Số: 232/2014/BC-HĐQT-CTY
HCM, March 12th, 2014
PNJ’S SUMMARY OPERATIONAL REPORT 2013
Looking back on 2013, a year marked many achievements in stabilizing macro economy,
but there are still many unresolved issues, especially the economy restructuring scheme, which
has no significant progress, will affect the growth rate of upcoming years. However, Vietnam's
economy has positive signs as the 2013 gross domestic product (GDP) increased 5.42 % from
5.3 % of 2012 and showed signs of recovery.
Gold price chart 2013
The gold market witnessed many changes,
especially changes in government policy on market
executive management as applying decree
24/2012/ND-CP from 3/4/2012, decree 22/2010/TTNHNN on 29/10/2010, strongly reduced gold
reserving, gold speculation in people, contributing
significantly to the stabilization of gold demand supply in the domestic market. Besides, gold price
dropped sharply, ending a bull market period lasted
for more than one decade. However, Government's
new policy for effectively monitoring gold market
purpose, partially creating advantages and challenges for large and prestigious companies, which
is indispensable PNJ - a leader in the industry.
In Vietnam market, gold price fell 24 % compared with the end of 2012
I.
2013 BUSINESS PERFORMANCE :
Unit :mil VND
Items
Plan
Total revenue
Gross profits
Financial income
Financial expenses
Selling expenses
7,798,211
649,701
25,000
122,000
240,275
2013
7,603,581
599,778
26,361
62,134
232,532
1 PNJ’s summary operational report 2013
2012
+/- (%)
% reach
6,428,395
18%
98%
550,225
116,574
106,805
216,894
9%
-77%
-42%
7%
92%
105%
51%
97%
G&A expenses
Earnings before tax
Earnings after tax
Consolidated
earnings
before tax
Consolidated
earnings
after tax
86,420
240,406
186,554
91,804
240,005
182,394
76,961
280,004
225,149
19%
-14%
-19%
106%
100%
98%
256,406
233,007
310,094
-25%
91%
205,250
169,037
254,409
-34%
82%
2013 parent company’s revenues reached 7,604 billion VND, rose 18% YoY, reached
98% of the plan. Gross profit rose by 9%, reached 92% of the annual target. Earnings before tax
was 240 billion VND, completed the set targets.
Despite lowering prices according to market gold price decreasing, the company has
maintained revenue growth rate at 18%. Even though the plan hasn’t been completed, but in a
difficult situation as last year, this is still a positive sign that PNJ brand has built a strong
foothold in consumers’ mind and a strategy to effectively reach customers.
2013 Revenue structure
1.7%
0.3%
43.0%
55.0%
Gold Bar
Gold Jewelry
Silver Jewelry Others
Gold bar
Gold
jewelry
Silver
jewelry
Watches
Services
Total
revenue
2,609,487
Propo
rtion
43.0%
yoy
+/- (%)
25%
4,184,756
3,647,058
55.0%
15%
131,427
10,422
8,737
155,778
6,207
9,865
-16%
68%
-11%
7,603,581
6,428,395
1.7%
0.1%
0.1%
100.0
%
2013
2012
3,268,239
18%
a. Gold jewelry is the mainstay business, contributing up to 55% of revenue. Despite the
decline in selling price due to the gold price falling, PNJ gold jewelry revenue in 2013 still
increased 15%, reaching 4.185 billion VND (excluding price reduction, gold jewelry sales
would increase 25%). In which wholesale business increased 22%, retail increased 6%,
export equivalent to 2012.
- Wholesale segment is one of the activities that seen best growth in year, with revenue
increased 22%. In addition to the advantage of the brand as well as modern production
technology, in 2013 wholesale business module has been actively expanding market, looking
2 PNJ’s summary operational report 2013
-
for more new partners in all provinces in the country. Besides products are more diverse,
exploiting actively market niches created a significant advantage as a leader.
Retail segment is the core business operation: accounted for 40 % of gold jewelery sales.
Unlike the wholesale business which has concentrated customers, retail business has large
scale and widespread, so the growth rate is always lower, especially in difficult economy.
Despite the general market downtrend, retail sales has increased by 6 %. Excluding the gold
price reduction, retail sales increased by 25 %, exceeding the annual target.
Customers has been more and more preferring the high-end products with unique designs and
sophisticated manufacturing, this is also a good opportunities for PNJ to be outstanding
compared to competitors with our credible quality, exquisite and diverse designs. When
customers are increasingly demanding more, these advantages will be the solid foundation
for the rapid and strong development of PNJ in the future.
Design and creating process of the golden bandanna – the work claimed by Vietnam
Guinness Record Book as “The Largest Golden Bandanna in Vietnam”.
