HOA PHAT GROUP 2009 ANNUAL REPORT Annual report

Transcription

1 HOA PHAT GROUP 2009 ANNUAL REPORT 1

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3 HOA PHAT GROUP NEW STRATEGY, NEW STATURE 2009 AnnuAl report 3

4 COMPANY PROFILE Trading name in Vietnamese: Cong ty Co Phan Tap Doan Hoa Phat Trading name in English: Hoa Phat Group Joint Stock Company Address: Pho Noi A Industrial Park, Giai Pham, Yen My, Hung Yen Hanoi branch: 34 Dai Co Viet, Le Dai Hanh, Hai Ba Trung, Hanoi, Vietnam Telephone: (84) Fax: (84) Da Nang branch: 171 Truong Chinh Street, Thanh Khe Dist, Da Nang City Telephone: (84) Fax: (84) Ho Chi Minh City branch: 129 Nguyen Huu Canh, 22 Ward, Binh Thanh, HCM city Telephone: (84) Fax: (84) Website: STOCK INFORMATION Charter Capital: 1,963,639,980,000 dong Ticker: HPG Stock exchange: HOSE Date of listing: 15/11/2007 Outstanding shares: 196,363,998 shares MAIN BUSINESS ACTIVITIES 1. Trading, exporting and importing irons and steels, materials and equipments for refining and rolling steels. 2. Producing rolling steel and corrugated iron. 3. Manufacturing steel pipes and galvanized ones, stainless ones. 4. Producing and trading non-ferrous metal and non-ferrous metal scrap. 5. Refining steel and casting iron. 6. Exploiting metal ores; trading metals, metal ores and metal scrap. 7. Manufacturing and trading construction and mining equipments 8. Producing furnitures for offices, households and schools. 9. Investing and building infrastructure for industrial parks and urban residential areas. 10. Trading real estate (excluding consultancy for valuation). 11. Manufacturing, trading, assembling, repairing, maintaining products of refrigeration, electric household and air conditioners. 12. Producing cement and trading construction materials.

5 Table of Contents Hoa Phat Group at a glance... Financial Highlights... Chairman s Message... Directors Report... Board of Management Structure - Human Resources... Special Features... History and Development... Review of Operations... Research and Development (R&D)... Corporate Social Responsibility (CSR)... Community... Environment... Auditted Consolidated Financial Statements and Notes... Information for Investors

6 HOA PHAT GROUP AT A GLANCE After three years of implementing restructuring corporations, Hoa Phat Group has affirmed its position in many areas of business. With impressive growth in 2009, the Group is moving closer to the goal of becoming a leading and dynamic industrial corporation with sustainable development as well as creating the basis for expansion to new areas of business. In 2009, under the influence of macro factors such as the recession reached its trough in first months of 2009, the price of gold fluctuated widely during the year, price of USD in term VND reached its highest level at the end of 2009 and so on, Hoa Phat Group s net revenue of 2009 failed to overpass that of However, on the other hand, Hoa Phat Group s net profit made a significant leap as compared to that of 2008 thanks to its proper decisions during the year. Particularly, Gross revenue of 2009 decreased 3% as compared to that of 2008, operating income increased by 63% and net profit of 2009 increased 48% as compared to that of Net sales (VND billion) 8,365 8,123 Operating income (VND billion) Net profit (VND billion) 1,271 1, , , Notably, ROE of Hoa Phat Group reached an impressive level of 26% in 2009 (that figure of 2008 was 21%) even though ROA of the Group decreased from 15% of 2008 to 12% of The deterioration of ROE dued to the massive increase of asset to invest in many projects. As at 31st December 2009, Hoa Phat Group s total asset was VND 10,243 billion and equity was VND 4,899 billion. Equity and Total assets (VND billion) Return on Equity (ROE) 26% Return on Asset (ROA) 15% 10,243 20% 21% 14% 12% 6 3,143 4, Equity Total Assets 4,111 5,639 4,

7 HoA phat Group financial HIGHlIGHtS Content Unit: VND Net sales 5,642,934,497,513 8,364,804,886,490 8,123,394,614,746 Cost of Goods sold 4,676,412,401,178 7,106,495,501,517 6,147,351,692,197 Gross profit 966,522,096,335 1,258,309,384,973 1,976,042,922,549 Operating Income 770,798,445,361 1,013,442,270,630 1,655,051,284,362 Net profit 643,973,627, ,410,312,473 1,270,706,623,417 Current Assets 3,135,512,550,218 3,849,009,101,068 5,407,840,665,885 Non-current Assets 1,621,282,269,054 1,790,365,447,252 4,835,399,323,200 Total Assets 4,756,794,819,272 5,639,374,548,320 10,243,239,989,085 Short and long term debts 700,369,312, ,364,849,575 4,151,843,910,016 Owner s Equity 3,142,550,739,733 4,111,066,885,716 4,898,775,649,293 financial ratios Gross profit margin 17.13% 15.04% 24% Operating income margin 13.66% 12.12% 20% Net profit margin 11.41% 10.27% 16% Net revenue growth rate 68.64% 48.24% -3% Net profit growth rate % 33.45% 48% Quick ratio % % 55% Gearing (Debt/equity) 22.29% 14.46% 85% ROE (Return on Equity) 20% 21% 26% ROA (Return on Assets) 14% 15% 12% EPS 5,264 4,439 6, AnnuAl report 7

8 8 Since 2010, Hoa Phat Group has adjusted its growth strategy from an industrial manufacturing Group to an industrial manufacturing, real estate and mining Group.

9 CHAIrMAn S MeSSAGe Dear shareholders, 2009 was marked as a successful year of Hoa Phat Group evidenced by the ability to overcome difficulties source from recession, stabilize the operation of core business lines, stimulate the progression of projects and orient to growth vertically. The severe impact of economy recession in 2008 extended to the first few months of During the first Quarter of 2009, the demand for building materials in general and demand for steel in particular dropped significantly as compared to As a result, many firms had to stop operation or went bankrupt. However, with the support of the Government s stimulation packages, at the end of the first quarter of 2009, many firms were able to beat the target revenue and profit set at the beginning of the year. Specifically, most of those firms operated in steel, banking and finance and rubber industry. Since the middle of the third quarter of 2009, as the economy faced with the risk of high inflation and the unstable in gold and foreign currency market, firms had to cope with many new difficulties. Specially, those difficulties had strong impact on firms, which had to rely on imported materials. Year 2009 ended with an acceptable CPI level of 6.88%. In spite of the negative impacts of the economy, Hoa Phat Group still reached an impressive growth thanks to its proper decisions during the year. In 2009, the Group s total revenue and net income were VND 8,244 billion and VND 1,271 billion respectively, increase by 18% and 38% as compared to adjusted target revenue and net profit. The contribution of the Group to the State budget was VND 621 billion, an increase of 13.7% as compared to that of Within the year, all members in the Group maintained their strong rate of growth and beat target revenue and net income set at the beginning of the year. The traditional business lines of the Group such 2009 AnnuAl report 9

10 CHAIRMAN S MESSAGE as steel, steel pipe, furniture, construction equipment, refrigeration had encouraging improvement in market share. Notably, Hoa Phat s construction steel business was ranked the fourth position among other suppliers, furniture, construction equipment and steel pipe maintained their leading position and refrigeration constituted 10% of air conditioner market. Exporting business of the Group achieved improvements in terms of market export and exporting products. Besides furniture, Hoa Phat s construction equipment exported to Philippines and continued to consolidate its current markets such as Ukraine, Laos and Cambodia. The first containers of Hoa Phat s steel pipe were exported to America and Hoa Phat s coke was exported to Europe. Remarkably, thanks to Hoa Phat s experiences in project management, decisiveness and determination in investment, Hoa Phat Integrated steel complex in Hai Duong the biggest project of Hoa Phat in medium and long term began its operation at the end of This complex is not only expected to contribute greatly to revenue and net profit of the Group but it is also expected to lift Hoa Phat Group to a new level. Three years after the restructure, the Group has affirmed its position in many fields. Transparence of public information and management s experiences were improved significantly. Hoa Phat brand name has become popular in Vietnam with expanding distribution network in terms of both nation-wide and worldwide. Working conditions and living standards for employees have been improved AnnuAl report 10 The economy in 2010 is expected to be more favorable than The recession has passed its trough and is facing opportunities to recover strongly. However, there is trade-off in order to turn these opportunities into real growth. In particular, the trade-off includes the risks to face trade deficit, unstable of foreign exchange market and high inflation. Steel industry is also expected to face chances as well as challenges in Particularly, challenges are the pressure of increase in oil price, supply of steel exceeds demand when new steel plants go into operation, the threats from increasing imported steel when imported tax has to be waived to exercise WTO agreement, monetary policy risk and foreign exchange risk, especially, Vietnam steel s industry relies heavily on imported material and has a high leverage level. Besides, there are also opportunities for growth such as increasing demand for steel thanks to the strong investment in infrastructure in long-term, the recovery of economy together with

11 CHAIRMAN S MESSAGE looser lending policies of commercial banks are factors which can stimulate the demand for steel of real estate projects. Hoa Phat Group is facing the opportunities to make a big leap considering its potential ability and advantages. Hoa Phat Group has adjusted its growth strategy from an industrial manufacturing Group to a leading industrial manufacturing, real estate and mining Group. Base on a conservative point of view, management team of Hoa Phat Group pledges to exert all strength and focus all resources on manufacturing to complete the plans well. The growth rate of all traditional business lines will be kept at the range of 15% to 20%, increase the market share and the coverage of Hoa Phat brand name in order to facilitate the introduction of Hoa Phat cement in the first quarter of On behalf of Board of Directors, I appreciated for the faith of shareholders, appreciated for the cooperation and for the contribution from our loyalty customers, partners and looking forward to continue our cooperation in future. I honestly would like to thank to more than 8,000 staffs of Hoa Phat Group nation-wide for their continuous efforts and contributions to the Group success in year With our in depth experiences, internal strength and great supports from shareholders, partners and all staffs, I am totally confident that Hoa Phat Group will get more successes in Thank you. Chairman tran Dinh long 2009 AnnuAl report 11

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13 DIRECTORS REPORT DIRECTORS REPORT 2009 is believed to be an eventful year of Vietnam with the impact of a moving to the trough recession during the first few months. At the same time, the issuance of stimulation packages also had positive effects to all the firms in market and this in turn helped boosting up the recovery of the economy. Besides, when the recession reached its trough, the price of base materials dropped to its lowest level and cost of lending stayed at acceptable level. These conditions were opportunities for firms to make a big leap. However, during the last few months of the year, the condition of the economy turned out to be unfavorable with unexpected fluctuations. Particularly, gold price fluctuated widely, price of USD in terms of VND increased to a recorded level and the severe impacts of natural calamity. Thanks to proper decisions to cope with unfavorable movements of the economy and to make use of favorable support from the Government s policies, Hoa Phat Group made significant improvement during the year in terms of horizontal and vertical. In 2009, the Group reached VND 8,244 billion as revenue and VND 1,271 billion as net profit. These figures were about 18% and 38% respectively compared to the adjusted target revenue and net income. Năm 2008 Năm 2009 Planned target for 2009 % of growth rate % over planned target Total Revenue (VND billion) 8,502 8,244 7,000-3% 18% Net profit (VND billion) 859 1, % 38% Revenue Structure Net Profit Struc ture Producing rolling steel 5.9% 7.7% Trading construction 5.3% 3.5% 7.3% 3.0% equipment Producing furniture 43.8% 18.2% Manufacturing steel pipe and 18.8% 45.1% other rolling steel products 12.0% 15.1% Manufacturing refrigeration products Building infrastructure for 6.5% 7.8% industrial parks Trading steel and metal scrap Construction steel continuously contributed the largest amount in term of net sales and net income for the Group, accounted for 44% and 45% respectively. Construction steel sales of Hoa Phat Group in 2009 reached over 350,000 tons, 30% higher than The market share in construction steel improved significantly and Hoa Phat was recognized as the fourth largest steel manufacturer in Vietnam. Also in steel business, Hoa 13

