Business and production situation

Implementation of business and production plans

In 2023, given multiple changes in Vietnam and around the world, deep decline in fertilizer price, sharp increase in input material price, by flexible, proactive, creative and innovative operational measures, PVCFC has deployed solutions for energy saving, reducing energy consumption and operational cost; seeking product supplies, strengthening domestic consumption and export, PVCFC has excellently performed its targets of production, consumption, profit, budget contribution and investment, especially PVCFC has completed the target of the highest production capacity. However, total revenue in 2023 was lower than planned target due to a decline in average selling price in 2023 by 13% (appro.1,493VND/kg) as planned. Specifically,

(Note: Some planned targets in 2023 have been implemented in accordance with Announcement No 2286/PVCFC-IR dated December 27 2023 of PVCFC. These targets have been adjusted to replace business and production targets approved by Resolution of annual meeting in 2023, No 1462/NQ-PVCFC dated June 12 2023).

Implementation of basic investment and construction projects

PVCFC has reviewed, evaluated projects before being implemented to ensure efficiency of cash flow and optimizing capital:

• Completing final settlement for molten urea based complex fertilizer production project with a capacity of 300,000 tons/year according to Decision No. 1435/QD-PVCFC dated June 9 2023 of BOD.
• Projects under implementation include: housing for officers and employees of PetroVietnam Ca Mau Fertilizer JSC; project of expanding rain roof for exporting system of Ca Mau Fertilizer Plant; Project of additional warehouse 12,000 tons, Thanh Hoa Research Center; wholesale warehouse in Long An; production project of CO₂ in food; project of industrial gas production, etc.
• Total investment value in 2023 was 404.72 billion VND, equivalent to 96.5% of the year plan (2023 plan was implemented according to Announcement No 2286/PVCFC-IR dated December 27 2023, investment value adjusted from 275.18 billion VND to 419.49 billion VND).

Governance

In 2023, PVCFC implemented and improved their governance system according to the best corporate governance practices to increase competitiveness and market value.

• Newly issuing and amending, supplementing, integrating some regulations such as: Whistleblowing, Information Disclosure, Risk Management, Internal Audit, Marketing Management, Business Management, Internal Regulations on Corporate Governance, Operational Regulations of BOD. These regulations are adjusted, integrating regulations into the business and production value chain of PVCFC in Q.1 2024.
• Continuing standardization of risk management models according to COSO and 3 lines of defense; streamlining the entire system of internal normative documents (value chain, regulatory framework, etc.) of PVCFC according to business and value chain model, completing governance model according to good governance practices. Additionally, PVCFC also evaluates, builds a roadmap and reinforces corporate governance according to good governance practices based on ACGS. Providing training courses on “overview of ESG and related issues to PVN and chemical fertilizers”, integrating ESG in corporate governance toward sustainable development goals, contributing to the process of green transition and sustainable economic growth.

Regarding the financial investment

As of December 31, 2023, PVCFC only invests in one (01) subsidiary company - PetroVietnam Packaging Joint Stock Company (PPC) with a contributed capital of 20.83 VND billion, accounting for 51.03% of the charter capital. In 2023, PPC has completed business and production targets, profit after tax in 2023 reached 8.02 billion VND, equivalent to 124.09% of the plan, return on equity reached 16.71% (ROE: 11.96%).

Evaluating the system of Internal Control, Internal Audit and Risk Management

• The Company's internal control system, internal audit, and risk management has operated effectively and efficiently to ensure compliance and prevent risks and fraud. With COSO and 3 lines of defense, PVCFC has focused on inspection, compliance audit on operation, finance and risk management.
• PVCFC has built internal process, risk management system under COSO standard with full professional process appropriate with structure, functions and missions of units. PVCFC has hired consultants to implement project of streamlining and standardizing internal normative documents; reviewing, updating and amending regulations and procedures according to business and value chain model.
• PVCFC closely monitors risk management activities and promptly reports to the Leadership Board for consideration and appropriate response.
• In 2023, the work of internal audit will be operated under a 3-year internal audit plan (2022-2024) and 2023 audit plan approved by BOD. Periodically, PVCFC conducts an audit, audit results are reported to BOD/Audit Committee & Risk Management, audit results are seriously directed and implemented by BOD/Audit Committee & Risk Management. On December 27 2023, BOD has issued Decision No 3420/QD-PVCFC on approval of 3-year internal audit plan (2024-2026).
• Internal Control, Internal Audit and Risk Management systems have been effectiveness and efficiency.

EVALUATING THE FINANCIAL STATEMENTS

The Supervisory Board has conducted an appraisal of quarterly financial statements, semi-annual financial statements and 2023 financial statements to ensure prudence, accuracy and transparency. The appraisal results are as follows:

• The financial reports fully and honestly reflected the financial situation of the Company as of December 31, 2023, as well as the results of business operations in 2023.
• Opening and recording accounting books, classifying economic contents are appropriate with accounting standards and current accounting regimes.
• Good financial indicators show that PVCFC is financially healthy, ensuring ability of debt payment, preserving and developing owner’s equity, specifically:

Evaluating the role, responsibilities and independence of the Independent Auditor unit

Based on Audit Report, Management Letter, Audit Summary Report, the Supervisory Board will collect information and evaluate independence and efficiency of independent auditors according to criteria stipulated at form BM01/DHDCD.03.02 and form BM02/DHDCD.03.02 under rule of procedures for General Meeting of Shareholders issued in accordance with Decision No. 399/QD-PVCFC dated March 3 2023 and reporting at General Meeting of Shareholders. The results are as follow:

Deloitte Vietnam Audit Co. Ltd, was selected to audit PVCFC's 2023 Financial Report. Deloitte has conducted and audited the PVCFC's Financial Report carefully, independently and objectively. The audit unit has complied with professional ethical standards and regulations during the audit process. The Financial Report audit results fully, honestly and reasonably reflect the Company's financial situation as well as the results of production and business activities in 2023.