Vietnam's state-run oil and gas group PetroVietnam is seeking the prime ministerial approval to sell its entire 74 per cent or at least a 38 per cent in polyester fibre and yarn factory PVTex Dinh Vu Joint Stock Company (PVTex), due to its recent string of losses, according to newswire Dantri.vn.
PVTex came in to commercial operation in May 2014 with a capacity of 236 tonnes of polyester fibre and yarn per day, equalling 48 per cent of its designed capacity. However, the factory had to suspend its operation numerous times due to unsold products piling up.
PVTex leadership confirmed that the factory is running losses due to higher-than-expected costs and uncompetitive products. Notably, according to the pre-feasibility study, the annual expenditure on electricity would be $4.69 million, while chemicals and equipment would cost an additional $500,000, however, in reality, the figures were up to $12 million and $11 million, respectively. Besides, materials and labour expenditures turned out to be 1.5-3 times the expected costs.
In particular, the factory expected to recover its investment capital nearly nine years, however, according to the latest calculation, it would take almost 23 years to break even.
According to a report published by PetroVietnam, as of June 2016 PVTex incurred a cumulative loss of VND3.008 trillion ($135.4 million). In 2015 alone, the figure was VND1.2 trillion ($53.8 million), up VND120 billion ($5.38 million) on-year. PVTex’s poor financial standing made it impossible to pay off its total bank debts of $221.3 million, including $70.7 million in short-term loans.
In March, PVTex requested the Vietnamese government for an additional $34 million loan with a 23-year payback time, instead of the nine years stipulated by a previous loan. PetroVietnam also proposed that the government adopt tariff barriers against imported fibres from China and Thailand, and asked for help in selling the factory's products to local garment-makers.
In late April, PetroVietnam appointed a new general director cum chairman of the board of directors to stop the continuous losses within six months. However, as of now, the business results have been rather bleak.