14 DIRECTORS REPORT Phat Steel Pipe Co.,Ltd a member of Hoa Phat Group also reached an impressive growth of 8% in net sales and 187% in net profit. Contrast with the success of steel manufacturing business, steel trading business witnessed a year of no growth in revenue and net profit. Particularly, in 2009, Hoa Phat Trading Co., Ltd posted a decrease in net sales and net profit of 24.45% and 24.67% as compared to those of 2008 respectively. Furniture, steel pipe, construction equipment continuously remained at the first position in the market. Refrigeration market share increased significantly to 10% with an increase of 8% in net sales and 98% in net profit and was recognized as the product with highest localization rate. Besides, with an impressive growth of 12% in revenue and 98% of net profit as compared to those of 2008, Hoa Phat Furniture JSC reached the revenue of VND 1,000 billion in Hoa Phat Equipment & Accessories Co.,Ltd s net sales and net profit were 33% and 74% higher than those of 2008 respectively. Urban Development and Construction JSC after an unsuccessful 2008 year had posted an impressive growth in 2009 in terms of gross revenue and net profit. Particularly, the company s net sales and net profit were 82% and 111% higher than those of 2008 respectively. Net sales of Hoa Phat Group and its members during the period from 2007 to 2009 (Unit: VND billion) 8,365 8,123 5,643 4,220 4,010 2,294 1,604 1,736 1, , Consolidation Producing rolling steel Trading construction equipment Producing furniture Manufacturing Manufacturing steel pipe refrigeration and other rolling produsts steel products Building infrastructure for industrial parks Trading steel and metal scrap

15 DIRECTORS REPORT Net profit of Hoa Phat Group and its members during the period from (Unit: VND billion) 1, Consolidation Producing rolling steel Trading construction equipment Producing furniture Manufacturing Manufacturing steel pipe refrigeration and other rolling produsts steel products Building infrastructure for industrial parks Trading steel and metal scrap In 2009, total assets of Hoa Phat Group reached VND 10,243 billion, an increase of 82% in comparison with The Group s ROA in 2009 was about 12%, 3% lower than that of It could be explained by the fact that the rapid increase of total asset (around 82%) to invest in the new projects while these projects had no much contribution to the Group s revenue in As a result, asset turnover ratio of the Group decreased significantly. Net profit margin improved greatly in 2009 but it was not enough to cover the impact of lower asset turnover. 15

16 DIRECTORS REPORT Breakdown of ROA of Hoa Phat Group from 2007 to Asset turnover Netprofit margin ROA 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2009 ROA of all members in Hoa Phat Group were higher than 12%. Notably, Furniture s field ROA was 31%, the highest among other members. ROA of Hoa Phat Group s members from 2007 to 2009 (Unit: VND billion) 40% 39% 31% 25% 15% 14% 12% 17% 21% 22% 15% 20% 14%14% 22% 13% 8% 16% 21% 15% 12% 10% 25% 15% 16 Consolidation Producing rolling steel Trading construction equipment Producing furniture Manufacturing Manufacturing steel pipe refrigeration and other rolling produsts steel products Building infrastructure for industrial parks Trading steel and metal scrap As at 31 st December 2009, the owner s equity of Hoa Phat Group reached VND 4,899 billion, increased by 19% compared to that of 1 st January Despite the decrease of ROA in 2009, ROE of the Group still reached a recorded level of 26% (5% higher than that of 2008). Using leverage effectively was the main reason account for this achievement.

17 DIRECTORS REPORT Breakdown of ROE of Hoa Phat Group from 2007 to Asset turnover Leverage Netprofit margin ROE 30% 25% 20% 15% 10% 5% 0% Except Hoa Phat Trading Co., Ltd which had a lower ROE as compared to 2008, all other members of Hoa Phat Group generated higher ROE in 2009 than in ROE of Hoa Phat Group s members from 2007 to 2009 (Unit: VND billion) 98% 91% 62% 55% 67% 63% 65% 45% 46% 20% 21%26% Consolidation Producing rolling steel 32% 28% Trading construction equipment 40% 35% Producing furniture 33% Manufacturing steel pipe and other rolling steel products 30% 15% Manufacturing refrigeration produsts 31% 31% 24% 24% Building infrastructure for industrial parks 36% Trading steel and metal scrap 17

18 DIRECTORS REPORT Total assets and owner s equity of Hoa Phat Group and its members in 2008 and 2009 Consolidation Producing rolling steel Trading construction equipment Producing furniture Manufacturing steel pipe and other rolling steel products Manufacturing refrigeration products Building infrastructure for industrial parks Trading steel and metal scrap Total assets as at 31 Dec ,639 1, Total assets as at 31 Dec ,243 1, , % of growth rate in Total assets 81.6% 37.9% 67.4% 25.5% 85.9% 1.4% 64.0% 25.7% Equity as at 31 Dec , Equity as at 31 Dec , % of growth rate in Equity 19.16% % 0.43% 4.72% 51.11% -8.24% % 5.62% As the Group intensified using debt capital, especially, short-term debt in order to take full advantage of the Government s stimulation package, debt ratios of 2009 increased significantly as compared to that of 2007 and Moreover, liquidity ratios such as current and quick ratios also decreased as a result of higher debt level. Current ratio of Hoa Phat Group and its members from 2007 to Consolidation Producing rolling steel Trading construction equipment Producing furniture , Manufacturing Manufacturing steel pipe refrigeration and other rolling produsts steel products 1,5 1.5 Building infrastructure for industrial parks Trading steel and metal scrap

19 DIRECTORS REPORT Quick ratio of Hoa Phat Group and its members from 2007 to Consolidation Producing rolling steel Trading construction equipment Producing furniture Manufacturing Manufacturing steel pipe refrigeration and other rolling produsts steel products Building infrastructure for industrial parks Trading steel and metal scrap In 2009, total amount of Hoa Phat Group contributed to the State budget was VND 621 billion, increased by 13.7% compared to List of provinces received contribution of Hoa Phat Group included Hung Yen, Hai Phong, Hanoi, Hai Duong, Ha Nam, Ha Giang, Lao Cai, Yen Bai, Phu Tho, Vinh, Da Nang, Ho Chi Minh City, Binh Duong. Hung Yen was the province which received a significant amount from Hoa Phat (VND 198 billion in absolute term, 32% of total amout of contribution and 9% of total amout Hung Yen province received in 2009 in relative term). The number of Hoa Phat Group s employees nation-wide was 8,136 in The outcome of Hoa Phat Group in 2009 was recognized as higher than average when compared to other firms worldwide. Looking at other firms which operated in steel business worldwide with total market cap ranged from USD 500 mil to USD 800 mil (Hoa Phat Group s market cap was about USD 670 mil as provided by the Reuter), ROE of Hoa Phat Group stayed at the second highest position (within 10 firms which were compared to Hoa Phat Group, only Mikhaylovskiy Go had a higher ROE). 19

20 DIRECTORS REPORT Market cap and ROE of some firms operating in steel industry worldwide % 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Mah seamless Tubacex Prakash Inds HPG Jiuli Metal Gindalbie Metal Minera Autlan Kyoei Steel Daye Steel Mikhaylovskiy Go Osaka Steel Marker cap ROE Flexible and diversified in capital raising In long-term, Hoa Phat Group plans to maintain a low debt ratio in order to minimize the pressure from debt capital and the impact of interest rate fluctuation. However, under favourable conditions of debt capital market, the Group adjusted its capital structure toward a higher debt ratio in order to minimize its weight average cost of capital. In particular, in order to take full advantage of the low cost loan from the Government s stimulation package, Hoa Phat intensified raising capital from this source to fund for working capital requirement. Besides, in order to fund for long-term capital requirement, Hoa Phat successfully issued VND 1,120 billion of convertible bond with zero coupon and maturity of 1 year. This helped to diversify the sources of fund as well as provide a long-term and stable fund for The Group in future Total liabilities/total resource Total liabilities/ Owner s Equity As a result of a rational and flexible capital structure, Interest coverage ratios of the Group and its members in 2009 improved significantly and reached their highest since 2007.

21 DIRECTORS REPORT EBIT over interest expense of Hoa Phat Group and its members from 2007 to ,5 0, , Consolidation Producing rolling steel Trading construction equipment Producing furniture Manufacturing Manufacturing steel pipe refrigeration and other rolling produsts steel products Building infrastructure for industrial parks Trading steel and metal scrap Solid foundation and integrated production make created competitive advantages In general, Hoa Phat is being recognized as one of leading industrial manufacturers in Vietnam. After 18 years of continuous developing, Hoa Phat has oriented to develop vertically to create values from solid foundation and integrated production. An experienced management team, especially in project management, cost of goods sold management and risk hedging is the core factor, which assists the Group in developing durably. Besides, strengthening the ability of distribution network is another factor that attracts the highest level of resources of the Group. A strong distribution network in terms of coverage and effect can help widening the coverage of Hoa Phat s brand name in Vietnamese market as well as foreign markets, increasing market share and consolidating the power of Hoa Phat trademark. In terms of each business line, Hoa Phat always focuses its resources on increase the value added of core products and maintaining the suistainable development of traditional businesses. Construction steel hold the fourth biggest manufacturer in Vietnam. Besides, the steel rolling factory in Hung Yen produced 17% over its designed capacity to satisfy market demand. 21

22 DIRECTORS REPORT The first products of Hoa Phat Integrated Steel Complex were introduced in the fourth quarter of 2009 such as clean coke was produced the first time ever in Vietnam in October of 2009, the first tons of steel products was produced in December and at the same time the 100 mil Kwh thermoelectric plant officially went into operation. These were not only the breakthough of the Group in terms of technology but also helped in increase the value-added of the Hoa Phat s steel production and affirmed the Group s long-term growth strategy which was to create values from solid foundation and intergrated production. Base on this strategy, members of the Group focused on expanding the three main businesses lines, which were steel, household commodities and construction. Intergrated production procedure was one of the main reasons, which helped the Group in reducing the production cost and increase the competition ability. Ratios indicating the ability to control the production cost and increase value-added of the Group showed significant improvement in Particularly, while the ratios of COGS (Cost of Goods sold) over total revenue and total cost reduced to the lowest level since 2007, the ratio of net profit margin stay at the highest level since COGS over Total revenue and Total costs Net profit margin 15.6% 85.0% 82.9% 75.7% 95.1% 94.5%91.1% 11.4% 10.3% % COGS/Total revenue % COGS/Total costs Orient to deveplop both horizontally and vertically to create momentum of strong growth The flexible guidances of management team showed effects in reducing risks as well as improving business outcome. Taking full advantages of macroscopic economic policy, members of the Groups focused their resources on reducing cost of production and limiting the unfavourable impacts of input materials market to avoid risks and creating more value-added to products.