PNJ is proud to create records of unique and exquisite golden jewelry products
3 PNJ’s summary operational report 2013
-
Exporting: not only in Vietnam, the difficult economic situation has also affected consumer
goods markets in countries around the world including those of PNJ export markets such as
the U.S., Europe, Australia .... Therefore, the revenue of the gold jewelery export in 2013 is
not so good. Especially when European countries and the U.S. have not been affected by
"gold culture" as in the East Asian countries. However this business segment accounted for
only a small proportion (2%) in total sales of gold jewelry.
b. Silver jewelry is the premium product line for young customers which have been impacted
significantly by bad economy in 2013. Total revenue reached 131 billion, decreased 15%.
Despite not reaching target, in 2013 with the appropriate strategy changes, relocating target
customers, in Q4 silver jewelry business segments achieved positive results. Q4 revenue rose
5%, instead of negative growth of Q3, improving revenue decline from 17% of 9 first months
to 16% at the end of the year. Along with this initial success, PNJ expected the year 2014
will bring changes clearer.
PNJ Silver designs
c. Gold bar: with the advantage of being one of 38 companies and financial institutions having
licenses for trading gold bar, its revenue reached 3,268 billion VND, increased 25% over the
same period.
As we know, in 2013 government policies related to gold market have changed a lot,
especially holding monopoly on gold bar production of SBV (under Decree 24/2012/ND-CP,
valid from the end of Q4/2012) has significantly affected the business situation of other gold
bar brands, including PNJ. There is no advantage in production costs due to own-branded
gold bar, the profit margin of this business segment decreased to 0.5%. However, gold bar
still contributes 3% of gross profit and is the factor to attract customers to PNJ’s stores.
d. Other businesses: 0.23% of revenue is accounted for trading watches and services. In which
watch trading revenue has grown well thanks to the promotion and business operation
expansion. Revenue from testing and renting services slightly decreased.
e. Retail stores network: by the end of 2013, PNJ has 169 stores. In 2013, the Board of
Directors has concentrated on upgrading stores, increasing sales area per store, increasing
sales revenue per m2, therefore instead of opening 14 stores as planned, only 6 new stores
4 PNJ’s summary operational report 2013
were opened to bring the best performance. Besides the Board also actively implemented
measures and indicators to improve performance of existed stores.
At the same time, image recognition and sales space have also been upgraded to provide
luxury appearance but still close and comfortable atmosphere when shopping at PNJ’s chain
stores.
PNJ Phú Nhuận
52 Nguyen Van Troi, Phu Nhuan District
o
o
o
o
o
o
o
Current ratio
Inventory turnover ratio
Inventory days
Gross profit / Net Revenue
NPAT / Net Revenue
NPAT / Total Asset (ROA)
NPAT / Equity (ROE)
CAO Thu Khoa Huan
16-18-20 Thu Khoa Huan, Dist.1
FINANCIAL RATIOS
Unit
Times
Rounds
Days
%
%
%
%
2013
1.18
6.28
58.2
7.9%
2.4%
6%
14%
2012
1.17
5.082
71.83
8.6%
3.5%
9.2%
19.1%
Indicators of liquidity always stay at safe level (> 1). In 2013, thanks to applying new
software in system management, days in inventory decreased significantly over the same period.
As mentioned above, decreasing in gross profit margin of some businesses segments such
as silver, gold bar led to lower gross profit margin, 7.9 % as compared to 8.6 % of last year. In
addition, by lacking revenue from divestments of subsidiaries and dividends received from
associated companies and joint ventures, which accounted for a large proportion of total profits
in 2012, net profit after tax decreased 19% in 2013. This caused decreasing in efficiency ratios
such as ROA, ROE and gross profit margin.
Excluding financial income, net profit after tax of the parent company increased by
45% due to good performance of core business and reducing interest expenses.
5 PNJ’s summary operational report 2013
II. SUBSIDIARIES PERFORMANCE:
1. CAO Fashion Limited Company:
Charter capital of 10 billion VND, 2013 revenue reached 43 billion VND, profit after tax
reached 2.8 billion VND, increased 3.5 times over the same period. By the end of 2013, CAO
distribution system has included 10 stores, remained as the end of 2012.
2. PNJ Lab Limited Company:
Charter capital of 10 billion VND, its revenue in 2013 reached 10.5 billion VND, rose 56%
compared to 2012, net profit reached 3.6 billion VND, significantly increased from 972
million of 2012. With gemstones testing service has more and more prestige in the market,
PNJL’s certificate is recognized equally with GIA certification – the highest prestigious
testing brand in the world.
