Vinafood 2 flooded by debts

According to statistics published by Nhip Cau Dau Tu, as of March this year, 19 out of the 44 subsidiaries of Vinafood 2 generated deficit in 2014. Two subsidiaries making the largest losses are Tra Vinh Food Company and TRAVIFACO with total losses of VND164.66 billion ($7.67 million) and VND134.52 billion ($6.27 million), respectively.

One reason for these losses is the failure in breeding tra fish. Vinafood 2 lost VND927 billion ($432 million) due to wasteful breeding, processing and exporting of tra fish.

Another reason for the generated deficit can be found in the inter-subsidiary lending arrangements: Vinh Long Food Company has steadily generated the loss of VND100 billion ($4.66 million) via defaulted loans provided to other subsidiaries, such as Thinh Phat Company, while financing its lending activities from bank loans guaranteed by Vinafood 2.

Adding to its troubles, Vinafood 2 rashly signed rice export contracts at low prices. “Last year, Vinafood 1 and Vinafood 2 won a bid to export a total of 800,000 tonnes of rice to the Philippines. However, subcontracting firms did not dare to implement the contract for fear of loss because the price was too low. As the result, Vinafood 2 had to fulfil the contracts by itself and lost $23.2 million,” Vinafood 2’s general director shared.

Some subsidiaries such as Hau Giang Food Company, Vinh Long Company and Dong Thap Company had similar troubles.

Although Vinafood 2 is a 100 per cent state-owned enterprise with 44 subsidiaries and so far the largest rice exporter in Vietnam, a status acquiring them increasing preferential treatment, the corporation currently faces bankruptcy. The government is asking it to equitise in the 2014-2015 period.

In March, Vinafood 1 is going to divest a series of its subsidiaries, such as Hanoi-Nam Dinh Beer Joint Stock Company (JSC), Southern Salt Company and Northeast Food JSC. In February, the corporation has already divested other subsidiaries, including Ha Son Binh Food JSC, Song Hong Food JSC, Hai Duong Vinafood 1 JSC and Nam Dinh Food JSC.