VINAFCO: TOP 5 KEY PLAYERS IN PROVIDING INTEGRATED LOGISTICS SERVICES

Vinafco Jsc. overview

Business information

Source: Vinafco

Vinafco Joint Stock Company, previously known as Central Transportation Services Inc, was established in 1987. Currently, Vinafco is operating in the main areas: Warehousing; Transport; Freight forwarding; Shipping; Distribution center; Manufacturing and trading construction steel and Trading. Among the above activities, the transportation and freight services by sea are the key activities, accounting for about 70% of the revenue and over 75% of the profit of the whole company.

With current facilities competency, including fleet of ships, tank systems, distribution centers and more than 175,000 square meter warehouses and yards, Vinafco is capable of meeting different requirements of transportation, forwarding and trade of domestic and foreign customers.

Background milestones

1995- 1997: The period of scale expanding of organizational apparatus and activity area: After mainly operating in Hanoi and some northern provinces for a while, the company expanded the business to almost all cities and provinces nationwide. At the same time, the company continued to expand the organization activities and investment in other fields. Strategic decisions were made ranging from establishing a transport agency and technical materials factory to opening a representative office in Hai Phong and establishing a branch in Ho Chi Minh City. The strong background created a momentum for development and accumulating resources for the next great development stage. 

In November 2002, the Company changed its name to Vinafco Joint Stock Company, and started the journey: Building the Vinafco brand, quality improvement by applying the standard process of logistics services, transportation and delivery. Company’s vision was to become a professional logistics service company in Vietnam. The year 2008 marked the development by successfully issuing shares, increasing its charter capital from 67 billion VND to 200 billion VND. In October 2011, Vinafco increased its charter capital from 200 billion VND to 340B VND.

In the period of 2014 – 2025: 2015 – 2025 development strategy, approved by the Board of Directors, is to develop and gradually get closer to the vision “Becoming one of the top five companies in providing integrated logistics services and supply chain solutions in Vietnam, Laos and Cambodia schools until 2025”.

According to figures updated on December 31st 2019, the total number of employees of the Vinafco is 677 employees. With a view to maintain and improve core competencies, Vinafco promotes policies and programs to equip the whole employees working in the company with necessary knowledge and skill sets.

Vinafco operates  in many different industries with a variety of products in its portfolio; however, the company has achieved stable growth and is forecast to continue to grow according to the industry trend. In 2019, Vinafco Corporation was awarded by the Vietnam Business Association as one of  Top 100 typical ASIA enterprises and among the Top 500 largest private enterprises in Vietnam (according to VNR).

Source: Vinafco

Business performance overview

Market proposition

Vinafco is an enterprise with more than 30 years of experience in warehouse business, transportation services and distribution. The company’s business line has been quite fragmented due to its focus on shipping, warehousing, trucking, distribution, and mining until 2010. After 2011, the company’s business activities changed its strategies when the Board of Directors advocated focusing on developing the warehouse and logistics business. Currently, the company is focusing on improving and promoting the warehouse system to develop into the largest 3PL supply chain service provider in Vietnam.

Vinafco provides international air transportation and agency services with a global network of agents, customs clearance for import and export at seaports, airports nationwide. Vinafco currently owns 230,000 m2 of warehouses located in key locations across the country: Trucking connection: HCM – Da Nang – Hanoi; Inland transportation on route HCM – Hai Phong and vice versa; Inland transportation on route HCM – Da Nang and vice versa; Directly transportation distribution from the factory; Transport distribution from the Distribution Center.

Source: Vinafco

Financial Review

A new business strategy defined in early 2011, the company’s business results have improved significantly, but still quite lagged from the projected plan. Business strategy is considered quite risky in the current difficult period. In fact, Vinafco had to delay many of its projects and capital raising plans. Business activities have relatively low profit margins compared to many companies operating in the same warehousing and transportation industry.

Specifically, in 2019, revenue only reached 90% of the previous plan, recording 98% of revenue compared to 2018. However, gross profit exceeded 19% compared to the plan and pre-tax profit of Vinafco was twice higher than its plan and showed the best profit before tax in the past 5 years.

Profit before tax in 2019 increased significantly compared to 2018, mainly due to the increase in profits from all road transport, warehouse and sea transportation sectors in 2019. In addition, in 2019, the company’s pre-tax profit target exceeded the plan by 118%. Within the warehouse segment, the company focused on the existing warehouse system and continued to expand the warehouse network from long-term warehouse rental to self-exploitation. By emphasizing on investment completion in Trau Quy, Gia Lam area, the project would be put into operation by the end of 2020.

Risks and challenges

Price fluctuation of raw materials

Transportation activities are one of the major parts of Vinafco’s business. As a result, the business performance of Vinafco is influenced by fluctuations in fuel prices. In 2019, fuel prices are relatively stable around the average price of 2018. Not much volatility in fuel price combined with control measures of fuel consumption will help reduce this risk for Vinafco to enhance the efficiency of production and business for the following years.

Legal policy risks 

To enhance management efficiency as well as create a legal corridor for businesses to grow and develop, the government has issued legal documents to regulate production and business activities of businesses in general, and logistics businesses in particular. Due to the complex business environment and the influence of Covid-19, the logistics industry faces certain risks of changes to the provisions of the law: Enterprise Law, Securities Law and other related documents.

Specific risks in the industry

Vinafco provides main services in 3 key areas, including warehousing, shipping and transportation business. Therefore, production and business activities of the company have a close relationship with the current situation around the globe. Vietnam as well as the activities of other enterprises in the increasingly fiercely competitive economy. 

The company is in the investment phase of a series of projects on warehouse facilities in Thanh Tri/Gia Lam – Hanoi, Dinh Vu – Hai Phong, Hoa Cam – Da Nang, Binh Duong Industrial Park,… for long-term strategy “To become one of the top five players in providing integrated logistics services and supply chain solutions in Vietnam, Laos and Cambodia market to 2025”. Currently, the company is only in the early stage of investing in warehouse infrastructure. Increasing investment in specialized means of transport to reduce costs, then profit targets would be maintained at a high level.


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