Shrimp processor and exporter Minh Phu (MPC), Viet Nam’s biggest shrimp company, plans to delist its shares in order to charge higher prices for them.
“Listing is meant to raise funds, but for us it’s like being caged,” Minh Phu chairman Le Van Quang told the Saigon Economic Times.
The shrimp industry’s troubles began in 2011, when the shrimp price increased constantly. In early 2012, when disease destroyed shrimp in Viet Nam and Indonesia, importers thought the price would not decline any further so they made purchasing contracts for the whole year in advance.
However, in June, as the European debt crisis hit, Europe bought less shrimp and the price again decreased. Meanwhile, exporters from India and Bangladesh reduced their prices thanks to abundant supply. Indian shrimp prices fell rapidly from US$14.5 for a pound of shrimp to $6.7.
“Big partners did not offer letters of credit, while some importers declared bankruptcy so they would not have to implement the signed contracts,” Quang said.
GreenFoods, Japan’s largest shrimp distributor, closed a week after prices bottomed. Although Minh Phu did not work with GreenFoods, only with its partners, the closing indicated just how disastrous the market had become to do business in.
Minh Phu lost nearly VND100 billion (US$4.7 million) last year due to dead shrimp. Other activities helped cover the loss, but net profits reached a mere VND16 billion ($761,000) compared to VND284 billion ($13.5 million) in 2011.
Japan and South Korea are the second and third-largest importers of Minh Phu shrimp, meaning the devaluing of the yen and won hit hard.
“When the customers asked for a reduction in price as they were also having a tough time, we could not make it harder for them,” Quang said.
The company’s exports in the Japanese and South Korean market continued to rise last year, but profits were lower.
The company’s short-term loans last year increased to nearly VND3.45 trillion ($164.2 million), adding to its long-term debt of VND828 billion ($39.4 million). Despite its efforts to cut corporate management costs, borrowing costs hit VND413 billion ($19.6 million), eating most of the company’s profits.
Foreign partners
Minh Phu wanted to sell 30 million shares to foreign partners. Although Thailand’s investor CP Foods agreed to buy them at VND50,000 ($2.38) per share, the deal failed, as MPC shares on the HCM City Stock Exchange were traded around VND25,000-30,000 ($1.19-1.40) and Minh Phu could not legally issue the shares for more than 5 per cent higher than the market value.
If the company sold 30 million shares to CP Foods at VND30,000, it would get only VND900 billion ($42.8 million). Meanwhile, if it delisted and sold them at the negotiated price, it would receive VND1.5 trillion ($71.4 million).
“Our company will list shares again if necessary, but right now we need to mobilise capital,” Quang said.
As the leading shrimp exporter in Viet Nam, Minh Phu is quite attractive to foreign firms. Partnership with a foreign partner would help the exporter expand into new markets and solve the problem of capital.
If Minh Phu’s planned delisting is approved, the exporter will be able to offer private placement to foreign investors by next year.