23 DIRECTORS REPORT Sale polices, agent supporting policies were received more attention during the year. Distribution network was oriented to develop in a better quality and less quantity way. A stable and close-knit distribution network was the basis to create market for new product lines such as cement. Till the end of 2009, the first phase of Hoa Phat Integrated Steel complex in Kinh Mon, Hai Duong was almost completed. It could be affirmed that the operation of Hoa Phat Integrated Steel Complex in 2009 would be a lever to inflate the Group s revenue and profit in Moreover, Hoa Phat cement another project of the Group was in the final stage of introducing the first products to market was also a preparation year for many real estate projects which would be deployed in In addition to the expansion project of Pho Noi A industrial zone and infrastructure impovement project of Hoa Mac industrial zone in order to welcome investors in the beginning of 2010, Hoa Phat Group also expanded its business to real estate and construction field with many projects were being in process. Tay Mo urban area project (Tu Liem, Hanoi) an important project to salute 1000 year old Thang Long - Hanoi was the one which standed out from other projects. With those active participation in real estate, Hoa Phat Group expressed its ambition to develop in this potential industry also marked many advances in Hoa Phat Group s export activities such as contruction equipment found distributor in Philippines, Hoa Phat steel pipe was exported to America market for the first time and the first batched of coke attracted attention of many foreign partners and was exported to Denmark. Furniture a traditional business of the Group also made a remarkable hallmark by providing its products to many stadiums which would hold activities of Seagames in Laos, besides the traditional markets such as UK, Japan, Middle - East., etc. Well-prepared for new challenges With the new growth strategy of being an industrial manufacturing, real estate and mining Group since 2010, Hoa Phat has organized the first basis to facilitate the implementation of this strategy during Particularly, they are: To raise capital to fund for real estate projects which will be implemented in Particularly, in 2009, Hoa Phat successfully issued VND 1,120 billion of convertible bond to fund for Tay Mo urban area, Binh Trieu high building apartment and Pho Noi A industrial park phase 4. To get the approval of being the official investor of Bac Pho Noi project with the coverage of 300 hectares To be participated in mining industry since 2007, Hoa Phat has spread its activities to mines in many provinces such as Lao Cai, Ha Giang, Yen Bai and Laos. In conjunction with mining activities, Hoa Phat also build refined ore processing plant to supply material for Hoa Phat Integrated Steel Complex in Kinh Mon, Hai Duong. 23

24 DIRECTORS REPORT Maximizing shareholders benefits In 2009, Hoa Phat Group completed dividend payment for 2008 and advanced 10% of stock principal value as dividend for 2009 by cash. In the annual shareholder meeting in March of 2010, Hoa Phat Group s Board of Director intends to proposed an adjustment to the dividend plan for Particularly, total dividend payment will be adjusted upward from 20% of stock par value to 60% of stock par value. Out of this 60%, 10% will be cash dividend (already paid) and 50% will be stock dividend. Create a prestigious and transparent image The endeavours and achievements of Hoa Phat Group were recognized by many awards during the year. The Chairman of the Group was honoured to receive certificate of merit from the Prime Minister, Hoa Phat Group JSC granted certificate of merit for excellent emulation in production from the Government. Besides, there were plenty of certificates of merit granted to the Group and its members by provinces where the Group operated in. Hoa Phat Group was ranked at the fifty four position in the list of top 500 biggest enterprises of Vietnam and was ranked at the six place in the list of top 500 biggest private enterprises of Vietnam. Moreover, steel and furniture were the two product lines of the Group which were continuously voted as Vietnamese high quality products. Those achievements were not only an acknowledgement of the Group s endeavors but also an confirmation of the consumers confidence in Hoa Phat brand name. Society activities such as sponsoring for pupils in remoted areas, giving Tet presents to the poors, supporting people, especially children affected by natural calamity. Besides, the improvement and enhancement of environmental and living standard for Hoa Phat s staffs were always received the highest attention. This was witnessed by the endearvour to ensure the salary, bonus, insurance policy as well as other welfare activities for staffs in the fact that the number of staffs kept increasing continuously. Activities such as an excellent pupil s meeting, Midautumn festival for staffs children, Company birthday party... were received positive feedbacks from Hoa Phat s staffs as good occasions to connect all members of the Group and build company culture. 24

25 DIRECTORS REPORT 2010 new ambitious orientation If 2009 was considered as a year of recession resistance, 2010 would be considered as a year of stablization and growth of Vietnamese enterprises. After the recession, the economy became exhausted sources of capital. The increasing of foreign exchange rate and interest rate led to a weaker competiton strength and higher inventory level as the costs of operating business went up. The unstable from macroscopic factors such as budget deficit, trade deficit, decrease in export, investing capital and foreign currency reserves impacted unfavourably to firms. However, with the experience of successful coping with recession in 2009, Hoa Phat Group strongly believes in the feasibility of the target for From 2010 onward, Hoa Phat Group will adjust its strategy from an industrial manufacturing Group to an industrial manufacturing, real estate and mining Group. Currently, urban projects and apartment building project are being intensified and they are expected to contribute greatly to the Group total revenue and profit in the next few years. Mining projects has passed their hard times and are expected to be stable since Besides, the Group will continue focus its resources on improving production, maintaining vertical growth, enhancing management tasks, maintaining and growth rate of 15% to 20%. Specifically: - Creating added value for core businesses such as steel, steel pipe, furniture, refrigeration, construction equipment; building concrete foundation for new businesses such as cement, mineral exploration. Taking full advantage from self-contained production procedure. - Growing vertically, expoiting new markets and consolidating traditional markets. - Expanding the coverage of Hoa Phat s brand name and products in the markets - Maintainning a safe debt ratio of the Group - Mustering resources for projects, especially, real estate project, mining projects and the second phase of Hoa Phat Integrated Steel Complex in Hai Duong. 25

26 board of directors 1. Mr. Tran Dinh Long - Chairman 2. Mr. Tran Tuan Duong - Deputy Chairman cum General Director of Hoa Phat Group JSC 3. Mr. Nguyen Manh Tuan - Deputy Chairman cum Director of Hoa Phat Steel Pipe Co., Ltd, Director of Hoa Phat Trading Co., Ltd 4. Mr. Doan Gia Cuong - Deputy Chairman cum Director of Hoa Phat Furniture JSC

27 5. Mr. Hoang Quang Viet - Directors Board Member cum Director of Hoa Phat Urban Development & Construction JSC 6. Mr. Ta Tuan Quang - Directors Board Member cum Director of Hoa Phat Refrigeration Engineering Co., Ltd 7. Mr. Nguyen Ngoc Quang - Directors Board Member cum Director of Hoa Phat Equipment & Accessories Co., Ltd 8. Mr. Don Di Lam - Directors Board Member 9. Mr. Lars Kjaer - Directors Board Member

28 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES 28 The Board of Directors members of Hoa Phat Group are dedicated and in depth experienced in their management roles. During 2009, Director members frequently held meetings to timely set out strategic directions for the company s business activities such as: Approved production and business plans in 2009 Chose auditing company for 2009 Contributed additional capital to some member companies such as Hoa Phat Urban Development and Construction JSC, Hoa Phat Steel Pipe Co,. Ltd Received transfer of shares and become shareholders hold dominant shares in An Thong Investment & Mineral JSC, Hoa Phat Energy JSC. Established Hoa Phat Binh Dinh One member, Co., Ltd Paid 2009 first period dividend in advance Approved the dividend payment rate in 2009 Approved the convertible bond issuance plan And other important decisions have been approved Hoa Phat Group s earnings in 2009 reflected by the close management of The Board of Directors, orienting right directions for all members in the Group. In 2010, the Board of Directors are still going to set new and clear directions for Hoa Phat Group. The Supervisory Board are appointed by the General Shareholders Meeting and responsible for verifying and ensuring reasonable and legal compliances of the management and performance of directors and managers, financial management, accounting record; and operates independently of Director Board. After the General Shareholders Meeting in 2009, members of Supervisory Board reelected Head Clerk and set new plans for the coming year. Members agreed to do tasks including quarterly reviewing financial statements before submitting them to the Hochiminh Stock Exchange, supervising commitments mentioned in mangement report as well as others compliances with resolutions, charter and current legal regulations. During the past year, the Supervisory Board assigned responsibilities to each member in accordance with the ability of each one. Therefore, the Supervisory Committee connected closely to the managers, directors to catch up management and business issues. In relation to any questions arising from the financial statements, the Supervisory Committee was explained in full details from the directors or managers. In 2009, there was change in members of Board of Director and Supervisory Board including: Dated 03/08/2009, General Shareholders Meeting approved the dismissal of a member in the Director Board of Mr Chu Quang Vu Regarding the remuneration for members of the Board of Directors and the Supervisory Board in 2009: For members of the Board of Director, total benefit received can not exceed 1% of net profit For members of the Supervisory committee, total benefit received is VND 20 million per person per year.

29 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES The current Board of Directors Members and their ownership No Number of share Full name Title holding as at Change 31/12/2008 Number of share holding as at 10/02/ Tran Dinh Long Chairman 50,960, ,960,000 2 Tran Tuan Duong Deputy chairman/ceo 5,600, ,600,000 3 Nguyen Manh Tuan Deputy chairman 5,600, ,600,000 4 Doan Gia Cuong Deputy chairman 4,200, ,200,000 5 Nguyen Ngoc Quang Director Board member 4,200, ,200,000 6 Ta Tuan Quang Director Board member 478,800 (78,000) 400,800 7 Hoang Quang Viet Director Board member 1,120, ,120,000 8 DonDiLam (On behalf of VOF) Director Board member 11,917,100 (2,805,880) 9,111,220 9 Lars Kjaer (On behalf of Bank Invest) Director Board member 10,248, ,248,000 Source: Hoa Phat Group, 2010 The Current Supervisory Board Members and their ownership No Number of share Full name Title holding as at Change 31/12/2008 Number of share holding as at 10/02/ Nguyen Thi Thao Nguyen Ta Tien Dung Dang Pham Minh Loan Vu Thanh Thuy Head of Supervisory Board Supervisory Board member Supervisory Board member Supervisory Board member 34, , ,500 (10,000) 24, , (27,500) 0 Resource: Hoa Phat Group,

30 2009 AnnuAl report

31 SuperVISory BoArD 1. Ms. nguyen thi thao nguyen - Head of Supervisory Board 2. Ms. Dang pham Minh loan - Member 3. Mr. ta tien Dung - Member 4. Ms. Vu thanh thuy - Member AnnuAl report 31

32 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES COMPANY S STRUCTURE Since the restruction the Group in the form of Holding Company, Hoa Phat has become the leading industrial production Group with 10 subsidiaried companies and 5 affiliated companies. the number of employees has reached 8,136 spreading over Vietnam, with capital owned as follows: STT List of companies Charter capial (VND billion) %. Of ownership Contribution amounts as at 31/12/2009 (VND billion) Subsidiaries 2,888 2,449 1 Hoa Phat Equipment & Accessories, Co. Ltd Hoa Phat Furniture, JSC Hoa Phat Steel pipe, Co, Ltd Hoa Phat Refrigeration Engineeing, Co., Ltd Hoa Phat Urban Developement and Construction JSC Hoa Phat Trading, Co., Ltd Hoa Phat Steel, JSC 1, , An Thong Investment & Minerals, JSC Hoa Phat Laos, Co,. Ltd Hoa Phat Binh Dinh One member Co., Ltd Affiliated companies 3, Hoa Phat Cement, JSC Hoa Phat Mineral, JSC Hoa Phat A Chau Real Estate, JSC 1, Hoa Phat Energy, JSC Hoa Phat SSG Mining, JSC Total 6, ,274 Source: Hoa Phat Group,2009

33 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES Organizational structure SUPERVISORY COMMITTEE GENERAL SHAREHOLDERS BOARD OF DIRECTORS BOARD OF MANAGEMENT SUBSIDIARIES OFFICE OF HOA PHAT AFFILIATES MANUFACTURING UNITS PR DEPARTMENT FINANCIAL DEPARTMENT IT DEPARTMENT SUPERVISORY & LEGAL DEPARTMENT ADMINISTRATION DEPARTMENT ACCOUNTING DEPARTMENT MATERIAL DEPARTMENT SALES DEPARTMENT STEEL ROLLING FACTORY STEEL BILLET FACTORY 1. Hoa Phat Equipment & Accessories Co., Ltd 2. Hoa Phat Furniture JSC 3. Hoa Phat Steel Pipe Co., Ltd 4. Hoa Phat Refrigeration Engineering Co., Ltd 5. Hoa Phat Urban Development & Construction JSC 6. Hoa Phat Trading Co., Ltd 7. Hoa Phat Steel JSC 8. An Thong Investment & Minerals JSC 9. Hoa Phat Lao Co., Ltd 10. Hoa Phat Binh Dinh One Member Co., Ltd HCM BRANCH DANANG BRANCH HANOI BRANCH 1. Hoa Phat Cement JSC 2. Hoa Phat Mineral JSC 3. Hoa Phat A Chau Real Estate JSC 4. Hoa Phat Energy JSC 5. Hoa Phat Mining JSC - SSG Source: Hoa Phat Group,

