Introduction

Hoa Phat Group is one of the leading private industrial production groups in Vietnam
with the vision to become a leading multi-disciplinary industrial manufacturer in Vietnam well
prepared for global integration with steel production as its core business activity. With a long
history of development, Hoa Phat group has gained significant achievements and reputation in
domestic market. Regarding the changing economic condition and business environment, the
Group is facing noteworthy challenges and opportunities, which are analyzed and argued in this
paper.
Background
History
Hoa Phat Group was founded in August 1992 as a trading company specializing in
construction machines. Over the time, it extended the business in different field such as
Furniture, Steel Pipe, Steel, Refrigeration and Real Estate by establishing Hoa Phat Furniture
Joint Stock Company (1995), Hoa Phat Steel Pipe Co., Ltd (1996), Hoa Phat Steel Joint Stock
Company (2000, which is now Hoa Phat Steel One Member Co., Ltd), Hoa Phat Refrigeration
Engineering Co., Ltd (2001), Hoa Phat Urban Development and Construction Joint Stock
Company (2001) and Hoa Phat Trading Co., Ltd (2004).
In 2007, there were some significant changes in the company. In January 2007, Hoa Phat
restructured to a Group model, in which Hoa Phat Group Joint Stock Company is the parent
company of its subsidiaries and affiliates. In November 15, 2007, Hoa Phat was officially listed
in the Vietnam Stock Exchange with ticker HPG. After the restructure, Hoa Phat has many
great strides in which the most prominent progress was implementing of Hoa Phat steel

integrated complex project in Hai Duong province with the steel production technology from
iron ore to steel, and invest to exploit minerals to create input for steel production.
2008 was a year with many difficulties in economic environment such as rising interest
rates, exchange rate fluctuations, volatility in the price of primary commodities in the world and
in Vietnam due to the crisis in the world economy. Despite the overall obstacle of the whole
industry, at the end of the year, Hoa Phat still presented the positive result in the operation of the
Group: return on equity (ROE) reaching 21%, higher than that of 2007 (20%); return on total
assets (ROA) reached 15% in 2008 compared to 14% in 2007. In late 2008, the total assets of the
Group reached 5,639 billion; Equity reached 4,111 billion.
In 2009, Hoa Phat Group acquired An Thong Mining investment Joint Stock Company
and Hoa Phat Energy Joint Stock Company as a signal to expand the operation in mining and
energy to support the steel production process.
Specially, in 2015, Hoa Phat officially launched Hoa Phat Feeds Production & Trading
One Member Limited Liability Company, marking a new step in the groups development history
by penetrating the agricultural sector, with a charter capital of VND300 billion and a capacity
designed to reach 300,000 tonnes per year. Entering into agriculture sectors raises a number of
questions and doubts among shareholders of the Group as Hoa Phat actually experienced losses
in this sector in 2015. However, in the shareholders meeting in quarter 1/ 2016, the Group did
claim that the penetration into agriculture is the strategic step of Hoa Phat long-run development
(Tu Linh, Cafef).
The appendix provides more detailed information about the historic milestone of Hoa
Phat Group.

Group Structure
Overtime, Hoa Phat has been continuously expanded its size and operation. As of 29
February 2016, the Hoa Phat group had 18 subsidiaries and 1 associate (Hoa Phat - SSG Mining,
Joint Stock Company).

(Hoa Phat Groups 2015 Annual Report )

Current Business Performance
By the end of 2015 the group achieved revenue of VND27,864 billion and profit after tax
of VND3,504 billion, exceeding the set targets by 24% and 8%, respectively, an increase of 8%

as compared to 2014. The main activities of Hoa Phat Group can be divided into four groups,
which are steel, other industrial production, real estate, and agriculture. The core segment, steel
production and trading accounted for 79.4% of the groups revenue and 82.3% of its profit,
contributing to the solid platform and internal force based on which the Hoa Phat group will
boost its growth in the future with its new segment, i.e. agriculture. The form of conglomerate
allows Hoa Phat to have strong financial support to invest in new segment based on the profit of
the primary segment. The following charts show the contribution of each sector into the Groups
profit and revenue.

(Hoa Phat Groups 2015 Annual Report)

Regarding liabilities and debts, Hoa Phats debt ratio experienced a decrease over the past
three years from 1.42 in 2013 to 0.76 in 2015, which means the risk of failure to pay has been
reduced. The bank borrowing to equity ratio in 2015 was 0.47, considered to be a safe indicator
for a typical heavy industrial production group.

(Hoa Phat Groups 2015 Annual Report)

The owners equity the owners equity of the group as at 31 December 2015 was
VND14,466 billion, showing significant growth from VND11,965 billion at the beginning of the
year due to dividend payment by share. This increase in capital can finance the Group to invest
in new project. Return on Assets (ROA) and return on equity (ROE) ratios decreased slightly
since new project has not been put into operation to yield revenue.

(Hoa Phat Groups 2015 Annual Report)

Appendix

(Hoa Phat Groups 2015 Annual Report )