This year's business story of Bầu Đức and Hoàng Anh Gia Lai Group Joint Stock Company (HAG) no longer features the image of pigs eating bananas but is replaced by durian fruits. In addition, Bầu Đức's determination to pay off debts is perhaps gradually becoming a reality. Bầu Đức's debt repayment journey is a classic case study of a determined entrepreneur striving to regain what has been lost.
Classic Debt Forgiveness Case
On December 13, 2023, Hoàng Anh Gia Lai (HAG) announced that its subsidiary, Gia Lai Livestock Joint Stock Company, had fully repaid 750 billion VND to Eximbank. This amount includes the entire principal debt of approximately 587 billion VND and part of the interest of 163 billion VND. Resolving loans from 2014, notably, Eximbank waived a total of nearly 1,425 billion VND in interest for these loans. This is the largest amount of waived interest that a bank has announced for a customer, including overdue interest, late payment fees, and part of the current interest. The repayment of the loan at Eximbank by HAG occurred shortly after Chairman Đoàn Nguyên Đức (Bầu Đức) collaborated with Chairman Nguyễn Đức Thủy (Bầu Thủy).
Since the end of October 2023, there have been many notable cooperation events between LP Bank and HAG reported by the media. The first highlight was the comprehensive cooperation agreement between LPBank and HAG signed on October 23, 2023. Although the details were not disclosed, from the statements of Bầu Đức and CEO Hồ Nam Tiến, it seems that LPBank will provide financial support to HAG in agricultural projects, including cultivation and livestock. Chairman Nguyễn Đức Thủy of LP Bank did not attend the signing ceremony, but on the same day, he was seen sitting next to Bầu Đức at the opening match of Vleague 2023-2024.
More than a week later, on November 2, LP Bank and the academy along with Hoàng Anh Gia Lai Football Club signed a comprehensive cooperation agreement. As a result, the academy and Hoàng Anh Gia Lai Football Club were renamed LP Bank Hoàng Anh Gia Lai Football Academy and LP Bank Hoàng Anh Gia Lai Football Club. Then, in mid-November, Chairman Đoàn Nguyên Đức of HAG led a delegation of LP Bank leaders to visit projects invested by HAG in Vietnam, Laos, and Cambodia. They visited pig farms that raised pigs on bananas and durians. Over the past 10 years of ups and downs with many changes in crops and livestock, HAG has now focused on three main areas: pigs, bananas, and durians. Although the business direction is clear, Bầu Đức still needs to address HAG's debt issues, especially the overdue loans that have accumulated for many years.
Will Not Abandon Hoàng Anh Gia Lai
For the past decade, the debt issues of Bầu Đức, a businessman who was once the richest on the Vietnamese stock market, have been mentioned many times. He has also expressed his suffering from debts many times, and despite his determination, the debt of tens of thousands of billion VND remains a heavy burden for him. As of September 30, 2023, Hoàng Anh Gia Lai had a medium and long-term loan balance of 3,848 billion VND, short-term loans of 3,930 billion VND, bringing the total financial debt of the group to 7,778 billion VND. In addition, HAG also has a payable expense balance of up to 4,830 billion VND, mainly consisting of bank loan interest and bonds.
In addition to repaying Eximbank on November 28, 2023, HAG also repaid more than 200 billion VND of the principal of the bond code HAGLBOND 16.26 with funds from the debt collection of Hoàng Anh Gia Lai International Agricultural Joint Stock Company (HNG). Thanks to these payments and the interest waivers from the bank, HAG's total liabilities decreased by 2,350 billion VND in just the last quarter of the year. Remembering back to 1993, Chairman Đoàn Nguyên Đức named his business after his eldest daughter. 30 years later, in a large auditorium, he stated in front of a large number of investors that the name Hoàng Anh is my daughter's name, and I will never abandon it. This time, Bầu Đức's determination to repay debts has reached its highest level; in the past, despite financial difficulties, HAG has never considered selling the hospital and Hoàng Anh Gia Lai Football Club.
However, the current situation has changed after renaming the Hoàng Anh Gia Lai Football Club, which has decided to sell the hospital. On December 26, 2023, HAG approved the decision to transfer shares in Hoàng Anh Gia Lai University Hospital Joint Stock Company to repay the principal of the bonds issued in 2016. Previously, in the third quarter of 2023, Hoàng Anh Gia Lai also sold Hoàng Anh Gia Lai Hotel for 180 billion VND. This amount is expected to be used to repay the Hoàng Anh Gia Lai bonds issued in 2016 to the Vietnam Joint Stock Commercial Bank for Industry and Trade (BIDV). Chairman Đoàn Nguyên Đức shared that Hoàng Anh Gia Lai is urgently repaying debts by all means.
