KAO Vietnam's US$1-trillion (US$43 million) losses in its 20 year-presence in Vietnam have taken many by surprise, as companies operating in similar fields such as Diana or Kimberly-Clark stay profitable every year, according to financial newswire CafeF.
Source: CafeF.
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The company's cost of goods sold accounted for 65 - 70% of the total revenue, leading to its gross profit margin of over 30%.
KAO Vietnam's gross profit margin in 2016 stood at 34%, which was lower than that of its competitors including Kimberly-Clack or Diana, whose figures are at over 40%.
Nevertheless, KAO Vietnam's recurring costs were quite high, of which sale expenses accounted for over 30% of the revenue and caused losses for the company.
The company reported loss of VND23 billion (US$986,930) in 2016, while the figure reached nearly VND80 billion (US$3.43 million) in 2015.
The incident was not a one-off, but has been going for nearly 20 years of its operation in Vietnam, raising the question of transfer pricing.
In the past, large multinational companies such as Coca Cola, Pepsi, or Metro had been in the tax agency's list of suspects of transfer pricing for its losses for years.
Under this circumstance, in 2013, a number of FIEs, including KAO Vietnam came under scrutiny for reporting losses in a long period of time. Afterwards, KAO Vietnam reported a loss of VND23 billion (US$986,930) in 2016, down 70% year-on-year.
