July 10, 2020 19:54

Advertisement Contact us RSS Vietnamese

Dark and bright picture after equitization: Part 4: Song Da Corporationoperates inefficiently after equitization

08:14 | 31/05/2020

VCN - Equitization helps to make corporate information transparent and improve the efficiency of capital use, production and business activities. However, not all state-owned enterprises after “changing blood” have seen positive changes. There are still many SOEs struggling to implement the task of changing the mode of operation and business in order to optimize operations for enterprises themselves and contribute to economic growth. Two enterprises that Customs News respectively introduced in a series are considered the examples for this fact.


The post-equitisation bright and dark picture-Part 2: Hapro and the journey to take advantage of opportunities from equitisation
Dark and bright picture after equitization: Part 1: Behind the figure of 13% of loss-making businesses
What does the picture of customs brokers show? - Final part: What do customs brokers need to develop?



Many investments of Song Da Corporationdo not bring dividends, profits, even losses or loss of investment capital.

The revenue and profit have dropped seriously, the burden of "huge" debts or still getting involved in the settlement of state capital in enterprises are the poor performances of Song Da Corporation after equitization.

Being burdened with debt

In recent years, mentioning Song Da-JSC, the most impressive impression is that production and business activities are not very bright with liabilities of tens of trillions of VND.

The Consolidated Financial Statements for the fourth quarter of 2019of this company show that the liabilities as of December 31, 2019 were more than VND20,148 billion, a slightdecreasecompared to VND21,150 billion at the beginning of 2019.

Compared to 2018, indicators of both revenue and profit of the company recorded declines. In particular, sales and service revenue of Song Da-JSC reached more than VND7,390 billion, down by VND612 billion compared to more than VND8,002 billion in 2018. Similarly, gross profit in terms of sales and service provision in 2019 reached more than VND1,617 billion, down byVND329 billion compared to VND1,946 billion in 2018. Corporate profits after tax in 2019 reached over VND329 billion, decreased byVND33 billion compared to VND362 billion in 2018.

Before 2019, the production and business activities of Song Da-JSC were not positive. Thecompany officially transformed into a joint stock company from April 6, 2018. However, state capital still accounts for about 99.79 percent.

According to the Ministry of Finance's report to the Ministry of Construction (December 2019) on the financial situation and production and business efficiency in 2018 of Song Da Corporation, the total revenue of the parent company in 2018 reached VND1,814 billion, down by VND860 billion compared to 2017, equivalent to a decrease of 32.2 percent. Corporate profits after tax in 2018 was only VND22.4 billion, down by VND145 billion compared to 2017, equivalent to a decrease of 86.7 percent.

According to the consolidated financial statements, the Corporation's total revenue in 2018 reached VND6,312 billion, down by VND3,397 billion compared to 2017, equivalent to a decrease of 35 percent. Corporate profits after tax reached VND333.5 billion, down by VND221 billion compared to 2017.

“The above figures show that the business results of the parent company are not commensurate with its resources,”the Ministry of Finance evaluated.

Regarding the situation of receivable and payable debts of the Corporation, the Ministry of Finance's report stated that: The total receivables is VND8,015 billion, accounting for 51 percent of total assets, 1.77 times higher than the equity of the Parent Company - Corporation. Meanwhile, the Corporation's liabilities amounted to VND11,135 billion. The ratio of liabilities/equity of the Parent Company - Corporation at the end of 2018 is 2.46 times; the ratio of liabilities/equity of the Corporation is 2.8 times.

The Ministry of Finance stated: “The parent company's debt is mainly related to receivables and payables in the parent company and its subsidiaries and associates. Therefore, although the index shows that the Parent Company - Corporation has the ability to pay debtdue,there are many potential risks if its subsidiaries and associate companies face difficulties and are unable to pay debts.”

Regarding the effectiveness of equitization of enterprises in general and the case of Song Da-JSC in particular, according to economist Le Quoc Phuong, many businesses operate ineffectively after equitization due to being implemented formally. The equitized capital is small while the state capital is still very large. After equitization, there is no change in apparatus and people of the enterprise. The mechanism of operation is also almost unchanged or is changed very little.

Inefficient investment

In the report to the Ministry of Construction, the investment of Song Da-CPCP Corporation is mentioned quite a lot by the Ministry of Finance. In 2018, the total value of long-term financial investments of the Parent Company - Song Da Corporation was VND6,226 billion, invested in 38 enterprises, accounting for 39.7 percent of total assets. In particular, investment in subsidiaries is over VND3,500 billion, investment in joint ventures and associates is VND2,561 billion and capital contribution to other units is VND156 billion. Dividends and profits shared from financial investments reached VND313 billion, profitability ratios were not high, reaching 5 percent.

Through the review, the Ministry of Finance found that besides some investments with efficiency such as: Song Da Joint Stock Company 4, 5, 6, 9, 10, Investment and Development Company development of San San 3A, there are some investments that do not bring profits with a total value of VND3,530 billion (accounting for 56.7 percent of total investment capital). Specifically, it invested in Nam Chien Hydroelectricity Joint Stock Company, Song Da Infrastructure One Member Limited Company, Viet Lao Electricity Joint Stock Company, Song Da Urban Development and Construction Investment Joint Stock Company, etc.

Notably, some investments have been lost or lost capital such as investments in Song Da 3 Joint Stock Company, Song Da Fire Protection and Construction Investment Joint Stock Company, Song Da 12 Joint Stock Company and CP Phu Rieng Kratie. “These are companies with poor financial situations and potential risks,” the Ministry of Finance stated.

Regarding equitization, the Ministry of Finance also said that Song Da Corporation officially transformed into a joint stock company from April 6, 2018, but by December 2019 (more than a year compared to the prescribed time), the Ministry of Construction has not yet finalized the settlement of state capital in Song Da.

“The Ministry of Construction must be responsible for the delay when implementing this content,” the Ministry of Finance pointed out when requesting the Ministry of Construction to urgently complete the settlement.

The Ministry of Finance also requested the Ministry of Construction to urgently implement the State Audit's recommendations on the payment of the remaining profits to the budget (VND73.47 billion), remitting the difference between the State capital increase from the time of enterprise valuation and the official transformation into a joint-stock company after subtracting expenditures according to regulations and interests arising due to late paymentto the Enterprise Arrangement and Development Support Fund; proposed the Ministry of Construction to manage and use investment capital outside the enterprise to ensure the efficiency of capital investment; closely supervising the operation of Nam Chien Hydroelectricity Joint Stock Company, Viet Lao Electricity Joint Stock Company and Song Da 3 Joint Stock Company for timely solutions.

Equitization: Heads must take responsibilities under Prime Minister for failure to fulfill assigned plans

VCN – The equitization progress in the first months of 2020 was quite slow. Unpredictable developments of ...

Talking to reporters from Customs News on May 8, a media representative of Song Da-JSC said that the company could not immediately give feedback and comments on relevant contents that the Ministry of Finance sent to the Ministry of Construction. It needed more time for the specialized department to review and finalize the appropriate answer. Customs News will continue to provide update son this issue.

By Thanh Nguyen/KieuOanh