Jan 1, 2013

Vietnam - 2012 – The year of sorrow for Vietnamese businesses

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VietNamNet Bridge – Vietnamese businesses had never before faced so many difficulties as in 2012. The stories about the enterprises incurring loss or getting bankrupt were so popular that they did not surprise anyone.

Trillions of dong in capital, no dong in turnover

In late July 2012, Sudico (SJS), an urban area development company announced the loss of 5.6 billion dong by the end of the first half of 2012, while it made a profit of 25 billion dong in the same period of the last year.

The reported loss then shocked SJS shareholders, who could not imagine that a big corporation with the stockholder equity of over 1.7 trillion dong did not make any dong.

The information then made SJS prices tumble dramatically from 35,000 dong per share to 17,000 dong per share in late November.

Though SJS’ shareholders keep buying SJS shares, the total market capitalization value of the enterprise decreased by 2 trillion dong in 2011 to 3 trillion dong and then to 2 trillion dong by the end of November 2012.

In the mining industry, investors also feel shocked because they cannot understand why so many enterprises have reported losses, when mining is considered a sector with great potentials. BGM, a mining joint stock company in Bac Giang province, did not have turnover in the first half of 2012

No turnover or low turnover was the common problem of many Vietnamese enterprises in 2012. Most recently, Meca-VNECO has reported the modest turnover of 627 million dong in turnover in the third quarter, a sharp decrease of 86 percent in comparison with the same period of the last year.

Especially, ITA, a giant in industrial zone infrastructure development sector, reported the turnover of minus 223 billion dong for the third quarter.

Owing money right and left, going bankrupt

Having modest turnover, of course, was not the good news for shareholders. However, this seemed to be better than bankruptcy or delisting.

Vinaconex, a giant in the construction industry, caused a shock to the enterprises when it reported the real net profit of 40.2 billion dong in 2011, which was 10 times lower than the profit announced before its finance report was audited.

PVX, a construction and installation corporation, which listed 400 million shares on the bourse in early September 2012, unexpectedly reported the huge loss and the arrest of four managers of its subsidiaries.

PVX had always been a blue chip share on the Hanoi Stock Exchange until the day the information was released. After the enterprise reported the post-tax profit of minus 334 billion dong by June 30, 2012, PVX has been excluded from the list of the shares eligible for margin trading.

In fact, PVX, like many other enterprises, made a blunder that it was too hurry to expand business, thus falling into the “hot growth trap.” Auditors have found out that by June 30, 2012, PVX had been acting as the guarantor for 10 subsidiaries which borrowed capital from five banks. The total overdue debts of the companies had reached to 558 billion dong.

The Ministry of Planning and Investment has reported that 62,794 enterprises had been established by the end of November 2012 with the total registered capital of 403 trillion dong, while 48,000 businesses got dissolved during the same time. It is estimated that 55,000 businesses would stop operation or get dissolved by the end of the year.

Manh Ha

Business & Investment Opportunities
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