Cong Thanh’s questionable investment in face of crippling debt

Cong Thanh plans building a new cement station despite heavy losses

As of December 31, 2016, the firm’s loan liabilities hit a record of VND13.763 trillion ($605.8 million), comprising short-term loans of VND1.181 trillion ($51.9 million) and long-term loans of VND7.309 trillion ($321.7 million) at VietinBank and VPBank.

Cong Thanh's loan liabilities in 2007-2016

However, despite a revenue boost in 2016, the two new production lines put a great burden on fixed asset depreciation and capital charges. The annual average depreciation amounted to VND440 billion ($19.37 million) with an interest of VND624 billion ($24.46 million) which is a record among cement manufacturers.

Speaking about its business target for 2017, Cong Thanh’s spokesperson declared a revenue target of VND5.156 trillion ($226.96 million), doubling the previous year’s revenue with a targeted net loss of VND44 billion ($1.93 million).

The firm’s spokesperson highlighted that the cement surplus, the frozen realty market, and surging fuel prices increasing transportation expenses were the root causes of the company going through a rough patch.

As of 2016, the total capacity of domestic cement manufacturers amounted to 90 million tonnes, whereas domestic cement consumption was only 59 million tonnes and the export volume was 15 million tonnes.

Along with the hefty domestic cement surplus, the investment in the upcoming grinding station in Cam Ranh should give cause to worry for the firm’s leadership.

To date, Cong Thanh’s the cement plant has two assembly lines with the total capacity of 12,500 tonnes of clinker per day or six million tonnes annually.

Once the legal proceedings are done, the firm will start the construction of a new cement grinding station in Cam Ranh city in the south-central coast of Khanh Hoa province, the firm’s representative stated.

In 2015, according to financial and business information corporation StoxPlus, Cong Thanh ranked sixth among the top ten cement manufacturers in terms of market share, total assets, and net revenue.

Cong Thanh Cement JSC is one of the leading cement manufacturers in Vietnam. The company also invests in thermal power, fertiliser, transportation, hotel, resort and golf.

Originally, the firm started off with a chartered capital of VND50 billion ($2.2 million) in 2006, mainly producing clinker and renting out concrete mixers. Since then, the firm has grown into Cong Thanh Group, with nine member companies.

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