Driving forces of Masan Group's substantial profit growth

Profit after tax in Q3 of Masan (HoSE: MSN), Vietnam's leading multi-sector group, jumped 43% to VND1,866 billion ($70.9 million) from a year earlier, as most of its business units recorded improved performance.

Retail arm WinCommerce and meat producer Masan MEATLife returned to profit, while Masan High-Tech Materials narrowed losses significantly, according to Masan Group's Q3 consolidated financial statements.

Gross profit margins improved as selling and administrative expenses dropped. Revenue went down slightly by 1.5% year-on-year to VND21,164 billion ($804.3 million).

For the first nine months, revenue slipped 3% to VND58,375 billion ($2.22 billion), while net profit jumped 64% to VND4,468 billion ($169.8 million).

WinCommerce (WCM) recorded a 22.6% increase in Q3 revenue to VND10,544 billion ($400.74 million), and a 16.6% hike in the first nine months to VND28,459 billion ($1.08 billion).

Moving from a loss of VND204 billion after a profit of VND243 billion, WinCommerce's Q3 contribution alone to the group's profit after tax was VND175 billion ($6.65 million).

The unit has opened 464 new stores since the start of the year, mostly in central and rural areas, with over 80% reaching store-level EBITDA (earnings before interest, taxes, depreciation, and amortization) breakeven. Masan targets 4,500 outlets by year-end.

Meanwhile, Masan MEATLife (HoSE: MML) saw revenue rise 23.2% to VND2,384 billion ($90.6 million) and profit after tax surge to VND101 billion ($3.84 million) from just VND2 billion a year earlier.

For the first nine months, it booked VND6,794 billion ($258.2 million) in revenue and VND466 billion ($17.7 million) in profit after tax, compared with a loss of VND60 billion in the same period last year.

The improvement was driven by higher sales across livestock, fresh and processed meat, closer integration with WinCommerce, and stronger pork prices.

Phuc Long Heritage, the group’s beverage chain, posted Q3 revenue of VND516 billion, up 21.2%, and profit of VND55 billion ($2.09 million) - 21 times higher than a year earlier.

Nine-month revenue increased by 14% to VND1,373 billion ($52.18 million) and profit after tax rose by 80% to VND141 billion ($5.36 million).

Masan High-Tech Materials returned to a profit of VND5 billion ($190,000) in Q3, compared with a loss of VND284 billion a year earlier, helped by higher commodity prices, lower production costs, and the deconsolidation of H.C. Starck. The nine-month loss was VND211 billion, down from VND1,370 billion in the same period last year.

Masan Consumer (HoSE: MCH) was the only unit to report weaker results, with Q3 revenue down 6% to VND7,517 billion and net profit falling 19% to VND1,698 billion ($64.5 million). Nine-month revenue decreased by 3.1% to VND21,281 billion and profit after tax dropped by 16.1% to VND4,660 billion.

The company attributed the decline to the nationwide rollout of a new direct distribution model but said performance has improved month by month.

Masan Group's total assets dropped 17.8% from the start of the year to VND121,351 billion ($4.61 billion), largely due to a reduction in short- and long-term deposits with partners.

Short-term liabilities fell to VND37,637 billion, while total borrowings declined to VND60,934 billion, with bond debt down VND2,567 billion to VND10,232 billion.

The group said it has repaid debts, settled other financial obligations, and increased indirect ownership in consumer and retail subsidiaries to streamline its capital structure.

Masan aims to further cut leverage and financing costs. With a debt of more than VND60,000 billion ($2.28 billion), Masan Group's interest expense in the first 9 months amounted to nearly VND4,200 billion ($159.56 million).