Vinacomin’s subsidiaries put under special control after incurring losses

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The Ministry of Finance (MOF) has released a report on the production, business, finance and investment of the Vinacomin holding company.

Vinacomin’s subsidiaries put under special control after incurring losses

The report shows that total revenue of the mining group in the first six months of 2021 was VND54.617 trillion, while the revenue of the Vinacomin holding company was VND51.442 trillion. The pre-tax profit of the entire group reached VND1.875 trillion, or 62.5 percent of the plan. The figure for Vinacomin holding company was VND1.022 trillion.

The after-tax return on equity of the holding company was 2.67 percent, while it was 3.98 percent for the entire group. The ratio of after-tax profit to total assets of the holding company was 1.19 percent while it was 1.27 percent for the entire group.

The short term solvency rate as of June 30, 2021 of the holding company was 1.11x (1.09 in 2020), and the rate of the entire group was 0.91x. The ratio of liabilities to equity at this time was 1.09x and 1.82x, respectively.

The irrecoverable debts of the holding company had reached VND199 billion as of January 1, 2020, while the provisions against bad debts was VND187 billion. The figures were VND193.7 billion and VND129 billion, respectively, as of December 31, 2020.

As of December 31, 2020, the total long-term financial investment of the holding company had reached VND16.305 trillion. Of this, 16.054 billion had been invested in 36 subsidiaries. There were 11 joint ventures and affiliated companies in which Vinacomin invested. The company also invested in two other businesses with investment capital of VND63.826 billion.

In 2020, some subsidiaries reported losses. Vinacomin Thanh Hoa Co Dinh Chromite JSC, which had charter capital of VND400 billion, incurred a loss of VND30.8 billion and accumulated loss of VND252 billion, which was equal to 63 percent of charter capital.

Meanwhile, Thach Khe Iron JSC reported an accumulated loss of VND21 billion and Dong Ta Phoi JSC with charter capital of VND458.3 billion reported a loss of VND203.4 billion and accumulated loss of VND230.5 billion, equal to 50.3 percent of charter capital.

Some companies showed signs of financial insecurity and were put under special control. Vinacomin – Ha Lam Coal JSC, for example, had debt to equity ratios of 10.08x and 10.21x in 2019 and 2020, respectively, which were higher than the permitted level (3x).

The Ministry of Finance has asked the Commission for the Management of State Capital at Enterprises to draw up plans to solve existing financial problems so as to equitize the holding company and complete the restructuring of Vinacomin in 2021-2025.

Regarding the investment in subsidiaries, according to MOF, some subsidiaries jointly investing in other subsidiaries of the same group is not in line with the current regulations. The subsidiaries need to divest from the companies to ensure the restructuring of Vinacomin.

Luong Bang

The total coal-fired thermal power capacity in the eighth national electricity development plan (Plan 8) is 14,800MW lower than the revised seventh plan. Vietnam is also considering developing offshore wind power.

Coal-fired thermopower plants are concerned as Vinacomin and Dong Bac Corporation lack enough coal for electricity generation.

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