Song Hong Garment (HSX: MSH) is running large risks by not setting aside provisions for the US partner’s debt.
|Song Hong will find it difficult to collect its VND219 billion ($9.52 million) from New York & Co. Source: doanhnhan.vn |
The local textile giant has just published the financial report for this year’s first half, showing that the company has not set a provision for the arrears of its biggest overseas partner, New York & Co. that went bankrupt last month.
Specifically, Song Hong sold a large number of orders to New York & Co. through intermediate Easy Fashion Macao Offshores ltd. (Easy Fashion). According to the agreement between Song Hong and the US partner, debt clearance related to the sales is performed via Easy Fashion with a timeline of 90 days.
The local company’s receivables from the partner as of June 30 were about VND219 billion ($9.52 million). Of this, past-due receivables were about VND163.8 billion ($7.1 million), and receivables still within the deadline were about VND55.2 billion ($2.4 million).
However, Song Hong seems to be unlikely to be able collect the sums due to the collapse of Retail Winds (RTW) that owned 400 New York & Co stores across 32 states in the US. On July 13, RTW filed for bankruptcy because of insolvency.
According to Song Hong’s management board, the event has impacted its ability to recover the sums. Currently, the company is working with Easy Fashion and lawyers.
“Recovering the receivables still depends on the progress of restructuring RTW’s operations,” noted the report.
RTW has 180 days to restructure operations under the supervision of authorities, according to US regulations.
In the second quarter of 2020, Song Hong earned VND962 billion ($41.83 million) in net revenue, down 17.4 per cent on-year. Besides, its after-tax profit reached VND58 billion ($2.5 million), down 56 per cent on-year. Over the first six months of the year, its cumulative profit declined 44 per cent to VND122 billion ($5.3 million), equalling nearly 60 per cent of the 2020 plan.