Vinatex divestment a tough cookie

Now is not a favourable time for the state to divest from Vinatex

Vinatex is on the list of the 55 enterprises in which SCIC will represent the state in divesting all state holdings. In particular, SCIC will be responsible for the divestment of all the 53.48 per cent of state holdings in Vinatex in 2018.

Vinatex was equitised in January 2015 with the chartered capital of over VND5 trillion ($220 million). Of the total, the state holds 53.48 per cent, an equivalent of VND2.675 trillion ($117.7 million).

Le Tien Truong, general director of Vinatex, said that divesting all state-owned capital is a measure to resolve business difficulties and enhance the company’s competitive capacity as the competition in the textile and garment sector is getting fiercer.

According to several securities companies, divesting the state’s capital in Vinatex will not be smooth sailing due to many unfavourable conditions.

Talking with VIR, Nguyen Xuan Duong, chairman of Hung Yen Garment Corporation JSC, shared his opinion on Vinatex: “I think that it will be difficult to sell the state holdings in Vinatex in this period, because recently, the attractiveness of the Vietnamese textile and garment industry has been fading. Previously, some foreign investors and investment funds showed interest in the industry, but after the US withdrawal from the TPP, the market has been less favourable, so attention has declined.”

Duong added that the industry has hit rock bottom now, while the salary of workers constantly increases, which leads to low rates of return for investors. Thus, it is hard for the Vietnamese textile and garment industry to compete and also, in this period, very few investors are eyeing this industry.

Vinatex is looking for the appropriate investor to help expand its market share, enhance corporate governance, and expected rising demand in the domestic market, so that Vinatex can expand its scale.

This ambition was admitted by Truong, as Vinatex targets to raise its chartered capital to VND10-15 trillion ($440-660 million) within the next three to four years.

According to Truong, despite difficulties in divesting state-owned capital, Vinatex will try its best to ensure the efficiency of the divestment to avoid the loss of state assets.

“We are concerned that our point of view will be different from investors’ perspectives, in which case the difference may become a bottleneck,” Truong said.

Vinatex is waiting for a big change to make a breakthrough in business. “We hope to sell all state holdings soon, so that Vinatex can be more proactive,” Truong said.

In the first half of 2017, Vinatex generated a revenue of nearly VND8.2 trillion ($360.8 million), an increase of 15 per cent compared to the same period last year, and earned an after-tax profit of VND316.6 billion ($13.9 million), a growth of 4.5 per cent compared to the first half of 2016.

During this period, Vinatex reported total assets of nearly VND21 trillion ($924 million), an increase of 6 per cent. Meanwhile, its inventory also rose by more than VND400 billion ($17.6 million) to over VND3.6 trillion ($158.4 million).

Vinatex targets to generate a revenue of nearly VND16 trillion ($704 million) and reach a consolidated pre-tax profit of VND749 billion ($33 million) in 2017.

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