(HSV VIETNAM GROUP) – Ten years ago, burdened with huge debt, Mr. Duc looked for short-term crops to improve cash flow for Hoang Anh Gia Lai. The thorny road after so many years has brought sweet fruit.
"People laugh because I do everything"
Claiming to have no money, no experience, no connections, no reputation, Mr. Doan Nguyen Duc (elected Duc) once rose to build Hoang Anh Gia Lai Group, a leader in many fields, becoming a famous furniture brand in the mountain town at one time. He also soon became the richest person on the Vietnamese stock exchange, the first Vietnamese to own a private plane and did not hesitate to express his dream of being on the list of world billionaires.
Then from the peak, he fell down with the failure of Hoang Anh Gia Lai when he gave up real estate to grow rubber. Rubber prices plummeted. The Group incurred a debt of nearly 30,000 billion VND in the period 2016-2017. The slide caused businesses to lose liquidity and banks refused to lend.
Thinking about those days, Mr. Duc once admitted the feeling of "having to face people who despise me and look down on me". He was hurt and chose to stay silent, thinking of a way to overcome it.
The owner of the famous Hoang Anh Gia Lai football team confided that he sees business as football matches. A team today is glorious, but tomorrow it can collapse in the blink of an eye. After every successful football match, football players will be praised, but as soon as they fail, yesterday's hero can immediately become a sinner in the hearts of the audience.
The same goes for the marketplace. With the spirit of "as long as there is business, there is still failure, and as long as there is business, there is still success", elected Duc led Hoang Anh Gia Lai to turn the situation around by investing in agriculture.
Bau Duc changed direction many times, doing everything related to agriculture: growing sugar cane, growing passion fruit and chili; while raising cows, growing bananas, growing vegetables and fruits in the Central Highlands, raising running chickens, raising sturgeon... Chairman Hoang Anh Gia Lai said he had to manage everything to survive, admitting "people laugh because I do everything", but it was those short-term crops that helped the business overcome the most difficult years.
After a period of struggling with difficulties, the passion fruit, chili, and cow were all gone, only the banana tree remained. From banana trees, Mr. Duc repeatedly announced different pivot strategies such as "2 trees, 2 children" (bananas, durian, pigs, chickens) and "2 trees, 1 child" (bananas, durian, pigs). And most recently, the owner of an agricultural company introduced the "4 trees, 1 animal" model (bananas, durian, coffee and pigs).
The road is bumpy, with ups and downs
Continuous change of direction is something many people clearly see in the process of electing Duc to work in agriculture. "What animals to raise, what plants to plant"... also brought Mr. Duc extreme excitement.
When growing durian, Mr. Duc affirmed that the greatest value in the future of Hoang Anh Gia Lai lies in this 1-capital 4-profit crop. When deciding to raise pigs, the mountain town tycoon confided: "When I discovered that the pig was eating bananas, I couldn't sleep."
Mr. Duc is confident that he has an endless source of bananas, which are waste bananas after being exported to feed pigs. These bananas account for 40% of the food, saving 30% of costs. With Bau Duc, raising pigs has no concept of loss.
He calculated that with the discarded banana output, Hoang Anh Gia Lai could raise 1 million pigs. The revenue of the pork industry is up to 15 billion USD/year. "With all those reasons, I cannot lose," Mr. Duc said in a conversation with a reporter from Dan Tri newspaper in October 2022.
Recently, Mr. Duc continued to announce the planting of new trees such as mulberry trees for silk export and coffee and tea. In particular, Hoang Anh Gia Lai plans to plant 2,000 hectares of coffee this year and another 2,000 hectares next year, for a total of 4,000 hectares.
The difference is that Hoang Anh Gia Lai chooses a type of coffee that is only available in Cau Dat (Da Lat) and some areas in Dien Bien, requiring an altitude of over 1,000m. The Group will plant in the red soil plateau of Laos.
According to Bau Duc, tea coffee has a current price of 9,000 USD/ton, double that of regular coffee and Vietnam only has 10% of the area planted with this type. Another reason is that mulberry or coffee has a short cultivation and harvesting time (mulberry tree 7 months, coffee 2 years - only 1/3 the time of durian), making it easy to create continuous cash flow. If on schedule, from 2027 onwards, coffee trees will begin to harvest and will bring stable cash flow and high profits.