3. Saigon Fuel Joint Stock Company (SFC):
Since 07/2013, SFC has became a subsidiary of PNJ with ownership rate of 50.02% and the
SFC business results would also be consolidated into PNJ's financial statement.
SFC's net revenues in 2013 reached 2,447 billion VND, rose 17%, earning after tax reached
19.5 billion VND, rose 1% over the same period.
III. 5 KEY MISSIONS OPERATING PERFORMANCE IN 2013:
1. Finalizing and operating the human resources management system properly and
effectively:
- With professional consulting from a prestigious HR consultant company, PNJ has completed
the organizational structure according to the new model: supplementing the vacancies,
completing job descriptions for each specific position under new standards, holding 65 shortterm and in-depth training programs to raise the level of awareness, specialized skills for
staff – employees and especially for the retail business segment.
- Develop and apply remuneration policies consistent with the context and common ground of
the labor market, to keep and attract high quality personnel.
o Applying new Framework on salaries, bonuses and subsidies
o Completing KPIs evaluation criteria for over 80% of staff positions.
- Implementing throughout internal communication programs to develop an in-depth corporate
culture to all officers and employees, including the prominent media program on the 25th
anniversary, understanding the Company's mission and vision accompanying with each
individual in PNJ and preparation programs for business in the integration phase.
2. Upgrading the information technology system to meet the needs of business modules
and effective management:
- Considering information technology as the foundation for the development, Information
technology has been properly invested and timely responded the needs of development. IT
has also been directed closely by the Board of Directors and Board of management, let ERP
projects soon complete and be put into use to meet the needs of the business system and
6 PNJ’s summary operational report 2013
financial management thoroughly and promptly, growing revenue, reducing inventory and
saving more money.
- Simultaneously, training for staff has been fully implemented, ensuring that managers of all
levels and operational staff can directly understand the program and use it to serve executive
management in business operation.
3. Improving and operating the internal processing system properly with the new
management process and efficiency controlling:
- The Company has completed developing, standardizing and deploying key processes related
to operations such as: purchasing, sales, ordering and design.
- The assessment operation is also performed regularly, periodically combining with sudden
inspections to ensure the compliance with developed standard operating procedures.
Efficiency measurement for key processes has been implemented.
- Performance Administration Division has just been established, implementing 9 key
processes’ efficiency measurement, expected acceptance test will be conducted at late
06/2014.
4. Fully supplying requests of business partner with reasonable competitive cost:
- Despite the new plant has just been operated more than a year (from 10/2012), it has quickly
stabilized production and finalizing organizational structure under the new administrative
model. Thus the order response rate in 2013 reached 95%, while wastage costs reduced
significantly, saving over 135 gold teals compared with 2012 (equivalent to 4.7 billion
VND).
- To increase operational efficiency, technological process have been invested - improved,
details in the following categories:
o Wire Production process has been upgraded and shortened, and are in progress of
performance measurement.
o Additional investment on alchemist technology.
o Increasing the number and improving the skills of high-end jeweler teams, meeting the
needs of quantity and quality of luxury goods to increase the strength of PNJ’s brand, at
the same time directly competing with foreign goods
o Training activities as well as research and development of new products have always
been fully and comprehensively focused. In 2013, in addition to the vocational training
(for who are in charge of main stages), workers also participate in the secondary stages
training to diverse their expertise.
5. Completing annual targets of revenue and profit:
As detailed analysis in the business performance, in 2013 for many objective and subjective
reasons PNJ has not completed some planned targets. By reaching 98% revenue target and
witnessing 15% growth in , gold jewelry revenue, it’s a great result of management team’s
effort.
7 PNJ’s summary operational report 2013
IV. RISK MANAGEMENT:
Risk management is an important factor, contributing to the sustainable development of
every business. Aware of this, the leaders of the company has focused on developing risk
management processes right from the inception and considering the completion of this work as
one of the key objectives of the company.
1. Risk management in business strategy:
- Identifying proper long-term targets and vision is the lodestar to bring sustainable
development to the company. With a vision of "A leading jewelry manufacturer and retailer
in Asia, maintaining leading position in every single market segment that PNJ has targeted in
Vietnam", the leaders coordinate with foreign consultants to establish a development strategy
for the 10-year period from 2012 to 2022. Accordingly, the objectives are specified for each
stage of development closely to the real situation. 2013 was the first year the program was
conducted as planned, difficulties and initial skepticism are inevitable. But with firmness and
close guidance from Board of management, project’s programs were initially created
effective internal confidence as well as the renovation is the premise for future solid
development. Strategic Management Division that has just been established has timely
followed-up and evaluated the implementation of each project, through which detected and
adjusted unsuitable sites, with the ultimate goal of achieving the proposed strategic vision.
