Vinamilk - Sacombank

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  • Topic: Milk, Powdered milk, Dairy product
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RESEARCH & INVESTMENT ADVISORY DEPARTMENT
May 2010

VIETNAM DAIRY PRODUCTS JSC (VINAMILK)
UPDATED REPORT DAIRY INDUSTRY IN QI/2010 The price of dairy products fell about 15% - 20% in Q1/2010. In Q1/2010, the price of powder milk in the global market underwent a corrective phase, falling by 15% - 20% after the 60% consecutive rise in 2009. The price of skimmed milk in Western Europe in March 2010 fell to 2725 USD/ton compared to 3437 USD/ton in December 2009. At the same time, the price of Australian skimmed milk in March 2010 also declined to 2875 USD/ton compared to 3400 USD/ton in December 2009. The decrease in the price of material milk can pull down the material cost of dairy companies. However, dairy product companies which signed purchase contracts for materials for the whole year of 2010 at a fixed price in December 2009 may not benefit much from the material costs. Weekly price of Autralian milk powder (USD/ton) 4000 3500 3000 2500 2000 1500 State Foreign Others PRICE CHART Ticker Stock exchange Expected price Market price (26/5/2010) 52 week high 52 week low Outstanding shares Market value (bil. VNĐ): 10 day - average volume Dividen (2010E) OWNERSHIP 47.5% 11.66% 40.84% VNM HOSE 110.524 89.500 99.000 64.000 353.056.800 32.481 281.772 30%

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Skimmed Milk Powder

Whole Milk Powder

Weekly price of Western Europe milk powder 4,500 4,000 3,500 3,000 2,500 2,000 1,500

Skim milk powder

Whole milk powder

Source:Vietnam Dairy Association, USDA

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VIETNAM DAIRY PRODUCTS JSC (VINAMILK)
Dairy product company increased the milk retail price by 10% - 15%. In Q1/2010, milk retail price raised about 10% - 15% compared to the 6% increase in December 2009. Dairy product companies therefore increased the retail price in order to ensure the profits in the context that the price of material milk rose largely at the end of 2009. The market share of liquid milk and yoghurt of Vietnam dairy companies rose significantly. The market share of liquid milk and yoghurt of domestic companies had impressive growth in the year thanks to advantages in expenditure and location due to the short longevity of the products. Particularly, liquid milk products of VNM had a 47.8% growth rate in 2009, accounting for 39% of the liquid milk market share of the whole market and surpassed the milk market share of Dutch Lady (35%); the product groups of yoghurt, ice-cream and cheese also had a growth rate of 51.7%. Meanwhile, powder milk products of the Company face the most severe competition from domestic and foreign companies when the advantage of low price is not enough to persuade consumers of a corresponding quality with imported milk. Prospect of the dairy industry in 2010 Milk price in the international market from the beginning of Q2/2010. From the beginning of Q2/2010, the price of powder material milk in the international market started a rising streak. According to forecasts of the U.S Ministry of Agriculture, demand and supply balance of powder material milk is fluctuating; therefore, milk price in the international market from now to the end of 2010 is forecasted to increase slightly by about 10%. Therefore, companies which sign contracts with fixed price at the end of 2009 will have certain disadvantages. When the milk output price is not under strict control, we forecast that dairy product companies can have another rising streak in Q2 or the beginning of Q3. Domestic dairy product companies will further consolidate the market share of liquid milk and yoghurt. Q2 is the start of the hot weather season. With the advantages in the market share of liquid milk and yoghurt products, domestic companies can accelerate this market share in the future. Besides, some companies are planned to launch new healthy soft drink products which will start to bring about income this summer. Severe competition in the market share of powder milk. Although the...
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