The COVID-19 pandemic would impact performance of Vietnam Dairy Products Joint Stock Company (Vinamilk) this year, but the long-term outlook for the dairy producer was still positive, experts forecast.

Experts from Fitch Solutions said despite short term challenges, they continue to see long-term growth potential for Vinamilk, given the strong growth outlook for dairy consumption in Viet Nam; its ongoing international push; the company's ongoing investment in its supply chain and capacity expansion; and its strong financial position. The company is well-positioned to benefit from the industry's growth as it is a well-known brand with a large distribution network.

“We are also positive on Vinamilk's internationalisation strategy, aiming at boosting exports as well as at investing abroad to source products and/or sell to local consumers. Vinamilk still relies heavily on the unstable Iraqi market, highlighting its internationalisation strategy has been slow so far,” the experts said.

Vinamilk remains focused on expanding exports going forward, looking mainly at Africa, Southeast Asia and the Middle East. In 2020, the company secured an export licence in China and plans to export condensed milk there. Although China's dairy imports are growing at a very fast pace and is an attractive market, Fitch noted it is an extremely competitive market which may prove difficult to enter.

According to the experts, Vinamilk continues to enjoy strong margins relative to its peers, thanks to its ability to control expenses and maintain a very low level of debt. Vinamilk also regularly records positive and elevated free cash flows. This bodes well for the company's future expansion plans.

“We therefore believe Vinamilk will remain an outperformer in the industry over a multi-quarter horizon, owing to its efficiency, cost control and emphasis on high-demand growth markets,” Fitch said. — VNS