments and restructure the investment portfolio for a better return of shareholders fund. At the same time, we should speed up in collecting our funds to re-invest into core businesses which are safer and of higher performance, and the most important aim is to improve the financial position of the Parent company. 6. Sabeco should improve Parent company s financial position. The current liabilities are too high compared with the current assets. The current ratio is 0.61 that is too risky. 7. Sabeco should review and re-evaluate the establishment of Sabeco Investment Fund. We are not expert in this business line which requires high level of profession and exposes to high risk. 8. Sabeco should pay more attention to the development of wine and soft drink sectors. This will help to balance and intensify the sustentation of our growth. III. CONTROLLING COMMITTEE S TARGETS IN 2009 Based on the 2009 targets approved by the General Meeting of Shareholders ( the GMS ), we set forth our plan for 2009 as follows: 1. To supevise and evaluate the implementation of 2009 Resolution of the GMS; 2. To keep reviewing the Corporation s internal regulations and policies and providing suggestion for amendment to be in line with the new operation structure, the provisions of Law on Enterprises and the Charter; 3. To cooperate with the Management team to set up internal audit department, to establish working regulation for it to exercise their internal audit and supervision function over the activities of the departments of Sabeco and our subsidiaries in compliance with the procedures of Sabeco; Evaluation Report of 2008 of the Controlling Committee of Sabeco 6/7

7 4. To inspect and supervise the issuance of resolutions and decisions by the Board to ensure their compliance with the Charter, Resolution of the GMS and the provisions of law. Thank you and wish you all good health and prosperity. Wish the meeting success. On behalf of the Controlling Committee Head of Controller Dong Viet Trung (Signature) Evaluation Report of 2008 of the Controlling Committee of Sabeco 7/7