VNR kicks off restructuring process

The state-owned enterprise (VNR) recently submitted its member business restructuring plan to the Ministry of Transport (MoT) for the period 2014-2015, which highlighted the goal of restructuring of two major members – the Hanoi and Saigon railway transport companies – before the end of next year.

According to the plan, the two railway transport firms, which are VNR’s primary revenue and profit earners, will be changed from financially dependent units into one-member limited liability companies with VNR holding their entire chartered capital. The conversion is slated for completion before the end of this year.

Regarding the shake-up plan, VNR said it would restructure another two companies who are locomotive operators, Di An Train Limited and Gia Lam Train Factory in two stages.

In stage 1, another VNR member Railway Rubber Enterprise will be merged with Gia Lam Train Factory, which will then be separated from its current parent the Hanoi Railway Passenger Transport Company before turning into a limited company controlled by VNR. According to the government, this task must be fulfilled by year-end.

Stage 2 will see Di An Train and Gia Lam Train equitised before the end of 2015.

Also as part of its overall restructuring plan, VNR hopes to turn 20 railway infrastructure management businesses into railway infrastructure maintenance joint stock companies, including 15 railway bridge maintenance and five railway signal and information units. This task must also be completed by the end of next year.

To raise capital for its core service lines, VNR has asked the MoT’s permission to entirely divest from 10 joint stock companies, sell all but 30 per cent of three joint stock companies, and sell all but 20 per cent at the Transport Investment and Construction Consultant Joint Stock Company.

VNE expects capital divestment at the aforementioned units to be completed within this year.

VNR’s stake in these joint companies has been valuated at around VND286 billion ($13.6 million), including VND85.7 billion ($4.08 million) at seven member companies with VNR’s stake in these companies averaging 64 per cent.

VNR’s stake in 21 affiliated firms was reported at VND200 billion ($9.6 million), averaging VND28.9 billion ($1.3 million) per firm. In the year’s first half, VNR received VND15.8 billion ($752,000) in dividends from these firms.

“This would be a crucial step towards realising parent company VNR’s initial public offering target in 2016,” said chairman Tran Ngoc Thanh.

Deputy Minister of Transport Nguyen Ngoc Dong has commented that “spurring the equitisation process of member companies will be VNR’s most urgent task in 2016 and “compared to the equitisation pace of other state-owned enterprises in the transport sector (slated for completion before the end of next year), VNR’s is expected to take place a year later, so drastic measures are needed to avoid any further delays.”

Cumbersome and ineffective organisational structures are reportedly the main reason for VNR’s poor performance, despite its position as the exclusive railway operator in Vietnam.

VNR employees also reportedly have the lowest average per capita among companies in the transport sector.

This year VNR was assigned by the MoT to reach VND5.211 trillion ($248 million) in total revenue and other income and VND59 billion ($2.8 million) in pretax profits.

“These figures will serve as a base to evaluate the operational efficiency of VNR’s management this year – a transitional time in restructuring the railway sector leader,” said an MoT Business Management Department executive.