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October 30, 2023

MSN’s consumer businesses deliver 45.5% EBIT YoY growth for 9M202

Ho Chi Minh City, 30 October 2023 – Masan Group Corporation (HOSE: MSN, “Masan” or the “Company”, today released its unaudited management accounts for the first 9 months of 2023 (“9M2023”).

Business Performance Highlights:

On a reported basis, Masan’s net revenue reached VND57,470 billion in 9M2023, an increase of 3.5% versus VND55,546 billion in 9M2022. NPAT Pre-MI achieved VND1,353 billion in 9M2023. MSN’s consolidated cash balance, including cash and cash equivalents, was VND14,258 billion at the end of 3Q2023. Additionally, free cash flows (“FCF”) improved consistently over several quarters, reaching VND2,202 billion in 3Q2023 compared to only VND125 billion in 3Q2022.
“In a time of such global sensitivity, uncertainty, and calamity, our mission to serve consumers their basic, daily life necessities has never been more important. Our DNA of doing well by doing good has guided us across each challenging period. It is no different this time around” said Dr. Nguyen Dang Quang, Chairman of Masan Group.
The CrownX (“TCX”)’s recorded revenue of VND41,704 billion in 9M2023 and VND14,869 billion in 3Q2023, up 2.4% YoY and 1.2% YoY, respectively. TCX’s posted EBITDA of VND5,622 billion in 9M2023 and VND2,116 billion in 3Q2023, up 11.4% YoY and 13.6% YoY, respectively.

Masan’s consumer businesses, WinCommerce (“WCM”), Masan Consumer Holdings (“MCH”), Masan MEATLife (“MML”), and Phuc Long Heritage (“PLH”), grew its combined operating profits (“EBIT” or “earnings before interest and taxes”) by 45.5% YoY in 9M2023 and 47.3% YoY in 3Q2023.

WCM reached EBIT breakeven for the first time post Covid-19. Net revenue increased by 2.1% YoY in 9M2023 and 3.3% YoY in 3Q2023 thanks to new store openings. WCM was more cautious about new store openings with 245 new minimart (“WMP”) locations and 2 new supermarket (“WMT”) outlets opened in 9M2023, ending September 2023 with 3,586 stores nationwide for both minimarts and supermarkets. In 2Q2023, WCM shared a plan for renovating existing WMP stores in urban and rural areas, transforming them into the new “All That You Need” WIN format in urban areas and WMP Rural in rural areas. These renovations, a major driver for LFL improvement, are well on track. As of 3Q2023, ~45% & ~95% of planned conversion in 2H2023 for WIN & WMP Rural already achieved. The renovated stores are delivering revenue uplift as envisioned – 3Q2023 LFL YoY growth of WIN and WMP Rural 4.8% and -3.5%, as compared to the -8.0% decline in existing WMP stores.
MCH increased topline by 10.5% YoY in 9M2023. On a LFL basis, MCH net revenue registered 10.5% YoY growth to VND20,376 billion in 9M2023. MCH was able to deliver gross margin of 44.3% in 9M2023, an increase of 430 bps from 40.0% in 9M2022 (LFL). Seasonings, Convenience Foods, and HPC grew by 21.0% YoY, 8.3% YoY, and 39.4% YoY, respectively, in 9M2023. In 3Q2023, these categories reported revenue growth rates of 16.6% YoY, 10.8% YoY, and 24.5% YoY, respectively. In 3Q2023, gross margin reached an all-time high of 45.6% resulting in ~26% EBITDA margin for this quarter. This exceptional gross margin is attributable to several factors, including sustained higher price due to its brand powers, higher margin product mix, ability to secure low raw material costs, and optimized demand & supply planning to improve manufacturing conversion cost.

