Vietnam’s HAGL Agrico plans major Laos expansion

Vietnam’s Hoang Anh Gia Lai Agricultural JSC (HAGL Agrico) will expand its Laos operations with large-scale fruit cultivation and cow breeding projects in Attapeu and Sekong provinces.

HAGL Agrico, listed on the Ho Chi Minh Stock Exchange (HoSE) as HNG, has announced that January 25 is the last registration date for shareholders to submit their opinions about this plan.

The company had announced earlier a board of directors’ resolution approving the establishment of a subsidiary –Southern Laos Agricultural Investment and Business Production Co. Ltd. (Southern Laos Agri) – with 100% charter capital held by it.

The subsidiary was formed by the merger of Hoang Anh Attepeu Agricultural Development Co. Ltd. and Hoang Anh Quang Minh Rubber Industry and Agriculture Co. Ltd. It has a registered capital of VND8.3 trillion ($339.2 million) and looks to operate in the fields of agriculture, hotel business, materials trading, agricultural machinery, production of microbial organic fertilizers and plant protection drugs.

HAGL Agrico has appointed Tran Bao Son as Southern Laos Agri’s director and legal representative.

Tran Ba Duong, chairman of the company, said the large-scale agricultural project covering a total area of 27,384 hectares aimed at integration-circulation.

In particular, specialized crops will be grown on an area of 10,000 hectares – 8,000 hectares of banana and 2,000 hectares of pineapples. The project will also grow fruit trees alongside raising 210,000 breeding cows and beef cattle on 14,000 hectares.

Other project activities will include the development of a 200-hectare production and processing industrial park, including factories producing agricultural materials and machines; fruit and agricultural product processing factories; offices, warehouses and logistics operations centers.

HAGL Agrico is an agricultural company founded by Doan Nguyen Duc, chairman of the Hoang Anh Gia Lai Corporation (HoSE: HAG), which was established in 2010.

In 2018, Duc's companies encountered financial difficulties and got support from Tran Ba Duong, chairman of Vietnamese private conglomerate Thaco Group. In August 2018, Thaco purchased 27.63% of HAGL Agrico's shares. In early 2021, Thaco officially took over HAGL Agrico’s projects, with HAGL’s withdrawal.

Initially, the company cultivated rubber trees, sugarcane and oil palms, apart from raised cows. Since 2016, it has narrowed down the cow raising operation and focused on growing fruit trees like banana, mango, jackfruit and grapefruit.

At the time of Thaco’s takeover, HAGL Agrico had 19,707 hectares of fruit trees, of which 8,794 hectares had been harvested. Banana is the firm’s key product, with a revenue contribution of up to 80% in 2020. HAGL Agrico's bananas are exported mainly to China.

Rubber also brings in several hundreds of billions of Vietnamese dong in revenue each year.

After the 2021 takeover, the enterprise planted, nurtured and harvested fruit trees, and exploited existing rubber plantations. In 2022, it focused investments on building transportation, irrigation and electricity systems, machinery and equipment, and means of transportation. It also began raising cows in areas where orchards and rubber plantations had proved ineffective.

At the end of 2022, the company had a total cultivation area of 35,757 hectares, including 27,383 hectares in Laos and 8,374 hectares in Cambodia.

Thaco had joined HAGL Agrico in extremely unfavourable circumstances, with the Covid-19 pandemic affecting production activities, prices of fertilizers, supplies and transportation increasing significantly, China – its largest market – imposing stringent anti-pandemic restrictions, severe damage caused by storm Noru in late 2022, falling output and a labor shortage in Laos.

As a result, the company's revenue fell and it suffered huge losses in 2021-2022. While revenue in the first nine months of 2023 dropped 21% year-on-year to VND438 billion ($17.9 million), the net loss of VND446 billion ($18.23 million) marked a significant decrease from losses of VND1,086 billion ($43.38 million) in the same period in 2022. Its accumulated losses increased to VND7 trillion ($286 million) by the end of September.

Its stock HNG, after bottoming at VND3,300 per share at the beginning of November, has gone up to VND5,000 ($0.2) per share, an increase of 50% in more than two months. It closed the Thursday session at VND5,040 per share.

However, HAGL Agrico has suffered losses for two consecutive years. If it posts no profit in 2023, its shares will be delisted, according to current regulations.