52 percent of shareholders’ capital lost
Of the ten maritime shipping firms that list their shares on the bourse, VSP is the company incurring the biggest loss. It lost 665 billion dong in the period from 2009 to the end of September 2011.
The company borrowed too much money to buy ships. However, in the global financial crisis, when the shipping cost decreased, the volume of goods also decreased, but the lending interest rates and the dollar price both increase, the earnings from shipping contracts are not high enough to cover the huge losses.
Meanwhile, VSP had to pay high for amortization, because it bought the ships at the time when the ship prices in the world reached the highest peak, which made the company’s situation more serious.
The financial report shows that shareholders contributed 1425 billion dong in capital to the company. Meanwhile, the stockholder equity has stopped to 683 billion dong, which means that 52 percent of the capital contributed by shareholders has lost.
Finance reports of shipping firms all show that the ratio of debts on total assets is surprisingly high. Most of the firms have the ratio at over 60 percent. Meanwhile, DDM’s ratio is 94 percent. It’s clear that of the total investment capital of shipping firms, only 10 percent is the capital of enterprises themselves, while the other 90 percent are borrowing.
Financial lever turns into burden
Since the shipping sector requires big investment capital, but the stockholder equity is modest, shipping agents usually have to borrow much money from banks after mortgaging their ships.
In general, shipping firms have been relying on bank loans which are considered the “financial lever” for them. Therefore, when the lending interest rates increase, the lever turns into the burden on shipping firms. DDM Company, for example, has the stockholder equity of 81 billion dong, while it borrowed 1020 billion dong form banks, which was 12.5 times higher than its own capital.
DDM had stable revenue in the first nine months of the year. However, since it had to pay too much for loan interests, about 60 billion dong, its profit was modest – 2 billion dong.
VOS, a big equitized company, which has the stockholder equity of 1399 billion dong, also has to borrow 3429 billion dong from banks. This explains why the company has bogged down in the big loans.
In the first 9 months of the year, after paying 140 billion dong in bank loan interests, the company incurred the loss of 46 billion dong.
As for VSP, the short term and long term debts have climbed to 1938 billion dong, while in the first nine months alone it had to pay 158 billion dong in bank loan interests.
Selling ships to pay debts
As the profits made by shipping firms are not enough to pay debts, a lot of shipping firms have to sell ships to restructure their debts. On November 22, VOS will put Song Tien ship into auction with the starting price of 1.05 million dollars.
Prior to that, VST sold three ships Phuong Dong I, II and III, while Vinaship and VFR are also considering selling some ships.
Source: NLD
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Consulting, Investment and Management, focusing three main economic sectors: International PR; Healthcare & Wellness;and Tourism & Hospitality. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programs. Sign up with twitter to get news updates with @SaigonBusinessC. Thanks.
No comments:
Post a Comment