- Processes and assessment criterias are also built comprehensively to ensure the keeping
abreast of strategic objectives implementation process. In 2013 the company began to
develop the KPI assessment criterias set, allowing to track the performance of each staff
position as well as the whole company performance indicators. The working goal of each
individual is built attaching to the strategic vision of the whole company.
- Focusing on brand-building, making a difference compared to other competitors. A strong
brand not only helps a company grow, but also is a tool to protect that company against risks
in business. Aware of that, right from the early days of establishment, brand-building was
invested methodically and scientifically, took 5 core values as foundation: Honesty - Quality
- Responsibility - Creativity - Innovation. Thus, PNJ is proud to be a leading jewelry brand in
Vietnam and has been always trusted by customers for over 25 years. 2013 marked a
milestone: 25 years of establishment and development. PNJ has organized many program to
honor the brand value, the Golden Night event – the 25th anniversary with a media message
"Honoring the true value" – has created great echoes and moved PNJ brand value to a new
level.
2. Business operational environment risk:
- Risks of policy: to minimize the impact of policy changes to the business situation, the
company has always updated the latest policy of the State to develop appropriate action
plans. Reporting and settlement are made fully, transparently and timely in accordance with
the current regulations.
Not only that, through high-level meetings, Board of Diretors also actively contribute
opinions to help the government have insights about the business environment, together to
8 PNJ’s summary operational report 2013
find solutions to build and develop Vietnam jewelry industry bigger alongside powers in the
region such as Thailand, China, India.
- Risks of input price fluctuation are strictly controlled by market analysis and price
management policy.
In 2013, ERP software was successfully developed, contributed to help Board of
Management effectively manage costs and inventory throughout the system, thus
guaranteeing the stable profit rate for most product groups.
- Risks of competition on labor market:
To maintain and develop experienced and skilled human resources as now, on one hand PNJ
care about the rights of workers through wage - rewards policies with job results, on the other
hand training is also invested in order to build a team with suitable inherited expertise, ready
for the assigned tasks. Especially PNJ culture has always been taken care and accreted over
the years, is a valuable asset to make colloidal attachment between PNJ’s employees.
3. Risk management in manufacturing:
- To avoid risks of workplace safety in production, management processes have been
applied under international standards such as ISO 9001 – 2008, 5S. Imported machinery and
equipments are tested and guided by foreign experts for smooth operation.
Besides, to strengthen risk avoidance, workers and staff are insured adequately.
- Environmental Risk: In addition to the environmental certification issued by concerned
agencies, jewelry factory has been certified ISO 14000 for safety environment. Full
compliance with the regulations on production environment.
- Risk of loss of goods: ERP Program - production module allows managers control the goods
at each stage of production at any given time of the day. At the beginning and end of the
process, all goods are checked for weight and quality to help avoid loss of goods
4. Financial risks:
- Liquidity ratios always stay at safe levels. Short-term debts (account for over 90% of loans)
are balanced by inventories. Unlike other businesses, company's inventories are mostly raw
materials and gold goods which is very liquid, is the specific factors to help mitigate liquidity
risk.
- Risks of operational cost
o Interest controlling:
 The finance department always actively looks for low-cost funding as well as
flexibility in the selection of appropriate partners and loan products.
 Balancing loans - inventory to meet the needs of enterprise development
o Saving cost: through measurable indicators of performance, the cost of unnecessary or
inappropriate in the present are reduced. Target budget is managed closely and reported
regularly to help Boards of Managers to closely monitor the situation of the company
costs.
V. 2013 INVESTOR RELATIONS ACTIVITIES
9 PNJ’s summary operational report 2013
In 2013, the IR department held more than 100 meetings with investors representing for
more than 40 investment funds, securities firms in domestic and abroad. In addition, the
company has joined major conferences organized by Dragon Capital, Vietnam Holdings,
Vietnam Capital Securities and Kim Eng Securities to actively exchange information with
potential investors.
Thanks to be more professionally invested, the 2012 annual report of PNJ was rated as
one of the 30 best annual report in the Annual Report 2012 poll co-organized by HOSE and
Securities Investment News.
VI. CONCLUSION:
Facing the common difficult situation of the economy, with great efforts PNJ has
achieved remarkable growth, once again confirms the correctness of the period 2012-2022
strategy, in which focusing core business activities and proving the internal power are top
priority. Following these successes, 2014 promises to be a more prosperous year with completed
and reinforce management system.
FOR AND ON BEHALF OF BOARD OF DIRECTORS
CHAIRWOMAN
(Signed and stamped)
CAO THI NGOC DUNG
10 PNJ’s summary operational report 2013