34 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES HUMAN RESOURCES IMPROVE TO DEVELOP HOÀN THIỆN ĐỂ PHÁT TRIỂN In 2009, Hoa phat Group had the boom, both in scale and stature. therefore the human resource of the group had been strengthened to generate a group of leaders and staffs who are responsibility and well equipped skills for the period of development. the number of employees reached 8,136, up more than 30% compared with labor quality is enhanced by increasing a range of training in all aspects. HOA PHAT A GREAT PRACTICAL UNIVERSITY In 2009, Hoa Phat Group constantly increased training to improve the quality of labor. Last year, in Hoa Phat Group JSC, at the Steel Rolling Mill and Steel Billet Factory, there were 528 staffs trained and 1,188 workers had been trained in working safety conditions. There is also a specialist Indian working regularly at the steel plant where regularly organizes training courses to enhance professional skills for personnel working at the factory. In all affiliated companies, the plant members are also offered specific training to match the working conditions. More advanced training skilled equipment operation and safety conditions were organized at Hoa Phat Steel JSC. By the end of 2009, the company also held safety training for new workers. Presently total workers were trained as 1,217 people, including 531 who were awarded safety certificate by Hai Duong Department of Labor AnnuAl report 34 Human Resource Department of Hoa Phat Furniture JSC., had collaborated with Research Center for Development and Management Skills (Hanoi University of Technology) to held training courses on production management for the team leaders, monitors of the plants. In September 2009, Hoa Phat Refrigeration Engineering., Co Ltd in conjunction with Finance and Management Institute to organize courses of Method of professional management for middle managers for Director of the factory in Hoa Phat Refrigeration Company, Managers of Accounting Department, Sales Department, and Human Resource Department. These activities also have been organized regularly in the Hoa Phat Equipment and Accessories Co.,Ltd. Annually, many managers of the company were assigned to China for

35 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES training of modern technology. In 2009, there were two training courses for casting workshop managers, Chief of technical analysis - chemical testing, advice and technical managers responsible for implementing expanded production, materials, technical engineering. In October 2009, managers of Ho Chi Minh City and Binh Duong brands also participated in training courses in China. Mikasa and RIKEN (Japan) also has held technical training and sale skills for Hoa Phat Group staffs, the exclusive distributor in the Vietnam market since Last year, the most comprehensive training in Hoa Phat Group took place in Hoa Phat Energy JSC. To promote the highest work efficiency of staffs, Hoa Phat Energy JSC has organized the first comprehensive training test in December 2009 at the Refine Coal plant and Thermal Power plants Hiep Son, Hai Duong. Through it, employees will understand the power and mastery of basic knowledge in their working position, which is fostering productive skills, increase awareness; responsibility for the company and products made by them, thereby directly contributing to control and improve product quality. Hoa Phat Cement JSC is always interested in training and retraining for staffs. In 2009, the company has conducted many courses on advanced skills, occupational safety, fire prevention, training and laboratory analysts and X-ray quality control. For the coming periods, company will continue to implement some advanced training courses for skilled technical service department for production of the cement. Hoa Phat Group regularly coordinates with the Thai Nguyen College of Engineering Metallurgy in the field of recruitment and personnel training. In 2009, Hoa Phat Steel Pipe Factory has hired nearly 20 students of the school to work at the factory in Hung Yen; 30 other students were recruited to work in factories in the Hoa Phat Integrated Steel Complex ( Hai Duong). In addition, the Hoa Phat Steel JSC also held a recruitment day at Red Star Career College - Chi Linh - Hai Duong. Moreover to general training, many metallurgy and casting workers have been practicing in the Hoa Phat Steel Billet Factory (Pho Noi A Industrial Zone, Hung Yen). Most of them want to work for Hoa Phat after finishing internship. Hoa Phat is regarded as a university, a large-scale vocational schools and most effective for future careers. Hoa Phat - Where training key staffs and managers from business The most important strategy to develop human resources for senior and managers of Hoa Phat Group is training, fostering and promotion them who have sufficient capacity, leadership and management skills. Staffs trained in Hoa Phat Group have experienced from the fact, both have experience of process capability and quality so that they can adapt successfully in new positions. In recent years, the Group has trained and appointed to key positions from CEO to chief deputy, deputy director of the affiliate companies. This class of managers will be the second generation of Hoa Phat. Working environment and on job training in of Hoa Phat has created advancement opportunities for all those enthusiastic, competent and sticking to commitment with Hoa Phat 35

36 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES ENSURE WELFARE OF EMPLOYEES Besides comprehensive training and cooperation for development of human resources, Hoa Phat is constantly ensuring legitimate rights for employees. In 2009, most companies in the Group were to application of flexible wages and encourage employee initiatives to improve their lives. 100% employees are in the social insurance and insurance body. Besides, Hoa Phat has collaborated with local health center, where factories, subsidiaries to organize the periodic health examination for all employees. This is a practical activity to take care of health of the employee group. Through periodic medical examination, common diseases have been detected and treated, so that the health of employees has been improved. Specifically, in some affiliate companies such as Hoa Phat Energy JSC, Hoa Phat Steel JSC, Hoa Phat Cement JSC had arranged housing for employees to help them assured long-term commitment with company. For the next period, the human resource of the Group will be strengthened in the direction of change in the basic framework payroll with the adjusted 15% or more. There is a special case of increasing 40%. Strengthen the cooperation with vocational schools, training institutions to recruit high quality employees. Trained manual career workers match production requirements; Strengthen policies to attract and retain employees, ensuring adequate social welfare regimes, enhancing the cultural and sport activities, improving the standard of living for staffs. Human resources development as well as policies for employee welfare are always the top priority of the Group s leaders. This strategy is reflected in the action plan of improving human resources to serve the goal of sustainable development of Hoa Phat Group AnnuAl report 36

37 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES EMPLOYMENT STRUCTURE OF HOA PHAT no Company postgraduate education Graduate Middle level education Sex other training Male female total 1 Hoa Phat Group JSC Hoa Phat Equipment & Accessories Co., Ltd 3 Hoa Phat Furniture JSC Hoa Phat Steel Pipe Co., Ltd Hoa Phat Refrigeration Engineering Co., Ltd 6 Hoa Phat Urban Development And Construction JSC 7 Hoa Phat Trading Co., Ltd Hoa Phat Steel JSC An Thong Investment and Minerals JSC 10 Hoa Phat Cement JSC Hoa Phat Minerals JSC Hoa Phat Energy JSC total Source: Hoa Phat Group, AnnuAl report 37

38

39 Board of Managing Directors Hoa Phat Group JSC 1. Mr. Tran Tuan Duong - General Director 2. Mr. Kieu Chi Cong - Deputy General Director 3. Ms. Nguyen Thi Thanh Van - Chief Accountant 39

40 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES BOARD OF DIRECTORS, CHIEF ACCOUNTANT During 2009, changes in percentage of shareholding and capital contribution of CEO/Managing Directors and Chief Accountant were as below: No Shareholder Title No. of shares as at 31/12/2008 Change No. of shares 10/02/ Tran Tuan Duong Deputy chairman/ CEO 5,600, ,600, Kieu Chi Cong Deputy General Director 10, , Nguyen Thi Thanh Van Chief Accountant Source: Hoa Phat Group,

41 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES EXECUTIVE TEAM Mr. Tran Dinh Long Chairman of Hoa Phat Group Bachelor of Economics - National Economics University Working starting time: 1992 As founding shareholder and holding Chairman position of member companies, Mr. Long was the first person setting up the foundation for Hoa Phat Equipment & Accessories Co., Ltd, the earliest member in the Group. Mr. Long employed so a lot experts who had consensus ambition and responsibilities. During the development of Hoa Phat, Mr. Long was the person who oriented business strategy for each susidiaries. Mr. Tran Tuan Duong Deputy Chairman - General Director of Hoa Phat Group JSC Bachelor of Economics National Economics University; Bachelor of Journalism Hanoi National University. Working starting time: 1992 Mr. Duong held management position in subsidiaries such as: Hoa Phat Equipment & Accessories, Hoa Phat Furniture and Hoa Phat Steel Pipe before he became the Deputy Chairman of Directors Board cum CEO of Hoa Phat Group since January With his in deep experience, Mr. Duong has contributed greatly to strenghthen position of Hoa Phat steel and Hoa Phat Group as a whole. Mr. Doan Gia Cuong Deputy Chairman Director of Hoa Phat Furniture JSC MBA, National Economics University Working starting time: 1999 Mr. Cuong was appointed first in the position of Vice Director before promoting as a Director of Hoa Phat Furniture JSC. From 12/2006, he additionally held the Deputy Chairman position of Hoa Phat Group JSC. With his straight forward orientation in achieving realistic goals, Mr. Cuong has helped Hoa Phat Furniture becoming familiar to every Vietnamese consumer. Mr. Nguyen Manh TuaN Deputy Chairman Director of Hoa Phat Steel Pipe Co., Ltd, Director of Hoa Phat Trading Co.,Ltd Bachelor of Economics National Economics University Working starting time: 1996 In 1996, Mr. Tuan was a Vice Director of Hoa Phat Steel Pipe cum Head of trading department. Since 10/2004, holding director of both companies Hoa Phat Steel Pipe and Hoa Phat Trading, Mr. Tuan has helped the Hoa Phat steel pipe become a top steel pipe maker in term of big diameter product. In addition, Hoa Phat Trading under Mr. Tuan s management is going to be stronger day by day and orienting to become a leading steel trading company in Vietnam. 41

42 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES Mr. Nguyen Ngoc Quang Directors Board Member cum Director of Hoa Phat Equipment & Accessories Co., Ltd Mr. Ta Tuan Quang Directors Board Member Director of Hoa Phat Refrigeration Engineering Co., Ltd Mr. Hoang Quang Viet Directors Board Member Director of Hoa Phat Urban Development & Construction JSC Middle level education Working starting time: Since 1992 Mr. Quang has been a Director of Hoa Phat Equipment & Accessories CO., Ltd since the establishment of the Company. As one of the top construction equipments producer in Vietnam, products of Hoa Phat Equipment & Accessories under his management have been successfully persuading customers in and out the country on their qualities, prices and after sales services. Bachelor of Economics - National Economics University Working starting time: Since 1995 Mr. Quang was among founders for Hoa Phat Furniture, he had been was Director of Hoa Phat Furniture for 11 years. Since December 2006, he has been Director of Hoa Phat Refrigeration Engineering where he has contributed significantly to its success and brand name of Funiki position. Graduated from People s Security University Working starting time: Since 2001 Joining the Group since 2001, Mr. Viet has been elected as a Director of Hoa Phat Urban Development and Construction. He was so successful in developing urban areas especially for the industrial parks such as in Pho Noi A where big international and domestic firms located. Mr. Viet and Board of Directors are now going to deploy other urban areas after the success of Pho Noi A.. 42

