(seafood.vasep.com.vn) On the morning of June 24, Minh Phu Seafood Corporation (MPC code - UPCoM) held the Annual General Meeting of Shareholders in 2023.
Mr. Le Van Quang, General Director of Minh Phu Seafood, raised concerns about the significant price difference of farmed shrimp in various countries. He pointed out that the price of farmed shrimp in India is very low, only 3.4 to 3.8 USD/kg, the price of Ecuadorian shrimp is even lower, only 2.2 to 2.4 USD/kg. In contrast, the price of farmed shrimp in Vietnam is higher, ranging from 4.8 to 5 USD/kg. As a result, this large price gap has made it difficult for Vietnam, including Minh Phu Seafood, to effectively sell their shrimp. In order to improve the competitiveness of Minh Phu Seafood as well as the Vietnamese shrimp industry, the only viable course of action appears to be a reduction in the price of farmed shrimp. Specifically, efforts must be made to align the price of Vietnamese shrimp with that of India and, ultimately, with that of Ecuador.
To enhance competitiveness, Minh Phu offers four main solutions including:
First, rather than engaging in direct competition with Ecuador's low prices, Minh Phu Seafood aims to boost the production and export of three distinctive native shrimp varieties: black tiger shrimp, banana prawn and greasybock shrimp. The company plans to achieve this by domesticating and genetically improving these three types of shrimp’s broodstock. By doing so, Minh Phu aims to increase the market share of black tiger shrimp from 20% to 50%, and that of banana prawn and greasybock shrimp from 5% to 20%.
Second, Minh Phu intends to collaborate with shrimp broodstock companies in Hawaii to domesticate and cultivate white-leg shrimp broodstock within Vietnam. This collaboration aims to create shrimp seed with excellent disease resistance and adaptability to Vietnam's unique weather, climate, and environment. Furthermore, this approach offers the advantage of cost-effectiveness in acquiring broodstock.
The price of farmed shrimp in Vietnam is higher than India and Ecuador
Third, Minh Phu aims to produce high quality shrimp seed, which is resistant to diseases and adapted to specific weather, climate and environmental conditions of Vietnam. Minh Phu aims to raise the success rate of Vietnam's shrimp farming industry to over 60% by 2030, reaching an impressive 80% by 2035.
Finally, Minh Phu is committed to developing and improving farming methods for different types of shrimp, such as wild tiger shrimp, extensive black tiger shrimp, semi-intensive black tiger shrimp, black tiger shrimp-rice, intensive vannamei shrimp, and high-tech super-intensive vannamei. These methods will be customized for each region and will be cost-effective, with low cost compared to India from 2030 and Ecuador from 2035.
In terms of financial plan, in 2023, Minh Phu sets a revenue target of 12,789.5 billionVND, equaling 77.9% over the same period and expected profit after tax of 639.3 billion VND, equaling 76.8 % compared to 2022.
In 2022, Minh Phu invested and completed three major investment projects of its subsidiaries including the new breading factory of Minh Phu Hau Giang Company, the new processing factory of Minh Phat Company and the Seawater Pipeline Project in Kien Giang of Minh Phu Hitech Agri.
Regarding dividends, in 2022, Minh Phu Seafood approved the plan to pay dividends at the rate of 20% to 30% of the undistributed consolidated after-tax profit as of December 31, 2022, respectively from 411VND to 617VND/share and is expected to be implemented in 2023. The Company will authorize the Board of Directors to choose a specific payout ratio and specific time. Entering 2023, the dividend is expected to be from 50% to 70%.
Mr. Le Van Quang, the General Director, addressed shareholders' questions as follows:
Mr. Le Van Quang, the General Director answered shareholders' questions regarding to raw material, import demand and future forecast
What is the current farming situation of Minh Phu Corporation?
Regarding the company's farming area, shrimp farmers faced challenges with shrimp growth during the early part of 2021 and the end of 2022. Shrimp were affected by a disease, resulting in slow growth, lack of appetite, fading color, and gradual death. However, Minh Phu held a meeting to address the issue and find solutions. Minh Phu Kien Giang has successfully raised shrimp for over 70 days, achieving good growth and generating revenue. Minh Phu Loc An is currently working on water treatment and pond preparation, with plans to stock shrimp by mid-July.
