PAN Group Q1-2023: Silver lining from core business growth

On April 28, PAN Group Joint Stock Company (HSX: PAN) announced its consolidated financial statements for Q1.2023. The difficult global economic environment and the macroeconomic conditions in Vietnam significantly affected the Group's quarterly business results. On the brighter side, PAN nonetheless experienced a sizable increase in net profit from core business operations.

In Q1/2023, the Group's consolidated revenue reached VND 2,635 billion, down 12.9% y-o-y. The decrease in revenue caused by an uncertain economic environment where consumer demand for key products of the Group's from major market such as pangasius, shrimp, and cashew nuts, has been notably weak.

Consolidated profit after tax reported at VND 106 billion, nearly 37% lower y-o-y. In Q1 2022, PAN booked an abnormal profit from a factory liquidation, amounting to VND 74 billion. Set aside this one-off transaction, the Group's NPAT from core business witnessed an noticeable growth at 13% y-o-y.

The Group nonetheless saw profit growth from its core activities despite the fall in revenue. The primary factors are (i) newly constructed shrimp ponds that are now fully operational and have greatly reduced production costs for the business; and (ii) upgrades and production line optimizations at subsidiaries that have increased business productivity.

Agricultural sector: the crop seeds and agrochemical business still managed to post similar financial performance year on year, contributing VND 1,100 billion in revenue and VND 91 billion in profit after tax, respectively.

Aquaculture sector: Revenue from the shrimp segment totaled VND 1,010 billion in Q1/2023, a 24% decrease from the last quarter due to weaker demand from export markets. However, this segment's profit after taxes increased by almost 15% over the same period to VND 48.6 billion. Given the current volatile state of the economy, this is a very encouraging outcome. The primary driving force is the effectiveness of the hundreds of hectares of shrimp farming land that is still growing, as well as the production line optimization to help lower production costs and boosts net profit margins.

Revenue for the pangasius segment were VND 124 billion, a 6.7% drop from the previous quarter. Nevertheless, the after-tax profit was reported at VND 9.2 billion, a sharp 21% increase from Q1/2022. Considering the overall situation of the industry, this is a highly favorable business results. The main Group's pangasius export market is Japan and the products are primarily deep-processed with high added value, so it is less affected by the general business cycle. This is one of Group's important competitive advantages. The profit after tax of pangasius business improved dramatically during the same time thanks to a enormous drop in transportation cost (sea freight) in Q1/2023.

Packaged foods sector: Due to a very severe decline in consumer demand throughout the Lunar New Year vacation compared to the same period last year, the confectionary segment's sales, which was VND 242 billion, was down 20% year over year. After-tax profit reached VND 3 billion. Excluding the gain from the factory liquidation in Q1 2022, the confectionery business maintained its net profit after tax compared to the same period last year. Nuts and snacks exports reported the same business results year over year with sales of VND 75 billion and after-tax profits of VND 2.7 billion.

With the gradual recovery of the global economy anticipated by many international organizations starting from the second quarter this year, the Group is expected to experience more robust growth and complete the business plan as approved at the General Meeting of Shareholders held on April 26.