43 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES Mr. Don Di Lam Directors Board Member Mr. Lars Kjaer Directors Board Member Mr. Kieu Chi Cong Deputy General Director Ms. Nguyen Thi Thanh Van Chief Accountant Bachelor of Arts, Commerce, Science and Political - Toronto University - Canada Date of holding position: Since 2007 Mr. Don Di Lam held a number of important positions as follows: Specialist for Coopers & Lybrand, Canada ( ); Head of department for Coopers & Lybrand AISC - Vietnam ( ); General Director of Deutsche Bank in Vietnam; Vice Director of PWC in Vietnam; General Director of VOF Investment Limited in Vietnam Master of Economics, University of Aarhus, Denmark Date of holding position: Since 2001 Mr. Lars Kjaer held many important positions such as: General Director of Carlsberg Denmark ( ); General Director of IC Denmark ( ); General Director of Nopef Finland ( ), Vice President BI Technology - Vietnam ( present) Bachelor of Economics, Foreign Trade University Working starting time: Since 1999 Mr. Cong held a lot management positions: Manager of Sales department of Hoa Phat Furniture JSC ( ), Head of sales department of Hoa Phat Group ( ), Head of sales department of Hoa Phat Group JSC cum Hanoi Branch Director of Hoa Phat Group JSC(03/ /2008), Deputy General Director of Hoa Phat Group JSC cum Hanoi Branch Director of Hoa Phat Group JSC (04/2008- present) Bachelor of Accountant - Academy of Finance Working starting time: Since 2007 Before becoming a Chief Accountant, Ms. Van was Head of accounting department of Hoa Phat Group JSC. 43

44 BOARD OF DIRECTORS, CORPORATE GOVERNANCE STRUCTURE AND HUMAN RESOURCES Ms. Nguyen Thi Thao Nguyen Head of Supervisory Board Mr. Ta Tien Dung Member of Supervisory Board Ms. Dang Pham Minh Loan Member of Supervisory Board Ms. Vu Thanh Thuy Member of Supervisory Board BA - Academy of Finance Working starting time: Since 1998 Ms. Nguyen held Chief Accountant position of Hoa Phat Steel Pipe Co., Ltd ( ) before taking responsibility in the new role of Head of Supervisory Board. Electrical Engineer Working starting time: Since 1998 Before joining Supervisory Board, Mr. Dung took management position such as Production manager of Hoa Phat wood project ( ); manager of Rolling Steel project (2003) and manager of Steel Billet project ( ). Now, he is a Director of Hoa Phat Cement JSC. Bachelor of Accountant, ACCA holder - UK, CPA Vietnam Time of holding position: Since 2007 Ms. Loan held a number of senior positions such as, Deputy Manager of auditing department - KPMG ( ); member of Supervisory Board, Specialist and Head of investing department in the Vinacapital Investment Management Ltd s representative office. Degree in economics Working starting time: Since 2005 Before becoming a member of Supervisory Board, Ms. Thuy held a number of positions in: Staff member in accounting department of Hoa Phat Steel JSC ( ), Staff member in Finance department of Hoa Phat Group (2007 present). 44

45 SPECIAL FEATURES Hoa Phat Group - New strategy, New stature 45

46 CoMpetItIVe ADVAntAGeS ADVAntAGeS from SolID foundation AnD InteGrAteD production 2009 AnnuAl report 46

47 SPECIAL FEATURES With the completion of the first phase of Hoa Phat Integrated Steel Complex project, the Group finally has a self-contained manufacturing and operating system, starting from processing coke steel billet from iron ore and scrap casting - laminating - transferring to steel-consuming firms to make finished products - distributing to other companies by its own trading subsidiaries. This helps company reducing selling, general and administration expenses. Plus, production costs are decreased significantly due to big scale production AnnuAl report 47

48 SPECIAL FEATURES 48

49 SPECIAL FEATURES Advantages from integrated production also had an advantage in real estate segment. Specifically, with the completion of cement factory, in addition to Hoa Phat Integrated Steel Complex and the ability to supply construction machinery equipments, Hoa Phat Group has an unbeatable competitive advantage of production costs on real estate construction market. 49

50 50

51 51

52 SPECIAL FEATURES 52

53 SPECIAL FEATURES A KnoWleDGeABle AnD WHoleHeArteD MAnAGeMent team The management team of the Group has many years of experience as well as intensive knowledge in all industries that the company covers. Besides, most of the members of management team have been working in the Group for a long time. They share a goal of taking Hoa Phat Group to the number one position on the market. The Group is developing at the fast-paced in recent years, Hoa Phat brand name is known domestically and internationally AnnuAl report 53

54 SPECIAL FEATURES Diversified operations 54

55 SPECIAL FEATURES From the starting point of construction equipment business, Hoa Phat extends its business to steel, steel pipe, furniture, refrigeration, and recently cement manufacturing. Since 2009, Hoa Phat concentrated on real estate and mineral exploitation. Diversification in operation helps Hoa Phat make use of its advantages from traditional segments in new businesses and at the same time lower overall risk of the Group. It is considered the biggest competitive advantage of Hoa Phat Group. 55

56 SPECIAL FEATURES 2009 AnnuAl report 56

57 SPECIAL FEATURES STRONG FINANCIAL POTENTIAL TO CONFRONT CHALlenGeS AnD to SeIZe Any emerging opportunities A good financial potential together with a low debt ratio compared to other firms in the same industry gives the Group a flexibility to adjust its financial structure to fit into a changing market condition as well as the company s need. In 2008, when interest rate surged 20 percent, making it difficult for other firms as they depended much on borrowing debts, because of its low debt ratio, Hoa Phat didn t get affected. In 2009, the Government stimulation package allowed firms to borrow capital at low costs, Hoa Phat was one of the companies who were successful at using leverage to achieve high ROE since it has a healthy balance sheet in that it can carry more debts AnnuAl report 57

58 SPECIAL FEATURES A BrAnD name GroWInG DoMeStICAlly AnD InternAtIonAlly 2009 AnnuAl report 58

59 SPECIAL FEATURES Nationwide distribution network Lào Sapa Hà Nội Hải Dương Hòa Mạc Hải Phòng Trung Quốc Hanoi Head office: - Hoa Phat Equipment & Accessories Co., Ltd - Hoa Phat Steel Pipe Co., Ltd - Hoa Phat Trading Co., Ltd - Hoa Phat Urban Development & Construction JSC Branch: - Hoa Phat Group JSC - Hoa Phat Furniture JSC - Hoa Phat Refrigeration Engineering Co., Ltd Vinh Hainan Ha Nam - Hoa Phat Cement JSC - Hoa Phat Urban Development & Construction: Hoa Mac IP Hai Duong City - Hoa Phat Integrated Steel Complex Hai Phong City - Branch of Hoa Phat Furniture JSC Thái Lan Cambodia Bình Dương Huế Đà Nẵng Hội An Đà Lạt TP. Hồ Chí Minh (Sài Gòn) Nha Trang Hung Yen Province Head office: - Hoa Phat Group JSC - Hoa Phat Furniture JSC - Hoa Phat Refrigeration Engineering Co., Ltd Factory: - Group s steel business section: Steel Rolling Mill and Steel Billet Mill - Equipment & Accessories: Construction & Mining Machines Manufactoring Factory - Furniture: Furniture Manufacture Complex in Nhu Quynh and Pho Noi A IP - Steel pipe: Steel pipe Factory & Cold Rolling Factory Industrial Park, Urban - Urban Development & Construction: Pho Noi A IP, Dai Dong IP, Pho Noi Urban Nghe An Province - Branch of Hoa Phat Furniture JSC Mêkong Delta Da Nang City - Branch: Hoa Phat Group JSC (steel business), Hoa Phat Equipment & Accessories Co., Ltd, Hoa Phat Furniture JSC, Hoa Phat Steel Pipe Co., Ltd, Hoa Phat Refrigeration Engineering Co., Ltd Binh Dinh Province - Hoa Phat Binh Dinh One Member Co., Ltd Binh Duong Province - Hoa Phat Equipment & Accessories Co., Ltd: Cast Factory - Hoa Phat Steel pipe: Steel pipe Factory Ho Chi Minh City - Branch: Hoa Phat Group JSC (steel business), Hoa Phat Equipment & Accessories Co., Ltd, Hoa Phat Furniture JSC, Hoa Phat Steel Pipe Co., Ltd, Hoa Phat Refrigeration Engineering Co., Ltd - Furniture Factory in Cat Lai IP 59

60 SPECIAL FEATURES Worldwide distribution network England, Holland, Russia, Ukraina... Japan, Laos, Cambodia, Philipines, Myanmar... USA 60 In 2009, following successful previous years, Hoa Phat s products have occupied consumer s confidence in high-quality furniture and steel not only on domestic market but also on international market. Year of 2009 marks Hoa Phat successfully exported first batch of steel pipes to the U.S market. It is a breakthrough step to the company as it brings Vietnam brand name to global market. In addition to U.S market, the Company is trying to import more to Laos, Cambodia, and Myanmar market.

61 SPECIAL FEATURES In December 2009, the first batch of Coke produced with an ultra clean technology was highly approved by Oxbow Coal BV Company (a Holland company) and placed more orders with the amount up to 6 million dollars. Follow this success, Hoa Phat Group has speeded up export operations in potential markets such as Japan, Korea, Taiwan, India besides meeting the maximum demand for Hoa Phat Integrated Steel Complex. These achievements have proved that Hoa Phat is a strong brand name in the market, creating momentum for the new products in the future. 61

62 SPECIAL FEATURES A solid R & D background for a sustainable development 62 Considerd that a solid R & D background is a foundation for the sustainable development of enterprises, Hoa Phat has invested a lot in new manufacturing technologies in recent years. By using the newest technologies, Hoa Phat can maximize customer s need. Particularly, in 2009, Hoa Phat succeeded in running the Coke manufactory which using a newest ultra clean technology complying with environment standards. Hoa Phap Integrated Steel Complex with the technique to produce steel from the first phase has one of the best and the first integrated production in Vietnam at this time. For developing new products, every company member in the Group such as Energy, Furniture, Steel pipe, Equipment & Accessories Companies offers new products with improved features and innovative design that are accepted by customers.

63 chờ Quảng cáo noi that chờ Quảng cáo noi that 63

64 OVERVIEW OF HISTORY AND DEVELOPMENT In 1992, Hoa Phat Equipment & Accessories Co.,Ltd, the first entity of Hoa Phat Group was established with the main business lines of trading small and medium size construction machinary and with initial charter capital of VND 500 million. Hoa Phat Furniture Joint Stock Company was founded in It main function was a trading company, imported and distributed furniture products in domestic market. Based on its experience, market potential and the capital surplus, from 1997 onward, the Company imported technologies and equipments to manufacture its own products. 64 Becoming the 3rd member of the Group right after the success of two previous ones, Hoa Phat Steel Pipe Co.,Ltd was founded in Its main products are galvanized steel pipe and welded steel pipe for civil and industrial constructions. Today, it is the biggest steel pipe manufacturer in Vietnam.

65 OVERVIEW OF HISTORY AND DEVELOPMENT In 2000, the next member, Hoa Phat Steel Joint Stock Company was established to implement the Rolling Mill project in Nhu Quynh, Hung Yen Industrial Zone. In 2002, the project came in to operation with capacity of 250,000 tons/ year. Hoa Phat Refrigeration Engineering Co.,Ltd and Hoa Phat Urban Development and Construction JSC were founded in The Refrigeration Company focuses mainly on electronic equipments with FUNIKI brand whereas the remaining Company focuses mainly on building technical infrastructure for industrial parks and urban residential areas. In 2004, Hoa Phat Steel JSC continued to build steel plant production with capacity of 180,000 tons steel billet per year in Pho Noi A Industrial Zone. 65

66 OVERVIEW OF HISTORY AND DEVELOPMENT In 2004, the last entity joining Hoa Phat before the whole members legally transformed into Group was Hoa Phat Trading Company Limited. It mainly imports and trades many kind of steel products. In 2007, Hoa Phat steel Joint Stock Company was successfully transformed into Hoa Phat Group Joint Stock Company, operating as a Parents Company with 6 subsidiaries: Equipment & Accessories, Furniture, Steel Pipe, Refrigeration Engineering, Trading, Urban Development and Construction. 66 In April 2007, Hoa Phat Cement Joint Stock Company started to construct cement factory in Ha Nam. This affiliate holds 50% of charter capital by the Group.