How is the consumption situation?
As for consumption, there have been various factors impacting the market. The conflicts between Russia and Ukraine, along with global inflation and slow economic growth, have led consumers to tighten their spending and consume cheaper products. Additionally, importers predicted an improved consumption situation after the end of the pandemic in 2022. However, weak consumption has caused high inventory. At the beginning of 2023, importers experienced slow sales and offered discounts to reduce inventory. Unfortunately, this could not solve the problem. Furthermore, the low prices of shrimp in India and Ecuador have boosted their exports, which has negatively impacted Vietnamese shrimp sales.
Nevertheless, there are positive signs for the year-end period. According to the data collected, it is estimated that India has around 30% to 50% of hanging, non-cultivated ponds, while Ecuador's farming area has been affected by approximately 30% damage due to EI Nino, resulting in a decrease in shrimp production. In Vietnam, low shrimp prices have led to approximately 30% to 50% of ponds being idle.
Therefore, shrimp supply may face a shortage of raw materials towards the end of the year, providing an opportunity to reduce high inventory. Additionally, with the Christmas and Lunar New Year in Asia, the consumption in this period will increase. It is expected that from August 2023 onwards, shrimp prices will increase,resolving inventory issues and leading to improved business conditions for the company.
What are the reasons for the decline in business results in the first quarter of 2023?
1. Inventory Problems: Minh Phu's partner countries are experiencing high inventory levels, leading to full warehouses. As a result, the partners suggest storing goods in Vietnam, which reduces export volume, revenue, and profit for Minh Phu.
2. Disease Outbreaks: There were disease outbreaks in farming areas during the first quarter of 2023, negatively impacting production. This issue is expected to continue affecting the second quarter as the farming areas are being resolved and stocking has just begun. The Minh Phu Loc An farming area remains unrepaired, while Minh Phu Kien Giang is expected to improve production in the third quarter after being released.
From the third quarter onwards, the market is expected to improve. Minh Phu plans to promote the export of inventory to regain profitability. The company remains confident in meeting its goals and will provide an update to shareholders in August 2023 after reviewing the actual situation.
How to reduce the cost of shrimp farming?
To reduce the cost of shrimp farming, the Company has undertaken various measures to enhance competitiveness and lower the production cost. The cost of farmed shrimp, which is currently at 4.8 to 5 USD/kg, is higher than the market price in India and Ecuador.
In Vietnam, the cost of raw shrimp is high due to a farming success rate of less than 40%. In contrast, India achieves a success rate of 60-70%, while Ecuador surpasses 90%. The low success rate in Vietnam can be attributed to factors such as disease-prone environments, small-scale farming ranging from 1-3 hectares per household, shared supply systems, poor drainage, and high disease transmission rates. To address the issue, Minh Phu employs the following strategies: utilizing low-density shrimp farming with disease-resistant shrimp lines, adopting medium-capacity farming methods, and maintaining a density of 30 to 50 shrimp per square meter. By employing low-density, medium-capacity practices suitable for a 100-hectare environment, the Company can utilize 70-80% of the water surface area for shrimp farming.
Regarding the company's raw material supply, Minh Phu possesses 10% internally and procure the remaining 90% externally. The decision to buy internally or externally is primarily based on price, with quality management being the only distinguishing factor. The addition of certification fees ensures better quality control.
Previously, the Company consistently purchased shrimp at high prices from farmers to sustain their operations. However, starting from April 2023, the Company had to reduce purchase prices for their own financial stability and to decrease raw material costs. This adjustment poses difficulties for farmers due to lower shrimp prices. The Company faces tough competition worldwide, as high shrimp prices in Vietnam could lead importers to choose rival countries like India and Ecuador. The company procures shrimp at market prices, and it is imperative for shrimp farmers to identify and improve their practices to lower prices. Processing companies cannot sustain buying at high prices indefinitely.
Compiled by Thuy Linh