But we must also admit that Mr. Duc's strategy pivots continuously and does not win on all fronts. Typically, like the pig story, from thinking that "can't lose", Hoang Anh Gia Lai encountered difficulties right in this area.
Since 2020, pig farming has brought revenue to the group, although not significant, only 12 billion VND. By 2021-2022, revenue in this segment will increase sharply, next year it will be several times higher than the previous year, with a gross profit margin of several tens of percent. By 2023, the pig farming segment will have a slower increase in revenue compared to previous periods. The increase was only nearly 14%, to VND 1,964 billion. Gross profit margin decreased sharply, to 3.4%, explained by the sharp decline in live pig prices, which is the general situation of the industry across the country.
By 2024, pig sales will still bring nearly 1,004 billion VND to Hoang Anh Gia Lai but has decreased by 49% compared to the previous year. Gross profit margin is about 10%. However, in the fourth quarter of this year, pig sales decreased sharply (down 66%) and for the first time recorded a gross loss of 49 billion VND. This year, Hoang Anh Gia Lai did not build new barns to feed pigs with bananas but focused on regenerating the herd.
Recently, Mr. Duc revealed that pig farming in 2024 will face difficulties due to capital problems, making it impossible to develop the segment. While pig prices are very good, the group's sales are very low.
Still facing difficulties in raising capital, Hoang Anh Gia Lai cannot plant an additional 2,000 hectares of bananas as planned in 2024, even though this is a key product.
He also had great expectations for durian, even predicting that the profit from durian would surpass that of bananas. Sometimes he thought that the future of Hoang Anh Gia Lai would be a durian garden. Because gourd Duc once considered it a very profitable plant, the cost price was only 5,000-10,000 VND/kg to sell to China. But recently, speaking to shareholders, he admitted that this year, China - Hoang Anh Gia Lai's main market - is affected by durian.
What to do if you are out of debt?
Continuously pivoting its strategy to agriculture, Bau Duc gradually reaped sweet fruits. Since 2022, he has declared his confidence to pay off all debt by 2025. After nearly 3 years, Mr. Duc is close to reaching that burning desire to ease the "pain" he has carried for nearly a decade.
Bananas and durians gradually assert their positions. In 2024, fruit sales make the main contribution to Hoang Anh Gia Lai's business picture. The group's banana growing area reaches 7,000 hectares, durian reaches 2,000 hectares.
In the first quarter of this year, fruit brought in large amounts of revenue, accounting for 72% of the revenue structure. The group had a profit of more than 360 billion VND, an increase of 59% over the same period last year.
Having a profit this quarter helped Hoang Anh Gia Lai reduce its accumulated loss, from nearly 423 billion VND to nearly 83 billion VND as of March 31. As of March 31, Hoang Anh Gia Lai had financial debt of more than VND 7,504 billion, of which short-term debt still accounts for a large proportion.
To resolve debt, Mr. Duc's business plans to issue a maximum of 210 million shares to swap bond debt. Duc expects Hoang Anh Gia Lai to reduce debt by up to 4,000 billion VND.
About to lift two burdens from his shoulders, Mr. Duc is confident that the group's financial statements at the end of this year will be "extremely beautiful". And also according to this person, "from this year onwards, it will be a bit difficult to find the bad things about Hoang Anh Gia Lai".
3 years ago, when asked if he was out of debt, Mr. Duc wanted to return to being the richest person on the stock exchange. He said it didn't mean anything anymore. What he hopes is to build a solid Hoang Anh Gia Lai, take care of the lives of those who have followed him for decades and fulfill his promise to shareholders who have trusted him.
Keeping this promise, Mr. Duc has just launched a special remuneration policy for employees with over 10 years of dedication. These officers received shares in the issuance of 12 million employee bonus shares (ESOP).
Speaking before shareholders, he said that the group develops farms and ranches in remote areas, in difficult and desolate places. Workers have to accept a life away from their wives and children, without a car, separated for a whole year... There are difficult times, they do not receive salary for 5-6 months but do not leave the company. The boss thanked them and acknowledged that without those silent contributions, Hoang Anh Gia Lai would have been wiped out.
"Hoang Anh Gia Lai is transforming, restructuring and investing in things that are strategic and have real value, not making movements, not following inspiration. I commit that everything I said today has been done, is being done and will continue to be done with the highest determination," Mr. Duc affirmed to shareholders in a recent meeting.
Ha Diem HSV