67 OVERVIEW OF HISTORY AND DEVELOPMENT In June 2007, Hoa Phat Group invested to hold 40% of charter capital of Hoa Phat Mining Joint Stock Company and 49% of charter capital of Hoa Phat-SGG Mineral Joint Stock Company. In August and October 2007, Hoa Phat Group established 2 other members and held 85% of their charter capital: Hoa Phat Steel Joint Stock Company and Kinh Mon Steel Plate Rolling Joint Stock Company. In November 2007, Hoa Phat s stock was listed in the Vietnamese stock exchange. HPG is among top ten biggest market cap stocks on HOSE. 67

68 OVERVIEW OF HISTORY AND DEVELOPMENT In 2008, Hoa Phat Group increased charter capital from VND 1,320 billion to VND 1,964 billion and established new members: Hoa Phat Lao Co.,Ltd., Hoa Phat A Chau Real Estate JSC. In 2009 Hoa Phat Group purchased An Thong Mineral Investment JSC and joined capital in Hoa Phat Energy JSC. Also in this year, Hoa Phat merged Kinh Mon Steel Plate Rolling JSC into Hoa Phat Steel JSC Hoa Phat Group has successfully issued VND 1,120 billion of convertible bonds to fund for real estate projects. 68

69 OVERVIEW OF HISTORY AND DEVELOPMENT At the end of 2009, Hoa Phat Intergrated Steel Complex in Hai Duong officially completed construction of phase 1 with three main products which are construction steel, coke and electricity. The complex is a significant break through in both of scale and capacity of Hoa Phat Group. In 2009 Hoa Phat Group was honored by the Government for its performance. Group also ranked the 54th position on list of 500 Vietnamese largest enterprises and ranked the 6th position on the Top 500 Vietnamese largest private eterprises. Overcoming the difficulties of post-crisis period, Hoa Phat Group has completed production and business plans in 2009 with impressive results: VND 8,244 billion revenue and VND 1,271 billion profit after tax. 69

70 OVERVIEW OF HISTORY AND DEVELOPMENT ACHIeVeMentS 1st The first company trading in construction equipment and small and medium crushing screening machine. The first company in Vietnam specializing in manufacturing the large crushing screening machine. 1st Exclusive distributor for the leading equipment manufacturers over the world such as MIKASA, AIRMAN, KOSHIN (Japan), VITO (France), DIMAS (USA), FIAC (Italy) and SMC (China). 1st No. 1 market share of office furniture in Vietnam 1st The leading steel pipe manufacturer with the biggest capacity in Vietnam as well as the first producer of steel pipe with a diameter of 219.1mm. 1st Manufacturer of refrigeration and home appliances products with Funiki brand name, with the hightest rate of localization in Vietnam. 4th The 4th largest of market share of steel in Vietnam 2009 AnnuAl report 1st 1st The first company to produce clean coke and Thremo-electricity The first company built a complex of the iron and steel production with iron ore input and iron-and steel-ingot output 70

71 group s operation activities group s operation activitives I. manufacturing and trading steel section 2009 recorded successful sales results of steel business and manufacture section. In 2009, sale volume of company reached 354,500 tons, over of 30.5 % compared with Market share of construction steel held firmly at about 8.6%, ranking the fourth in the market of construction steel. Revenue structure in terms of product lines in 2009 Steel wirerod 31.17% Others 6.25% Deformed bar 62.58% Sale Revenue from 2005 to 2009/ interm of products (Unit: VND Billion) ,288 1, Deformed bar Steel Wirerod Scrap and others 966 1,257 2,454 2,536 71

72 GROUP S OPERATION ACTIVITIES Steel Sale volume grew in the first half year, especially in December 2009, Sale volume reached a record high of 33,400 tons. to complete. In particular, the material processing plant was put into production from May 3rd 2009 for material creation for the complex. Last year, Hoa Phat continued its success in providing steel products for projects, typically Lang Hoa Lac Highway, Nam La hydroelectric project, Hanoi - Lao Cai High Way, Quang Ninh thermal electricity plant, civil constructions and others. Impressive business result was partly because the company always pays attention to expand the market. Currently, Hoa Phat has signed contracts with more than 30 distribution agents of steel in the North, and two branches in Southern and Central, and Hoa Phat Steel brand has gradually presented across the country. Notably, Hoa Phat Steel Branch in Ho Chi Minh City though newly established in 2009 but also sold 18,657 tons. Besides, distribution policies as well as pricing policies will be facilitated in order to create more flexibility for branches. Being implemented since 2007, Hoa Phat Integrated Steel Complex (Hai Duong), including processing plant material (refined iron ore, active lime), iron factory, steel mill and the power plant is rushing In December 2009 marked a milestone with the D10 steel batch reactors of the first steel mill (capacity of 60 tons/h), and put in to use for projects in the complex. Presently, the plant has produced successful product line of steel bar from D10 to D41. Besides the iron factory with capacity of 35 thousand tons per year deployed hot wind drying oven to prepare steel for steel factory. Thanks to dynamic team leadership and focusing on improving quality, sales skills and active in business, Hoa Phat Steel Brand has been expanding its coverage throughout the country and affirmed the leading position on the market is forecasted to be more challenging when more steel plants put into operation to increase pressure on sales. To achieve the objectives, Hoa Phat Steel will promote market expansion in the civil sector such as in Hanoi, the Southern West region, the Mekong River delta, and the Cambodian market AnnuAl report 72

73 2009 AnnuAl report 73

74 group s operation activities II. STEEL PIPE AND ROLLED STEEL PRODUCTS SECTION 2009 continuously marked a year of success of Hoa Phat Steel Pipe with No. 1 position in the market even though faced with fierce competition and the general difficulties of the global economic crisis. Galvanized steel pipe has led the market with 40% market share, welded steel pipe maintained at 12% to 15% market share. Specifically, total revenue reached VND 1,745 billion in 2009, exceeding 29% over the plan and 8% compared to 2008, earning after tax reached VND 249 billion, up 187% over 2008, exccellently completed its assigned plan. Hoa Phat Steel pipe s the outstanding success of 2009 can not ignore the objective advantage from the recovery of the construction industry growth through positive effects of the economic stimulus package of the Government in early Hoa Phat Steel Pipe took full advantage of restoring momentum of construction industry to accelerate distribution channels development on the regions, access to key projects, develope brand strength and quality. Sales and service revenue, and profit after tax each year over the period (VND billion) 1,614 1,745 1, In addition, the fact that Steel Pipe plant No 2 in Song Than II Industrial Zone (Di An District, Binh 29 Duong province) with a capacity of 42,000 tons per year has raised company production capacity on full Sale and service revenue Profit Proportion of sales by product 2009 Welded steel pipe, 46.28% Steel material 10.26% Galvanized steel pipe 43.46% 150,000 tons/year, better meet customer s needs. The success of the company in 2009 also marked by exporting the first order to the U.S. market, one of the market with high demand in the world and appreciated by customers. This is really a milestone encouraging more to promote Hoa Phat Steel Pipe brand to the international market will contain even more difficulty although the economy is recovering gradually its growth, but Hoa Phat Steel Pipe staff collective threads confidence to overcome challenges, fluctuations of the market to complete oustandingly the assigned tasks.

75 group s operation activities III. STEEL and scrap BUSSINESS SECTION 2009 recorded efforts to overcome difficulties and achieve to the encouraging results of Hoa Phat Group. The company has continuously expanded its scope of operation, customers, increased market share, boosted business of industrial products such as billet steel, steel coils, steel sheets,... The revenue reached VND712 billion, over 78% to assigned plan, down 24.93% compared with 2008, profit after tax reached VND40 billion, over 34% of the plan, down 24.67% compared to 2008 inspite of the difficulty of the market. Sales and profit after tax each year over the from (VND billion) Sale and Service Revenue Profit On December 21 st, 2009, Hoa Phat - Binh Dinh One Member Limited Company received the certificate of business registration with location in Nhon Hoi Industrial Park (Area A), Nhon Hoi Economic Zone, Nhon Hoi commune, Quy Nhon City, Binh Dinh Province. Fields of main activity of the company is installing production facilities, assembling furniture and refrigeration, steel fiber production to expand production and trading of mainstream items of Hoa Phat Group. Total investment of the project is VND 45 billion, expected to work in 50 years. Hoa Phat - Binh Dinh One member Co., Ltd. was born will increase commercial activities of the Group in the central region. Proportion of sales by product 2009 Others 2.39% Construction steel 10.22% Scrap 0.79% Steel sheet 17.80% Steel plate 23.95% Steel billet 44.02% Steel pipe 0.83% 75

76 group s operation activities IV. FURNITURE SECTION In 2009, Hoa Phat Furniture brand continued to confirm No 1 position in the market. In 2009, building brand image continued to maintain and promote by installing a series of new boards at stores, maintaining a large boards in key markets. Besides, HoaPhat Furniture invested remarkably in developping the export markets, promoting strongly sales in the regional markets as Laos, Cambodia. In 2009, Hoa Phat Furniture proudly offered products for 25 th Seagames in Laos. With the excellent performance achieved in the past year, the company honored with certificates, reputed prizes as Vietnam high quality goods in 2009, top 500 enterprises Sales and Net profit from (VND billion) , Sale and service revenue Profit Chair 28.13% Proportion of sales by product 2009 Book shelf 2.18% Safe box 7.82% Others 4.64% Partition 2.03% Bed 1.02% Office Table 27.73% Steel Cabinet 26.45% 206 In addition, the Company continued to invest in infrastructure, expand production, equip a variety of plant with modern machinery for to bring output value of the factory system to reach and exceed the plan The company has many innovative products to the market as steel cabinet, Newtrend industrial wood to better meet customer tastes. In addition, the company successfully launched products to meet market needs: product lines of Newtrend industrial wood, Compact Mobile Shelves, fire resistant safes, revolving chair. In 2010, Hoa Phat Furniture will continue to focus on improving product quality, building and applying flexibly the policies on distribution, pricing policies, new products development policy to bring to market the competitive products and satisfy customer requirements. The company will also expand production and invest to manufacture products in development policy priorities of the state such as health, education, products specific to mountainous areas, central area; expansion of inventory, increase capacity for seasonal reserves.

