The PAN Group: Business results in the third quarter and the first 9 months of 2023

On October 30, 2023, The PAN Group Joint Stock Company (HSX: PAN) announced its consolidated financial statements for the third quarter and accumulated results of the first nine months of the year. Accordingly,in the third quarter, the Group's business results witnessed relatively impressive growth, indicating a recovery after a difficult period and signs of improvement in the fourth quarter.

Unit	Q3.2023	Q3.2022	%yoy	9M.2023	9M.2022	%yoy
Net revenue	3.703	3.585	3.3%	9,008	9,756	-7.7%
PBT	218	177	23.1%	534	642	-16.9%
NPAT	192	142	35.8%	456	539	-15.4%
Net profit to parent shareholders	99	55	78.2%	201	232	-13.3%

Source: PAN's Financial Report - Q3 2023

Business results rebounded after a challenging period

The consolidated net revenue of the Group for the third quarter amounted to VND 3,703 billion, reflecting a marginal 3.3% growth compared to same period last year. This represents a turnaround following a challenging period, as the second quarter had previously experienced an 11% year-on-year decline in revenue. For the first nine months of 2023 PAN achieved consolidated net revenue of VND 9,008 billion, narrowing the impressive decline from -14% in the first six months of the year to -8% over the same period last year. This result was contributed by robust recovery and growth in the main business segments during the third quarter.

Net revenue by business segments (VND billion)

Segment	Q3.2023	Q3.2022	%yoy	9M.2023	9M.2022	%yoy
Agriculture	1.175	1.102	6,6%	3.389	3.358	0,9%
Aquaculture	1.928	1.914	0,7%	4.228	4.964	-14,8%
Packaged Food	600	569	5,4%	1.392	1.434	-2,9%
Net Total revenue	3.703	3.585	3,3%	9.009	9.756	-11.6%

Source: PAN's Financial Report - Q3 2023

The main seafood export markets continued to experience difficulty in the third quarter of 2023, resulting in the largest revenue decline from this segment in PAN's total revenue. Inflation in markets such as the United States and the European Union has prompted individuals to reduce their spending, resulting in a decline in consumption scale and export prices. Furthermore, the comparison for 2022 represents an all-time peak for the seafood industry. Nevertheless, aquaculture business started showing signs of encouraging signals during the third quarter, indicating a successful rebound after a tough period in the beginning of the year.

Despite the challenging conditions of the overall market, which has experienced numerous negative effects since the start of the year, agriculture and food continue to be bright spots with impressive results in the third quarter. The growth catalyst comes from the high rice prices, leading to a sharp increase of demand from the agricultural input market.

The profit after taxes for the third quarter of 2023 increased by a noteworthy 35% y/y. This growth was driven by the strong return of key business segments and the good performance of the Group's financial investments.

Accumulated 9 months, the consolidated after-tax profit of the parent shareholders decreased by 13% over the same period. The reason is that the Group generated a profit of 43 billion from asset liquidation during the first nine months of the last year. If calculating the results of main production and business activities in the first 9 months of 2023, the group's net profit will increase by approximately 7% y/y.

Net profit by business segments (excluding extraordinary profit)

Segment	Q3.2023	Q3.2022	%yoy	9M.2023	9M.2022	%yoy	Notes
Agriculture	110	100	10,1%	300	324	-7,3%
Aquaculture	103	92	12,1%	265	292	-9,3%
Packaged Food	35	33	6,7%	55	181	-69,6%
Others	(56)	(83)		(164)	(258)		Consolidated adjustments
Net Profit	193	142	35,8%	456	539	-15,4%
NPAT MI	99	55	78.2%	201	189	6.5%

Source: PAN's Financial Report - Q3 2023

The agriculture segment's net profit declined by 7% y/y, with increased input costs, including capital costs driven by high interest rates as the primary cause. In addition, the price of input materials, mainly fresh rice, increased sharply, while output revenue (mainly rice varieties) did not keep up during this period, leading to a decrease in profit margin.

Due to the effectiveness of the owned farming area, the aquaculture segment's net profit decreased by only about 9% y/y, despite a 14.8% y/y decline in revenue. In addition, transportation expenses decreased substantially since the peak in 2022. This result is an improvement over the industry average decline.

The packaged food segment experienced a decline in net profit margin due to the increase of input materials, including sugar and eggs. Due to the general influence of the market, most products have reduced prices to prioritize the company's cash flow goals, in parallel with profit goals.

In general, third quarter business results increased over the same period and had stronger growth compared to the first two quarters of 2023, reflecting the recovery in business of the aquaculture segment when orders have increased again since May 2023.

Outlook for the last 3 months of the year

In the first 9 months of 2023, the Group completed about 60% of the revenue plan and 50% of the net profit plan for shareholders. The main business segments, aquaculture in particular, are yet to recover as anticipated, resulting in a low rate of plan completion following the first three quarters of the year. Furthermore, the domestic market also experiences many unpredictable fluctuations in prices, production costs, domestic demand and inflation.

Therefore, the completion of the 2023 business plan continues to be impacted with obstacles, given that the aquaculture segment's recovery pace has not met expectations. The last three months of the year will be the Group's peak business period, with the following as the highlights:

The agriculture segment:

As a result of climate change, El Nino, and the recent prohibition on rice exports from India and other nations, the price of Vietnam export rice has recently skyrocketed to its highest level in a decade. Throughout the forthcoming three-month peak season, rice seedlings and agricultural materials will continue to be in high demand on the market.

The production outcomes surpassed initial projections: in 2023, the state of products production is comparatively favorable in terms of procuring and manufacturing the intended quantity of inventory. The Group's seed and rice output surpassed 65,000 tonnes during the first half of the year, a 15% growth y/y. Consequently, a positive business outlook is secured for the forthcoming season.

Aquaculture segment:

New owned farming areas are now operational. A new farming area encompassing over 203 hectares has been prepared for the shrimp business. The first official harvest was stocked in May 2023, bringing the total owned farming area of FMC to approximately 530 hectares, converting to 40% of self-supplied of shrimp material. The Group plan to put in use 100% of the newly developed farming areas stocked by the end of 2023. Additionally, the new factories achieve a capacity of 60-70%. For pangasius business, stocking started on two additional 22-hectare agricultural areas in Dong Phu as well in 2023.

Positive indications of market demand were observed in the return of orders during the third quarter. The Group also welcomed many foreign delegations to work, and signed orders also increased positively.

Packaged food segment:

The last 3 months of the year are the peak season for the food segment to serve the Lunar New Year holiday. The company has proactively prepared well by signing input raw material contracts in advance at appropriate prices.

In addition, the Group also develops new brand products that offer substantial value addition, including diabetic diet cakes and gummies.

Thus, PAN's business results in the first 9 months of the year showed a positive recovery, responding well to signs of improvement from the general market after a long difficult period from the beginning of the year. In the last 3 months of the year, the Group continued to promote core production and business activities, focusing on completing large projects in the agricultural - food value chain.