After Covid-19, many businesses are stepping up the restructuring of business lines to consolidate resources for sustainable development in the future. In addition to the "encroachment" plans and joining new fields, many businesses also narrowed their trades to focus resources for core fields.

Renewable energy is one of the "hot" fields that attracts many businesses to invest.
Photo: N.H 

Trend of "encroachment"

At the recent General Meeting of Shareholders in 2020, Huynh Van Thon, Chairman of Loc Troi Group, spoke about the orientation to become an agricultural service company and invest in comprehensive development of agricultural service delivery stages. This is to help businesses avoid difficulties that agricultural businesses face such as epidemics and weather. Accordingly, Loc Troi has conducted a comprehensive restructuring and specialization of business units in four sectors, including agricultural services, agricultural materials, food, production and logistics.

Since the end of the fourth quarter of 2019, Loc Troi has started focusing on promoting agricultural services, especially the application of drone technology to spray plant protection chemicals at a lower cost than hiring workers and saving materials.

The group has also applied to exploit big data about farmers and crop information in operating services, apply information technology in operation management and structure of services according to the priority of large-area farmers, cooperatives and cooperative groups.

In the next three years, Loc Troi sets the goal of developing crop management processes, a set of products for nourishing and protecting plants, diversifying services from signing contracts to organize material areas and package care to deal with crops, provide technical advice, arrange consumption markets.

Accordingly, Loc Troi expects that in 2020 the service segment will bring in revenue of VND 258 billion and gross profit of about VND 68 billion.

Along with the orientation to become an agricultural service company, Loc Troi will also encroach on the solar power field with the AGM's approval of the report on the addition of solar power production.

Many other businesses are also investing in renewable energy, including wind power and solar power. At the recent General Meeting of Shareholders, leaders of Refrigeration Electrical Engineering (REE) said that renewable energy is a key plan in 2020. In its annual report in 2020, REE set ambitions to become a leading company.

Vietnam will produce renewable energy in the next five years, focusing on solar power, wind power and clean water. REE is currently implementing the Tra Vinh wind power project with a capacity of 48 MW, the target of commercial operation before November 2021 to enjoy the preferential price under the FIT mechanism of 9.8 cents/kWh. With the goal of exceeding 1,000 MW of renewable energy in the next five years (currently 515 MW), REE is seeking opportunities to acquire wind power projects that are not implemented by other investors.

Many other businesses are also planning to "encroach" into new fields and industries.

Vinamilk is implementing a project of opening a chain of retail shops for coffee, beverages and some food items under the Hi-Cafe brand. This plan was implemented after Vinamilk cooperated with Kido Group Joint Stock Company to form a joint venture of beverage and ice cream industry with 51% of Vinamilk's capital contribution. In addition, Vinamilk also plans to participate in sugar production with a plan to develop commercial sugar products with specialized functions such as sugar for diabetics and dieters.

In the short term, these “encroachment” plans will slow down the growth of the company due to focusing resources for investment. But in the long run, this will open up opportunities for businesses in new areas when traditional industries are showing signs of slowing down and entering a saturated phase, thereby helping businesses have the opportunity to grow more sustainable in the long run. However, multidisciplinary business also puts businesses in front of many risks, requiring businesses to have multidisciplinary management capacity.

Focus on core areas

While many businesses encroach into new potential areas to find new sources of revenue, many others withdraw from ineffective areas to focus on the core business and minimize risks. Specifically, the Board of Directors of Quoc Cuong Gia Lai Joint Stock Company recently agreed on the transfer of all 34% of the shares in Hiep Phuc Real Estate Joint Stock Company after successfully selling 56% of the capital in this company. It is known that the Song Da Riverside project in Thu Duc district (Ho Chi Minh City) of HiepPhuc Company has been "frozen" for nearly 10 years but cannot be implemented.

Similarly, Vinh Son - Song Hinh Hydropower Joint Stock Company (VSH) has just approved the plan to divest from BinhDinh Tourism Joint Stock Company (Biditour) under the public auction plan of nearly 1 million shares of Biditour. However, this plan of VSH was not successful because no investors participated. Previously, VSH said that due to the impact of Covid-19, Biditour's Q12020 revenue was seriously reduced. This has affected the consolidated business results in the first quarter of 2020 with an after-tax loss of more than VND1 billion.

Vietnam Electrical Equipment Joint Stock Corporation (GEX) has also recently approved a full divestment plan at Gelex Logistics Co., Ltd. (Gelex Logistics), expected to be implemented before the third quarter of 2020. Gelex Logistics is the direct owner of the Southern Logistics Joint Stock Company and indirectly owns Sowatco, Vietranstimex and Sotrans Logistics companies.

In recent years, Gelex Logistics has contributed significantly to the consolidated business results of GEX, but the growth rate showed signs of slowing down. The divestment of the entire logistics segment shows the GEX's policy to strongly restructure its operations in the near future towards focusing more on electrical equipment and infrastructure (industrial parks, electricity and water).

According to investors, the divestment plan, if successful, will bring businesses a large amount of money and financial strength to focus investment in core areas and exploit potential in the fields. The region is strong. Since then, it is expected to create new resilience for businesses.