77 group s operation activities V. REFRIGERATION SECTION Proportion of sales by product 2009 Electric Water Healter, 5.55% Washing Machine, 0.20% Plastic, 9.68% Trading, 0.71% Air Conditioner, 41.40% Fridge, 42.46% Overcome difficulties due to declining demand from the global economic crisis caused, Hoa Phat Refrigeration is steadfastness destination with the turnover and excellent profits exceeded its plan. In 2009, Hoa Phat Refrigeration revenue reached VND 488 billion, up 6.06% as compared to Net profit reached VND 48 billion, up 98% over In the same year, the company continues to honor standing in the charts of VNR500 and received several merits of Hung Yen People s Committee. Sales and Service Revenue and profit after tax each year over the period (VND billion) In 2009, Hoa Phat Refrigeration actively set up new agents, strengthenned and expanded the scope of potential agents, built and developed company image with marketing activities. Company also upgrade the warranty system in the provinces to ensure aftersales services with better quality. In 2010, Hoa Phat Refrigeration Company will continue to expand plant and increase personnel to increase productivity. The company is expected to launch new products of refrigerator with many features and outstanding forms. In addition, the company will continue to maintain and increase market share in three regions and focus on developing export markets, bringing brand Funiki became popular brand and being the top choice of consumers Sale and Service Revenue Profit 77

78 group s operation activities VI. REAL ESTATE BUSINESS SECTION In 2009, Real estate section continued to grow steady to reach a turnover of VND 548 billion, up 72.9% compared with 2008, profit after tax of VND 99 billion, up 111% compared with Main results were from investing and building infrastructure for Industrial Park. 78 Sales and Service Revenue and profit after tax each year over the period (VND billion) Sale and Service Revenue Profit Proportion of sales by product 2009 Construction Materials 2.67% Industrial land Rental 29.14% The business of industrial park infrastructure was difficult in the first half of 2009 due to the decrease of foreign investment flows, and prospered from the 3rd Quarter to help sign more new land lease contracts. With the achieved results, the company planned to expand Pho Noi A Industrial Zone to 600 hectares. At the same time, the company also started building infrastructure for Hoa Mac Industrial Zone in Ha Nam and started for rent from early Construction Materials 63.93% 99 Industrial Zone Service 4.26% 2009 also marked the powerful growth of Resident and Urban projects section. Taking advantage of financial potential, the company has successfully captured new investment opportunities being transferred through several real estate projects and participated in capital contribution. Currently, the company is implementing 06 projects for housing in Hanoi and Ho Chi Minh City with total investment capital of VND7,000 billion. Hoa Phat Land is implementing the procedures for investment projects of Northern urban area at Highway no. 5 ( Pho Noi Urban Zone) in the town of Ban, Yen Nhan, My Hao district, Hung Yen province with an area of about 300 hectares and approved planning and modern uniform with full technical and social infrastructure. Pho Noi Urban Area is the administrative center of the town Pho Noi in the coming years and will be satellite towns of Hanoi in the future An affiliated company of the Group in the field of real estate property is Hoa Phat Asia Real Estate Joint Stock Company. The company is a joint between Hoa Phat Group and Asia Commercial Bank. The company s primary business is trading of real estate, land use rights, construction of civil engineering, houses, building materials business, installing electrical systems, water supply systems and other construction and installation. Notably, in 2009, Hoa Phat A Chau represented Hoa Phat Group involved in partnerships with Vinaconex-ACB-Viettel-Hoa Phat to be investors of urban project in Tay Mo Tu Liem District, Hanoi with scale of 292 hectares. In addition, the company also is promoting some other real estate projects in Hanoi and HCM City.

79 group s operation activities VII. CONSTRUCTION EQUIPMENT BUSINESS SECTION In 2009, Hoa Phat Equipment and Accessories section continues to grow steady with sales of VND602 billion, up 32.8% compared with 2008, profit after tax of VND106 billion, up 73.8% compared with Brand of Hoa Phat construction equipment increasingly captured the customers belief. Sales and services, profit after tax each year over the period (VNDbillion) trust of customers. This was a favorable signal that opened opportunities to penetrate foreign markets for products bearing the brand name of Hoa Phat company. Determining the opportunities and challenges in 2010, the Board of Directors has set out plans and specific objectives, which continue to focus on improving production, business management and competitiveness of Hoa Phat products in the market. To improve productivity and product quality, firstly, the company will build and soon put into operation new factory in Binh Duong province with total area of nearly 17,000 m 2 factory, is expected to help increase the total capacity up 65%. In addition, the company will continue to expand exports to new markets in the region and maintain good growth in existing markets such as Philippines, Laos, Cambodia, Ukraine. Sale and Service Revenue Profit Proportion of sales by product 2009 Rocks 1.10% Carton box 0.24% Machining 4.68% Others 1.31% Tower Crane, Mass lifting 7.50% Steel 2.88% Moulder products 11.50% Scaffolding 24.48% Construction Equipment 20.53% Crushing Equipment 21.88% Concrete mix machinery 3.90% In 2009, the Company continued to promote the marketing activities to construction companies, mining projects in major economic zones, export-processing zones, seaports and other mining areas across the country and has collected good results when the construction market strived in the second quarter a series of construction work was started again 2009 also marked the first appearance of stone Crushing machines in the Philippines and captured the 79

80 group s operation activities VIII. MINING SECTION There are currently four companies of the Group activities in this area: Hoa Phat Minerals JSC, An Thong Investment and Minerals JSC and Hoa Phat Laos Limited Company, Hoa Phat-SSG Mining JSC After two years of efforts to implement several projects in 2009, Hoa Phat Mineral JSC launched two factories go into production and delivered the first ore material to Hoa Phat Integrated Steel Complex in Hai Duong. Kha Cuu Iron ore processing plant with capacity of 300,000 tons of crude ore per year, using refine technology from input materials as iron ore in Kha Cuu mines nearby. To the end of 2009, factory output reached 30,000 tons of fine ore. Au Lau ore processing plant with a capacity of 300,000 tons per year, currently, the capacity to operate in the early stages reached 50% of its designed capacity which was 7,000 tons of fine ore. The two plants came into operation on stability is very important for the company and corporation, created main source of revenues and reinvestment in other projects of the company. Specifically, the company s products contributed to a stable source of raw materials for activities of Hoa Phat Integrated Steel Complex, creating an uninterrupted chain from the mining and ore refining to steel manufacturing of the Group. An Thong Mineral & Investment Company was established on February 5th 2007 with the main business including: exploration, exploitation and refining, trading, import and export of minerals in general which is mainly iron ore. On June 5th 2009, the company officially became a member of Hoa Phat Group. Currently, the company invests to exploit and refine iron ore at 2 mines in Tung Ba (Tung Ba commune, Vi Xuyen, Ha Giang Province) and Sang Than (Minh Son commune, Bac Me District, Ha Giang). It is expected until late June 2010, clearance work and construction of infrastructure, the path to mine will basically completed. Parallel to that, the construction of iron ore plant in Minh Son district and Vi Xuyen is also speeding up construction. The Board of Directors of both companies has strived to bring two factories went into operation in October 2010 right on the anniversary of 1000 years of Thang Long - Hanoi. 80 In additions, the company is conducting exploration projects to expand the Tung Ba mine (Tung Ba 2) in an area of 4.68 km 2 with reserves of about 13 million tons of mining. When put into operation, the company will provide 80% - 90% of iron ore for the Hoa Phat Integrated Steel Complex in Kinh Mon, Hai Duong, in a period of 30 years, while also creating jobs for 600 workers, contributing to the process of local economic and society development.

81 group s operation activities Hoa Phat Laos Co, Ltd was licensed on January 28th 2008 with registered capital of USD 3 million. The company is located in the capital Vientiane, with the aim of searching, surveying, mining copper and gold exploration and implementation of investment activities in Laos. determination to promote the work of preparation to put into operation and investment projects in the coming period, contributing to boosting cooperation and social-economic development of Laos-Vietnam and increase good relations between the two neighboring countries. In the past year, the company has been actively consolidating for personnel to prepare projects in operation. Investment projects in Laos are strategically important Hoa Phat Group. The achieved results in 2009 is an important premise, creating the foundation for long-term investment activities and performance. Hoa Phat has been made efforts and Hoa Phat-SSG Mining JSC operates mainly in mining. Recently, the company has been granted the permission of wolfram exploration in Sa Thay district, Kontum province by the Invironmental Resource Ministry. Currently the company is actively implementing the exploration activities and following mineral mining research projects 81

82 group s operation activities IX. CEMENT PRODUCTION SECTION In 2009, with the aim at launching high quality Hoa Phat cement brand, the Hoa Phat cement company has focused timely from the selection and installation of equipment and machinery to stage exploration, exploitation and selection of materials inputs. With total investment capital up to VND3,200 billion, Hoa Phat Cement Plant is equipped with modern production lines from Germany and the most advanced technology in line with other plants with equivalent capacity in Vietnam. With the aim to put quality first and ensure the stability of the continuous plant when going into production, Hoa Phat Cement Company has spent more time for experiments, analysis, blending, trial grind to adjust and chose the highest quality cement. markets, channel distribution, promotion plan, particularly the quality of products. Hoa Phat Cement will look forward to providing for large contrustion work to contribute to build modern Ha noi capital. In additions, Hoa Phat Cement Company has focused on building distribution network across three regions to prepare for the launching of Hoa Phat Cement products to customers. Until now, the company has strengthenned the distribution network in the target markets with the signing of 02 to 03 the authorized distributors, which have potentially financial, experience, means of transport with strong 2nd level agent system. With the aim to launch product on the market in 2010, Hoa Phat cement is prepared for human resources, 82

83 group s operation activities X. COKE AND THERMO-ELECTRICITY PRODUCTION SECTION This year marked the great efforts of Hoa Phat Energy JSC to produce first batch of Coke manufactured by clean technology, marking an important step in the operation of the first phase of the Coke and Thermo-Electricity Plant s Project. In August 2009, the company dried 80 first laboratories and in October 2009, the first batch of Coke was launched, marking the success of clean and high quality coke production what supplies to Hoa Phat Integrated Steel Complex, in Kinh Mon, Hai Duong, as well as domestic demand and exports. The stability operation of the Coke plant created favorable conditions to operate the boiler workshop in No 1 Thermo-Electricity Plant of a capacity 15MW, using hot air supplied from the Coke plant. achievements will be great encouragement for the powerful development of Hoa Phat Energy Company in the near future. On May 12th 2009, Hoa Phat Energy Company received the news when the first shipment of Coke successfully exported to Netherlands and get appreciated by customers. This is the full encouragement, open prospects into the world market of Hoa Phat Coke. To meet the demands of the Hoa Phat Integrated Steel Complex and export, the Company is rushing along with the contractors to operate the 2 nd period of the plant in operating the plant, striving to twice increase the capacity up about 700,000 tons of coke per year and 30 MW power output capactity, bringing total turnover of VND3,500 billion. This impressive 83

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86 RESEARCH AND DEVELOPMENT (R & D) The Foundation for the sustainable Development Hoa Phat Energy company successfully produces coke which has been applied clean production technology Early in October 2009, the first batch of coke was produced. the latest and most successful technologies is Coke manufacture from coking coal and anthracite coal mixed with thermoelectric production from plus heat source. This technology is called Heat of combustion recovery & Clean Coke production Technology ensures environment standard. As at December 19th 2009, combination No. 1 of the thermo-electricity plant of Hoa Phat Energy JSC officially generated no load electricity, marking a major step on perfecting the technology of the complex equipment of Coke production and generating thermal electricity. The trial run of combination no. 1 of 15MW capacity was stable and going to officially supply power for the complex it reaffirmed the right choice in terms of technology. This is a great success of all the company s employees in keeping the rate of project progress. Coke which is produced by this factory applies cleanest and modernist technology in the world and in Vietnam with many outstanding features. Coke production system, Phase I of Hoa Phat Energy Company includes 80 laboratories with the capacity of 350,000 tons/year. This is the most modern design of furnace with 6 fire channels distributed to gain maximum heat exchange overall coefficient. The dimension of each laboratory is considered as a room with 14m length, 3.6m width, 2.8m height vault roof, heat-proof steel is designed around the furnace. The laboratory is made by refractory Silicon brick whose duration is up to 40 years of continuous operation. At the 2 heads of each laboratory, there is the system of hot beehive shelf leading to generation plat; heat-proof steel is designed around the furnace. The heat will be served for the generating plant to produce commercial electricity. 86 Currently, in Vietnam, Coke production for metallurgy has mostly used old technology, the traditional Coking coal pyrolysis, the outputs include Coke and sub products such as oil, light oil, tar, etc heavily polluted air and water. Due to the increasing demand of Coke for metallurgy, some advanced technology countries started to make researches and apply new Coke manufacture technology. The researches were carried out in America and Germany. One of Coke production technology which is based on the Heat of combustion recovery is used Anthracite coal, bringing high economic efficiency, saving significant coking coal import cost, especially suitable for development-oriented and modern industry of Vietnam in the future. Currently, Hoa Phat Energy Company has also registered successful projects with the United Nations and it is certified emissions. This is worthy effort to protect the environment and set environment as one of its operation targets. The reality shows that Coke production according to Clean Coke production Technology & Heat of combustion recovery of Hoa Phat Coke Production Factory is the important progress in confirmation of strategic vision as well as acceptance and master of world advanced technology to contribute step by step to modernize Vietnam industry in the integration trend. Coke will help Hoa Phat Integrated Steel