If there are no debts, there will be no pressure to borrow again. Currently, I am very focused on sustainable profits, and Hoàng Anh Gia Lai will strive for profits next year to be higher than the previous year, achieving sustainable growth. Bầu Đức stated that this time HAG is making every effort to manage the situation, not only by selling assets but also through fundraising. HAG plans to issue private shares to strategic investors and use part of the capital raised to repay debts.
Specifically, HAG hopes to raise 1,300 billion VND from this share issuance, with more than 330 billion VND expected to be used to repay the principal and interest of bonds issued since 2012 and about 270 billion VND to repay debts to the livestock joint stock company at Tiên Phong Commercial Joint Stock Bank. Once again, the figure of Bầu Thủy appears after this billion VND fundraising plan, as the list of expected investors to buy HAG shares is all related to him. Accordingly, LP Bank Securities (LPBS) is expected to buy 50 million shares, Thaigroup Joint Stock Company is expected to buy 52 million shares, and Nguyễn Đức Quân Tùng, the acting general director of LPBS, is expected to buy 28 million shares.
Durian Rises
Last year, HAG's pig farming project attracted much attention, although it initially had high expectations, due to falling pig prices, HAG admitted that pig farming did not bring profits but also did not incur losses. In the investor conference in August 2023, Chairman Đoàn Nguyên Đức affirmed that HAG did not incur losses in pig farming. He stated that only Hoàng Anh Gia Lai BAPI Joint Stock Company, the distributor of pigs fed with bananas, experienced slight losses due to distribution and competition issues. Bầu Đức declared that saying Hoàng Anh Gia Lai lost money in pig farming is completely incorrect, utterly wrong. He expressed hope that in 2024, pig prices would rise again as many farmers have reduced their herds.
In addition to pigs, another agricultural product of HAG that has attracted attention this year is durian. Recently, Bầu Đức also excitedly shared about the potential of durian with investors. He shared about the economic efficiency from the 30-hectare durian lot that HAG just harvested, with production costs of just under 12,000 VND per kg, but they sold it for 77,000 VND per kg, yielding such high profits that he could hardly believe it.
HAG started planting durian in 2018, and 2023 is the first year they harvested and sold it to the market. He noted that Hoàng Anh Gia Lai durian has an advantage as it is grown in a highland area where the climate is suitable, helping the product have a higher value. Bầu Đức also emphasized the importance of cost price in durian production. He revealed that the actual cost for each kg of Hoàng Anh Gia Lai durian is less than 10,000 VND, even only 5,000 VND per kg for large quantities. He also mentioned that although the price of durian in Vietnam has never reached 20,000 VND per kg, Hoàng Anh Gia Lai can still sell it at this price. In 2023, HAG only began testing selling durian to traders in small quantities as this is the first year of harvest.
However, in 2024, Hoàng Anh Gia Lai plans to harvest, package, and export durian directly to China. Mr. Đức stated that Hoàng Anh Gia Lai has attracted interest from many Chinese customers, and they plan to sell durian directly to distributors in China, rather than through traders. Hoàng Anh Gia Lai has been known in the community of 500 Chinese fruit and vegetable importers thanks to its banana distribution, and they plan to continue expanding into this market with durian. HAG's financial results will significantly improve after they repay more than 700 billion VND to Eximbank and receive waivers of more than 1,400 billion VND in interest and penalties.
This will help HAG's year-end accounting balance look better, especially as this interest waiver allows HAG to recognize unusual profits since they can reverse previously accrued interest expenses. Bầu Đức revealed that in 2023, Hoàng Anh Gia Lai expects a post-tax profit of at least 2,150 billion VND, including unusual income. With the goal for 2024, HAG's chairman expects revenue to be 25% higher than in 2023, based on the increase in durian area, and although pig production is not expected to increase, pig prices are expected to recover after the decline in 2023.
In addition, HAG also aims to eliminate accumulated losses. As of the end of 2022, Hoàng Anh Gia Lai had accumulated losses of 3,341 billion VND; if they actually record a profit of 2,150 billion VND in 2023, the accumulated loss will decrease to about 1,200 billion VND. Chairman Đoàn Nguyên Đức is confident that Hoàng Anh Gia Lai will completely eliminate this loss in the first half of 2024.