Why Metro Makes Losses and Divests its Vietnam Operation

Share the info

Metro Group (Germany) has announced that it has come into an agreement with Berli Jucker Corporation (BJC) of Thailand on the transfer of the wholesale stores system in Vietnam. Particularly, BJC shall wholly take over the commercial operation of the Vietnam Metro Cash & Carry (MCC Vietnam), including 19 distribution centers and the portfolio of relevant real estate with the total value of EUR 655 million (USD 879 million). The representative of Metro review that the deal shall be completed in the first half of 2015.

Metro Group set its foot in Vietnam market back in 2002 with the focus on the wholesale sector. Currently, the MCC Vietnam is having 19 centers all over the nation, with the labor force of 3,600. In the 2012-2013 financial year, the revenue gained in operation in Vietnam of MCC Vietnam reached EUR 516 million (USD 692 million in equivalent). In 12 years of operation, MCC Vietnam has invested strongly and continuously in the commercial infrastructure. Meanwhile, Berli Jucker is a Trading Investment Promotion and Production Group of Thailand, with the total value of capital on the stock market of Baht 88 billion (USD 2.8 billion). The commercial sectors of BJC is divided into 5 major service chains including packaging, commodities, health care, technical, retail and other type of service chains. The corporation has 6 offices in the South East Asian with the total revenue of around USD 1.3 billion in 2013.

In Vietnam, Metro has continuously been expanding its market, with the retailing supermarket system stretched from Northern to Southern areas. However, despite the increasing revenue over the years, pursuant to the statistics of Tax Agency of Ho Chi Minh City, company is one of the FDI company having largest loss in Vietnam and as such has not been subject to any Corporate Income Tax.

Answering why Metro always make losses in Vietnam the representative of Metro responded that the company had had to concentrate on investment in the expansion of its market, on the equipment, infrastructures, land lease, land compensation, management cost to establish a wholesale center.

A result of the survey and analysis on the price transferring of FDI businesses in Vietnam in 2013 by the cooperation of researchers of Vietnam Chamber of Commercial and Industry (VCCI) and the USAID has shown that 20% of the FDI businesses have been conducting price transferring in order to avoid tax obligations in Vietnam. Despite statistically being loss, many FDI businesses still invest in widening its commercial operation.

Contact us to schedule your complimentary consultation.

We are available at offices in central of Hanoi, Ho Chi Minh City and Da Nang that help cover through out Vietnam.