87 research and development Complex to be active in material for steel production, supply high-quality metallurgical coke for domestic steel plants and export. Hoa Phat Integrated Steel Complex successfully produces deformed bars with diameter range from D10-D51 An extremely important milestone was in December 2009, the 60 tons/h steel plant was successfully trial hot run, the first batch of D10 steel was put to use for the projects of the complex. That is second plant of the complex which was officially put into production. Until now, after a period of production, the factory has successfully produced deformed bars with diameter range from D10-D51. And an other notable event was on the last days of 2009, cast iron factory of 350,000 tons dried hot blast furnace. This is an important step to prepare to dry the 350m 3 furnace, to ensure steel billets for stable production of the steel mill. Hoa Phat Furniture succeeded in providing their fire resistant safes on the market Matching the consumers demand, the company launched its fire resistant safes which have two-storey and four storey with individual and safe drawers for family, office, mobile Compact system for libraries, stores with solid steel frame structure, reasonable compartments, flexible steering wheel. Regarding Stainless steel projects, the company has achieved many successes and got positive feedback about the design, quality after a year of launching. In addition, the company focuses on enhancing product quality. The steel cabinet (filing cabinet, locker), NewTrend wooden office furniture, safes have much outstanding innovation: perfecting cabinet structure, increasing certainty, easy assembly, focusing on aesthetic details, increasing products value. In addition, the office chair s details were improved to enhance aestheticism and it is highly appreciated by the customers. With the great support and the determination of all employees, Hoa Phat Steel JSC produced the first batch of iron in early February and will put the Complex in to operation in the first quarter 2010, contributing to increase profits for the company in particular and Hoa Phat Group in general. More importantly, the success of the complex will optimize the value chain in the cycle of metallurgical, and affirm the pride and stature of Hoa Phat brand in the integration. 87

88 research and development Hoa Phat Equipment and Accessories Co., Ltd has applied electrostatic painting technology in new products For many years, the Company has researched and innovated to diversify products, met the increasing needs of the customers as launching new products of ore washing machine which is firstly produced in Vietnam with lower price in comparison with the imported equipment, tower crane, grinding machine, etc. The company is the leading one in the North applying electrostatic painting line to paint products. Many times, the Company has to work overtime to meet the orders. The factory also expanded painting workshop to increase the capacity, speed to meet increasing demands. In Binh Duong Branch, electrostatic painting products are well consumed and received many positive customers feedback. This is the competitive advantages of Hoa Phat in comparison with other providers products on the market. Hoa Phat Steel Pipe successfully applied for Zinc dust re-recovery system In 2009, Hoa Phat Steel Pipe Co., Ltd has many innovation initiatives Specifically the company has successfully applied for Zinc dust re-recovery system in the workshop, bringing efficiency in the environment improvement, reducing material consumption, saving production costs and has been commended by Van Lam district People s Committee of Hung Yen province. 88

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90 COMMUNITY Hoa Phat Gives A Hand For Community 2009 was the year which Vietnam continued to experience difficulties in terms of economy and society, however with the efforts of all staffs, Hoa Phat Group has achieved considerable accomplishments in many fields. Those accomplishments included social activities and charity. This was also the guiding principles in the operation of the Group, which was to mount harmoniously business activities and charitable activities to contribute to the community. 90

91 social responsibility Enthusiastic with charitable activities Take care of the young Take care of the young - the seed of the country s future was one of the key tasks in the social activities of the Group over the year. At the beginning of the year, Hoa Phat gave many gifts to children infected and affected by HIV/AIDS, which were living in Phap Van Pagoda (Hanoi) and for poor children through the Hung Yen Children-Sponsoring Fund. To be in an eager bustle of the day beginning of school, Hoa Phat implemented the program: Hoa Phat gives strength to school which donated blankets, screens, books, learning tools for 400 pupils of Ethnicity Boarding-School in Mu Cang Chai district (Yen Bai province) with a desire to help children improve the conditions for learning and living and before entering the new school year. During the period of the raging storm number nine in the provinces in middle of Vietnam, thousands of children were put at risk of dropping out of school and in need of care, Hoa Phat Group contributed VND 50 mil to children in provinces which affected by the storm. Besides, at the beginning of 2010, the program: Hoa Phat light up pupil s dreams has been implemented in Quang Tri province to donate 70 bicycles to studious pupils to light up their trust in the future. 91

92 social responsibility Share with people affected by the disaster Respond to the program to support the poor lauched by Binh Dinh People s Committee, Hoa Phat Group donated VND 300 mil to Fund For The Poor of Binh Dinh province. This amount was awarded to the fund at the conference to promote investment in Binh Dinh on 19th Jan 2010 by Mr Duong Hoai Vu Director of Hoa Phat Binh Dinh One Member Co.,Ltd on behalf of Hoa Phat Group. Other social acitvities In addition, in response to the guidelines of Hanoi People s Committee regarding socializing the protection, embankment and improvement of lakes in Hanoi, Hoa Phat Group will take part in improving the environment of two lakes in Long Bien District with total invested amout of around VND 10 billion. This program is being deployed in the first days of With all the love, staffs of Hoa Phat Group actively participated in campaign collecting clothes to donate compatriots in Ha Giang and to donate clothes, household commodities and cash to the poor in mountainous area. They were meaningful actions with the purpose of sharing with people in difficult circumstances in mountainous provinces The spirit of remembering the source To uphold traditional solidarity, the spirit of remembering the souce and the spirit of the leaves protect the tattered ones, in 2010, Hoa Phat Group will promote more social activities, charitable activites and contributions to build a better life. A meaningful activity was commited to implement in 2010 by Hoa Phat Group was the program to support the construction of Con Dao Historic Museum Park with total amount of support up to VND 5 billion. This activity illustrates the grateful hearts of Hoa Phat Group to revolutionary soldiers sacrificed for the independence of the country. On the occasion of Lunar new year 2010, Hoa Phat Group continued to implement the program: Hoa Phat joins the happiness of new year with children and the program: Warm spring which donated nearly 800 gifts to orphans, malnutrition children and children affected by HIV/AIDS, children have cancer and the poor household in Hanoi, Yen Bai, Lao Cai, Phu Tho, Ha Giang, Hai Duong, Ha Nam. These gifts of love aimed to alleviate pain as well as to encourage those people to strive for life.

93 SOCIAL RESPONSIBILITY ACtIVely Support Sport ACtIVItIeS Along with charitable and social activities, Hoa Phat Group also actively participated in sponsored activities for the sport movement in provinces where Hoa Phat operates its businesses. In Additon, Hoa Phat is actively investing and reforming Hoa Phat-Hanoi football club. In 2009, HP.HN returned to the peak tournament - V-league only after 1 year porticipated in the first class football tournament contributed to sport and physical movement of society. Hoa Phat Ha Noi Football Club 2009 AnnuAl report 93

94 environment As a nature of its business operates in many fields, some of Hoa Phat Group operating lines have a significant impact to the environment. Therefore, Hoa Phat was realized the important of pas a nature of its business operates in many fields, some of Hoa Phat Group operating lines have a significant impact to the environment. Therefore, Hoa Phat was realized the important of protective environment at the first place, develops the business strategy in concurrent for the best environment condition. Accordingly, Hoa Phat Group had taken a practical action in order to restrict the effect on environment, ensures the sustainable development of Group all the time. rotective environment at the first place, develops the business strategy in concurrent for the best environment condition. Accordingly, Hoa Phat Group had taken a practical action in order to restrict the effect on environment, ensures the sustainable development of Group all the time. 94 Formulate and implement seriously quality policy and develop sustainably in conjunction with friendly environment. Hoa Phat Furniture Company has successfully built a environmental quality control system conforms to ISO 14001:2004 standard and achieved certification awarded by WQA organization with those main criterias: guarantee of clean and safe working environment in manufacturing plants for staff and surrounding communities as well as friendly to environment. Hoa Phat Furniture will strive to maintain the full implementation of commitments on environment and product quality, improve the product design, saving up production cost, meet the increasing demand of the customers.

95 social responsibility Industrial park One of business lines which bring significant profit to construction and urban development sector of Hoa Phat Group is the operating of industrial park s infrastructure. Pho Noi A Industrial park is a good example in compliance with the regulations on environmental protection. Until today Pho Noi A Industrial Park has 83 registered investment companies in which 73 companies went into operation. Many plants of the Group are located in Pho Noi A IP such as construction equipment and mining machinery manufacturing plant of Hoa Phat Equipment and Accessories Co.,Ltd, Hoa Phat Billet Steel Mill, Hoa Phat Refrigeration Factory, The Office Chair Factory and The Industrial Wood Factory (Hoa Phat Furniture Joint Stock Company) Correspondingly, the protective environment is highly considered for Hoa Phat Group as well as all other enterprises in Pho Noi A IP. In order to protect the environment for sustainable growth, a close supervision is taken twice every year (quarter II and quarter IV). Right after Pho Noi A Industrial Park, Hoa Phat Group is going to invest in Hoa Mac industrial park at Duy Tien Ha Nam, the project is expected to carry out in quarter II/2009. Recently, Hoa Phat Group made an evaluating report on the environmental effects; this report had been approved by Ha Nam People s Committee. Following a success of environmental control in Pho Noi A Industrial Park, Hoa Mac Industrial Zone will implement and maintain a good environment condition to attract more enterprises. 95

96 social responsibility Coke refining technology of Hoa Phat: ultra clean manufacturing technology Recognizing the importance of environmental protection in conjunction with meeting demand of Hoa Phat Integrated Steel Complex, Hoa Phat Group decided to invest in building closed and deep technology coke factory in Kinh Mon district, Hai Duong province. Coke was produced under modernest ultra clean technology in the world as well as in Vietnam with many outstanding features. Thanks to the increasing demand of coke for metallurgy, a number of developed countries has focused on research and application of new coke manufacturing technologies. Those researches are mostly in America and Germany. One of the newest and most successful technology which is applied at Hoa Phat, is producing coke from fat coal and anthracite in conjunction with producing thermoelectricity from residual heat. This technology is recognized as an ultra clean coke coal manufacturing and heat recovering technology, which meets environmental standards. This technology is also a CDM (clean development mechanism) which can help reduce the greenhouse gas emissions under the Kyoto Protocol. Cement Production As a new business line of the Group, the cement plant is going to use high technology and friendly environment including: Using straining bag before the inputting material gate, installing electrostatic dust filter in high temperature section to eliminate dust over the environment (the exhaust fumes from the plant meet the standard of 50mg dust/m3, chimney is met the concentration of dust and the height). Waste water treatment: the waste water in the cement plant basically comes from the office buildings; Waste water during the process of cement is treated according to the Vietnamese standard. In addition, the feasibility study of the project is also included the Surplus Heating System in generating power. In one hand, this system is going to supply power for the operation of the project. In another hand, it is also protective the environment in best possible way. 96

97 social responsibility Environmental friendly products Beside to the environmental protection purposes, Hoa Phat also produces so many friendly products. Recently, Hoa Phat Equipment & Accessories introduced a crushing machine capacity of tons/hour; the inputting material is crusher stone (this stone is come from the process of manufacturing the construction-stone). This stone when pass through the machine will generate fine sand in a better quality than the sand exploiting from the river. In implementing this machine to generate fine sand, this technique will satisfy the domestic demand, especially fine sand is scarce in the future. At the same time, this technique will reduce a number of eroding river bank when sand is mainly exploited from here. 97