VietNamNet Bridge - Investing in many business fields and expanding too rapidly, some large corporations have lost prestige and fallen into debt. 

HVG invests in many projects

Bianfishco was a well known name in the seafood industry. At first, it was known as a big seafood processor and exporter, and as a big investor. Later, it became famous for its huge debt of VND1.5 trillion by 2012.

At a 2012 press conference, the Can Tho City People’s Committee said Bianfishco was meeting difficulties due to tightened bank lending and rampant investments in non-core business fields, including real estate. The company was found using short-term capital to make long-term investments, which led to serious financial imbalances.

Bianfishco is not the only company which has gone downhill because of bad investments.

HVG reported post-tax loss of VND713 billion in 2017, which was 14 times higher than the VND49 billion loss in 2016.

Most recently, Thien Ma Seafood Export, a well known seafood company in Can Tho City with 12 large-scale farms, three processing factories and export volume of 40,000 tons of catfish a year has been investigated because of heaped up debts.

The same situation is also occurring at Huong Vuong Seafood JSC (HVG). In a report to the State Securities Commission (SSC) and the HCMC Stock Exchange last March, HVG reported post-tax loss of VND713 billion in 2017, which was 14 times higher than the VND49 billion loss in 2016.

Due to the short supply of materials, lasting since the second half of 2016, HVG’s 11 factories with 15,000 workers have been running with just 50 percent of capacity. It has been mostly processing inventory materials to fulfill export contracts.

Insufficient materials, large fixed costs, plus allowances for workers during the production interruption, all have increased the production cost by 30 percent. The export price increase is not enough to offset the cost hike.

Another important reason behind HVG’s problems is that its capital has been poured into too many projects, including breeder farms and 60,000-pallet cold storehouses.

HVG explained that five large projects the company is developing have ‘gobbled up’ VND2.1 trillion worth of capital, 70 percent of which is from loans.

The report said in some projects, 80 percent of the workload has been fulfilled, but the bank disbursement has been delayed. As a result, HVG has to use its short-term capital for the projects.

The total capital HVG had spent by the end of February had reached VND640 billion, mostly from short-term capital with the interest rate of 9 percent per annum. 

HVG, the pride of Vietnam’s seafood industry, and a big catfish exporter, saw its shares put under management agencies’ control on January 26 after continued losses in the last two years.

US$1=VND22,000

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