MML's revenue increased by 61.1% YoY in 9M2023 and 47.5% YoY in 3Q2023, driven by stronger sales across almost all segments, notably processed meat with a remarkable 35.9% YoY growth in 9M2023 and 23.1% YoY growth in 3Q2023. Meanwhile, in 3Q2023, gross margin was 18.6%, up 260 bps from 16.0% in 3Q2022. Stronger YoY margin in 3Q2023 compared to 9M2023 was driven by significant QoQ improvement in gross margins of farm pig and farm chicken in 3Q2023 as a result of higher live hog and chicken broiler price compared to 1H2023. In 3Q2023, farm pig achieved a gross margin of 30.8% (vs. 11.6% in 1H2023) and farm chicken reached a gross margin of 14.4% (vs -17.1% in 1H2023). For processed meat, revenue increased by 35.9% to VND1,714 billion in 9M2023, primarily driven by increased volume. For branded chilled pork, MML reduced the price gap with wet market via exclusive prices for WIN members, resulting in a sustained 30% uplift in daily revenue for MML products in WCM’s outlets.

PLH improved profitability by rationalizing kiosk footprints. EBITDA margin improved to 20.8% in 3Q2023 compared to 17.0% in 2Q2023 due to the rationalization of the kiosk footprints (PLH stores inside WCM). In 3Q202, PLH opened 6 new locations. PLH stores outside WCM experienced slight growth in revenue, reaching VND876 billion in 9M2023.

Strategic Actions:

Announcement of Bain Capital’s equity investment into Masan Group, which can be upsized to USD500 million, will serve to strengthen the Company’s balance sheet as most of the proceeds will be used for deleveraging. MSN targets Net Debt to EBITDA of ≤ 3.5x.
There are no hedging structures or stock borrow of MSN shares as part of the equity investment that would result in MSN shares needing to be sold in the open market at the date of the issuance. Bain Capital and potential follow-on investors are fully aligned with current MSN shareholders.

Similarly, SK Group is a long-term partner of Masan Group and, in that spirit, with respect to its interest in MSN shares, both corporates are working together to achieve a multi-year solution to mutually maximize their shareholder value. 
Masan has fully repaid its debt obligations maturing in 2023.
Bond obligations maturing in 2024 of ~VND6 trillion is significantly lower than the Company’s current cash and equivalents of VND14 trillion and 12-month trailing EBITDA of ~VND14 trillion. Pro forma cash and cash equivalents are expected to increase by approximately VND4,900 billion to VND12,250 billion after the Bain Capital-led equity investment.
Free cash flow (“FCF”) showed a consistent improvement, with 3Q2023 FCF reaching VND2,202 billion, a significant increase compared to VND125 billion in 3Q2022 driven by more effective working capital management.

4Q2023 Initiatives:
To continue its sustainable growth rates and deliver improved profitability, Masan will focus on the below initiatives:
  • TCX:
- WCM plans to enhance its sales productivity, improving LFL growth to reach store revenue level similar to that in 4Q2022 and target EBIT positive in 4Q2023.
- MCH continues to focus on innovation for beverages, HPC and convenience food products to drive 4Q2023 growth and act as a significant growth driver for 2024.
  • PLH aims to open 11 new stores in 4Q2023 and improve sales per store to get closer to the 4Q2022 levels.
  • MML expects to improve daily sales in WCM from VND1.6 million to VND2 million per store by focusing on dynamic pricing strategy to improve sales of slow-moving items and integrated planning with WCM to deliver the right assortment to the right store. Furthermore, MML will continue to enhance brand experience as a Meat destination in WCM outlets, by rolling out Meat Corners in select locations, enhancing visibility and experience for MEATDeli products. MML will also control costs strictly to adapt to the new market environment.
  • MHT aims to increase volume of sold materials by proactively building up customer demand book as the global economy slowly recovers and selling down copper inventory (18,000 dmt targeted in 4Q2023). MHT will also continue to execute cost optimization activities in operations and procurement, explore strategic alternatives to deleverage as well as resolve blasting issues with contractor.
  • Balance sheet: Masan will continue to actively explore alternatives in the capital market to extend its debt maturities, improve interest rates, and unlock earnings via deleveraging. At the same time, the Company will continue to invest in initiatives that unlock thes ecosystem synergy such as membership program and shared logistics system to materialize the consumer – tech strategy.

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