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ASSIGNMENT FOLDERFINAL REPORT

<b>SUBJECT NAME: Performance Management</b>

<b>SUBJECT CODE: INS401901</b>

<b>LECTURER: TS Nguyen Phu Hung</b>

<i>Ha Noi, June 2023</i>

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<b>VIETNAM OIL AND GAS GROUP (PETRO VIETNAM - PVS)</b>

- Stock symbol: PTSC

- Address: 18 Lang Ha Street, Ba Dinh, Hanoi, Vietnam.- Tax code: 0100150873

- Hotline: (84-24) 38252526- Website: www.pvscompany.com

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1. Introduction of the company

1.1 Background

PTSC, a member of Vietnam Oil & Gas Group (PetroVietnam - PVN)

PTSC was established on the implementation of Decision No. 458/TTg dated 24 November 1976 for the approval of the master plan to build a petroleum base in Vung Tau city. Over 47 years of development, PTSC has made important breakthroughs to become a leadingcontractor in providing technical services for oil & gas industry and other industries in Vietnam and also an outstanding brandname for technical service in oil & gas industry in the region.

PTSC's core businesses are to provide technical services for oil & gas, energy and industrial sectors including high technical solution, high quality and professional approaching international standard such as: EPCIC for offhore facilities; EPC for industrial plants; FSO/FPSO; Offhsore supply vessels; Geological survey; Installation, operation and maintenance of offshore facilities; Port & Supply Base and Technical manpower supply.

1.7 Product lines

- Exploration

- Field development – production – operation- Transportation and processing.

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2. Performance Analysis

2.1 Industry Benchmarking

2.1.1 Profitability

<b>Average of ValueColumn Labels</b>

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- ROA: Looking at the data table, it can be seen that the ROA of the industries is decreasing markedly, the average ROA of the industry has decreased by 58% and the ROA of the Mining&Oil industry is no exception when it has decreased by 243%. Low ROA shows that the capital efficiency of enterprises in the industry is not good. Mining & Oil industry has low capital efficiency compared to other industries.

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- ROE: It can be said that the ROE of industries has quite a big difference when there are industries with high ROE, while there are quite serious declines in industry Mining&Oil's ROE decreased by 494%, which is an alarming figure for companies in this industry.2.1.2 Capital Adequacy

Capital Adequacy of companies in the Mining &Oil industry has shown signs of a slight decrease in 5 years from 2018-2022 from 55% in 2018 to 50% in 2022, a decrease of 5%.2.1.3 Liquidity

<b>Average of ValueColumn Labels</b>

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showing that companies in this industry have short-term debt. more than cash and cash equivalents.

- Quick Ratio: Quick ratio in Mining&Oil industry, although slightly decreased from 1.22 to 1.11 but remained above 1, we can see that companies in this industry have more cash, cash&cash equivalents, account receivables than short-term debt.

2.2 Compare PVS performance with the rest of the industry

2.2.1 Compare PVS financial ratios with those of other companies in the same industry

- Regarding revenue

The revenue of Mining &Oil industry tends to increase, but there are signs of decrease in 2021.

In the period of 2018-2020, Mining &Oil industry growth because the good growth of Vietnam’s economy and the demand to consume fuel. In 2019, the net revenue of this industry is 8,520 billion dong, increase more than 1200 billion compare to net revenue in 2018.The data show that the net revenue in 2020 achieved the massive growth to 10,131 billion dong.

<b>Average of Value</b>

<b>Column Labels</b>

<b>Average1. Revenue7,371.50</b>

Mining &Oil 7,371.508,561.0

Mining &Oil 7,371.508,520.0

However, by 2021, the revenue of Mining &Oil companies indicates that this industry has been stop growing. Due to Covid-19 pandemic, many people died, the government required quarantines to all the religion of Vietnam, that why not only Mining &Oil industry has negative data but also another industry in same situation.

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PVS’s gross profit trend in 5 years from 2018 to 2022 is quite similar to the trend of Mining &Oil industry. The data show that 2018 is the best for the fuel industry. The industry was in the growth period but is suddenly decrease in the next 4 years because COVID-19. In Vietnam, the price of gasoline significantly decreases by 13,000 VND/liter while before is 25,000 VND/liter Gross of profit of this industry stay around 380 to 560 while the data of PVS around 770 to 890 (double that of data of fuel industry)

<b>Average of Value</b>

<b>Column Labels</b>

<b>Row Labels20182019202020212022Average1. Revenue14,638.00</b>

Mining &Oil 14,638.0017,050.0

Mining&Oil 14,638.0016,968.0

-Regarding profitability ratios

With this criterion, we compare MIM and PVS by net profit margin, ROCE, ROA, ROE. In 2018, both companies have positive statistics around 2.5%. In the next year, MIM’s net profitmargin has decrease sharply by 12% while this of PVS still increase to 4.76% and continue toincrease to 2022. MIM’s net profit margin increase to 4.45% in 2021 and recorded the downtrend in 2022, average net profit margin of this company in 5 years is a negative number.

