Profit of giant Song Da plunges after equitisation

Song Da Corporation has been floundering since its equitisation

Over the years, Song Da has been a “giant” in the field of construction of power plants, transportation, industrial plants, manufacturing, and supply of construction materials, constructive equipment, and real estate.

However, according to the report on the 2018 profit distribution plan submitted to the Ministry of Construction, Ho Van Dung, head of the representative group of the state capital in Song Da, showed that the company’s profit was terribly low compared to its assets.

According to the report, as of the end of 2018, Song Da had about VND15.65 trillion ($680.43 million) of state capital, while state equity capital was VND4.52 trillion ($196.52 million) and 2018 revenue was about VND2.2 trillion ($95.65 million).

However, the pre-tax profit of the whole corporation was only VND22.3 billion ($969,565), equivalent to 11 per cent of the plan set by the board at the beginning of 2018. Thus, the return on equity is only 0.06 per cent, and after-tax profit is only about 0.17 per cent of the total assets. This is a record low business result for the corporation.

According to Dung, Song Da is not allowed to re-evaluate financial investments made prior to the transformation into a joint stock company in April 2018. Therefore, the corporation made a provision of VND239 billion ($10.39 million), including VND179.9 billion ($7.82 million) of financial provision and VND59.1 billion ($2.6 million) for bad debts, affecting the business results in 2018.

The State Audit Report released earlier this year also noted that Song Da is managing and using 46 land lots with a total area of ​​more than 64.3 million sq.m, including 44 areas allocated for organising production and business activities, to be used as offices, and two land areas assigned to implement residential projects.

However, the investment in many hydropower projects in Vietnam and Laos, the slow capital recovery of build-operate-transfer (BOT) projects has pushed up the total debts of the corporation to VND10.7 trillion ($465.22 million), including about VND1.9 trillion ($82.6 million) of overdue debt.

Previously, at the initial public offering (IPO) of Song Da Corporation on the Hanoi Stock Exchange, the corporation offered 219,678,000 shares (equivalent to 48.82 per cent of its charter capital) but only 801,500 shares were registered to be bought by 229 individual investors, equivalent to only 0.3 per cent.