<b>Average of Value MIM’s DATAColumn Labels </b>

<b>AverageEBIT margin5.87-5.57-2.106.94-8.97-0.77</b>

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Mining&Oil 2.05-

10.65 -6.65 4.45-11.32 -4.42

<b>Return on capital employed </b>

12.62 -6.93

51.26 -2.23

-Mining&Oil 2.19 -7.31 -4.99 5.92-12.59 -3.36

64.83 -15.53

<b>-Average of Value PVS DATAColumn Labels</b>

Mining&Oil 6.85 6.70 5.35 6.50 6.32 6.34

<b>EBITDA/Net revenue10.739.528.0210.0</b>

Mining&Oil 10.73 9.52 8.0210.0

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The data of PVS’s ROA like ROCE of the company, it stables in 5 years. Starting with 4.46%in 2018, after that slightly decreased to 2.35% and ended with 3.05%. Unlike PVS, MIM’s data is more complex, each year had a huge change. The data of ROA in 2019 down to -7.31%, increase in next 2 years and keep going down to worst record is -12.59%There is a special case if we continue to compare two companies by ROE. The PSV’s ROE unchanged in 5 years and recorded with 8.45%. The MIM’s ROE changes a lot with decrease by 30% in 2019, it increases till 2021 and become the worst in 2022 while the company witnessed the data is -64.83% (decrease more than 80% compare with 2021).2.2.2 Discuss the budget adequacy of PVS.

According to the profitability ratios of PVS, all criteria included EBIT margin, Net revenue, gross profit margin, net profit margin, ROCE, ROA, ROE are a positive data in 5 years, the number increase year by year before and after the pandemic show that the company use their cash very carefully although the company was affected significantly because COVID-19. Cashflow ratios, efficiency ratios, growth rate are continuing to make sure PVS has no problem with their budget adequacy.

2.3 The performance problems of PVS

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The Cash ratio of PVS is increased from 2020 to 2022 ( 0.53 – 0.66 – 0.57), and decreased from 0.92 to 0.77 in 2018 – 2019. A decrease in the cash ratio indicates that PVS has less

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cash available relative to its current liabilities. So PVS have a risk about liquidity and ability to meet its short-term obligations. It could indicate potential financial difficulties or poor cashmanagement. On the other hand, an increase in the cash ratio signifies that PVS has a higher proportion of cash relative to its current liabilities. This is a positive sign because PVS can improve liquidity and a stronger ability to meet short-term obligations.

The interest coverage of PVS decreased from 37.43 to 33.66 and 19.38 in 2018 – 2020, and sharply decreased from 20.24 to -23.71 in the next two years, which shows that PVS’s earnings are becoming less sufficient to cover its interest expenses, indicating a potential strain on its financial resources. A lower interest coverage ratio raises concerns about PVS’s ability to service its debt and may signal a higher risk of defaulting on interest payments. Because of Covid-19 happened and lockdown law, the demand for gasoline became less, PVS has difficulties with financial.

The quick ratio of PVS has remained unchanged from 2021 to 2022, it means that the company’s liquid assets and current liabilities have remained relatively stable. This could indicate that the company’s liquidity position has not significantly improved or deteriorated. On the other hand, from 2020 to 2021, the quick ratio increased 1.48 to 1.52, which improvedshort-term liquidity and a stronger ability to meet its immediate obligations.

The short–term ratio of PVS decreased from 2018 to 2020 (2.07 – 1.78 – 1.69) and increased from 1.76 to 1.77 between 2021 and 2022, which shows asses PVS’s short-term liquidity , financial stability, and ability to meet its immediate obligations.

The most risk of PVS is industry and market risks: Consider the risks associated with the oil and gas industry, such as fluctuating oil prices, geopolitical tensions, regulatory changes, and environment concerns. As a state-owned company, PVS is subject to government control and policy changes so that PVS has risk of Government influence.

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VTL, which lowers inventory turnover ratio can be a signal of potential inventory obsolescence or carrying costs.

Payable turnover: Payable turnover ratio provides insights into the efficiency of a company’s payables management and supplier relationships. VTL overall shows higher payable turnover, which indicates that VTL is paying its suppliers quickly. However in 2022, an extremely high ratio of VTL (45.54 times) may indicate a potential liquidity risk or difficultlyin managing cash flows.

Fixed asset turnover: In 2018, VTL has sharply increases of 10.14 (times), and the remaining years decrease rapidly. On the other hand, NAF has a stable fixed asset turnover in the periodof 2018-2022.

Total assets turnover: Total assets turnover ratio shows the ability of a business to use total assets to generate revenue. In the period of 2019-2022, NAF increases this index so that the better for the business.

Equity turnover: Equity turnover ratio shows the ability of the business to use total assets to generate revenue. In 2022, VTL shows higher index than NAF. For owners, this is one of the important criteria for making investment and capital investment decisions.

- In Health care industry, we have information of financial ratios of two companies: DCL andTRA

We see that, in the period of 2018 – 2022 inventory turnover of both companies DCL and TRA have decreased due to the Covid-19 pandemic, which affecting the operational efficiency of both companies and their ability to convert inventory into sales. With fixed assets turnover of TRA, this index rises from 2.68, 3.16, 3.82, and 4.52 times between 2019 to 2022. Moreover, equity turnover ratio of DCL fluctuated slightly and TRA’s index has increased from 2018 to 2022.

- In the Plastic industry, we have information of nine companies, which including AAA, CJC,CTB, DVG, NHH, PHR, QHD, SHE, and VTZ

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Inventory turnover: In the period of 2021 – 2022, CTB and VTZ both show us the slight increase from 2.48 to 3.02 times (CTB), 3.12 to 3.79 (VTZ) and DVG, NHH, PHR, QHD, SHE companies have slightly drop. On the other hand, AAA company has sharply decreased from 10.25 to 3.73 times, which so that a signal of potential inventory obsolescence or carrying costs.

Payable turnover: In the period 2020- 2022, CJC, CTB, NHH, SHE, and VTZ companies show the fluctuation stable in this index, and PHR is the company has the highest payable turnover ratio. Moreover, AAA sharply decreased from 21.01 to 8.21 (2021 – 2022), and DVG in 2020 (12.58 to 6.05), which takes longer to pay its suppliers to maintain cash on hand to indicate potential financial issues. QHD increases rapidly from 17.39 to 39.04 in 2020 and 2021.

Fixed asset turnover: This index increases in CJC, CTB, NHH, QHD, and SHE in the last twoyears indicates that companies is generate more sales revenue for each unit of fixed assets it owns, which implies efficient utilization and productivity of the company’s assets. On the other hand, AAA, DVG, PHR, VTZ decrease this index show that companies may not be effectively utilizing their assets to generate sales. It could indicate underutilization of assets. Equity turnover: This index in DVG, NHH, PHR, QHD, SHE, and VTZ have fluctuate stability from 2020 – 2022. However, CJC shows the sharply decreases in 2021 (5.91 to 2.3 times), which not be effectively utilizing its equity to generate sales, it could be indication of lower sales revenue relative to the equity invested, which may point to operational inefficiencies or challenges in revenue generation. On the other hand, CTB increases from

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2.06, 2.67, and 4.18 times (2020 – 2022) indicating use of capital and strong revenue generation.

- In Whole Sales industry, we have information of four companies: CVN, VFG, VID, and VKC

Inventory turnover: This index of CVN and VFG rise in the period 2020 – 2022 from 0.89, 1.02 to 1.64 times (CVN), and 1.75, 2.39 to 2.74 times (VFG). On the other hand, VID and VKC drop from 8.11, 5.84 to 2.76 times (VKC), from 10.28, 5.75 to 4.95 times (VID).Payable turnover: This ratio of VKC sharply drops in 2019 (8.65 times) after that stable increase in 2020 to 2021. At VID, payable turnover ratio rapidly decreases in 2021 from 11.02 to 5.48 times. Moreover, VFG and CVN have stability fluctuation in the period of 2018to 2022.

Equity turnover: This index of both CVN and VKC fall in 2020 – 2022 from 4.29 - 3.64 - 2.12 times in VKC and from 0.41 – 0.35 – 0.32 times. VFG company rises 2.01, 2.1, 2.77 times from 2020 to 2022, and VID has stability fluctuation of equity turnover in the period of 2018 - 2022.

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The EBIT margin provides insights into a company’s ability to generate profits from its operations before considering the impact of interest and taxes. With the EBIT margin in the period 2018-2022 shows that the highest index belongs to PHR, which generate more profit from each dollar of revenue, indicating better efficiency in controlling costs and managing operations, and shows the stability and sustainability, the ability of PHR to cover operating expenses, invest in growth opportunities is better than others.

The EBITDA/ Net revenue: The highest index also is PHR, which average is 61.14 shows that the company’s sales are increasing well. However, the lowest index is VKC (average is -11.09), shows that the company’s sales are decreasing, it measures of sales is ineffectiveness and can not influence the structure of commission plans.

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The gross profit margin reveals how efficiently the company manages its production costs and pricing strategies to generate profit from its sales. The highest gross profit margin is MBS (average is 56.25) generally indicates better profitability. MBS’s gross profit margin increases over 5 years may indicate improving cost management and pricing power. Net profit margin of PHR is the highest, which have a stability fluctuation and the average is 44.12 shows PHR can effectively manage its costs, taxes, and other expenses to generate profit from its sales, and better profitability than others. The lowest index is VKC, which cannot attract investors.

Return on capital employed (ROCE): SMB, the highest ROCE, and VTL, the lowest ROCE. ROCE is used to assess the efficiency and effectiveness of a company’s capital investments. It measures how well the company generates operating profit in relation to the capital invested. So that, SMB indicates better utilization of capital and higher profitability, generating better returns on the capital invested, which can enhance shareholder value and attract investor interest.

ROA: The highest ROA is SMB shows that SMB generates efficiently profit relative to its total assets, stakeholders can evaluate whether the company is becoming more efficient in utilizing its assets and indicate better investment potential.

ROE: The highest ROE is also SMB, which helps evaluate whether the company’s return on equity is in line with industry standards or if there are opportunities for improvement, indicate better investment potential and efficiency in generating returns for shareholders.

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