Vinafood 2 sets aside stellar provisions for fraudulent subsidiaries

There are ongoing investigations against the subsidiaries of Vinafood 2

With the provisions for loss of assets that are currently being investigated by the police as well as provisions for difficult short-term receivables, Vinafood 2 (VSF) recorded a net loss of VND1.5 trillion ($65.21 million) in the last accounting period.In the period from January 1 to October 8, 2018, although the revenue exceeded VND15 trillion ($652.17 million), Vinafood 2’s net profit was only VND16 billion ($695,700).

The period from October 9 to December 31, 2018 is also the first accounting period since the company officially changed into a joint stock company.

Accounts receivable of Vinafood 2 have arisen from the previous period but provisions will only be made after transferring to a joint stock company model.

As of December 31, 2018, Vinafood 2’s accumulated loss was nearly VND2 trillion ($86.96 million), leading to the equity falling to VND3.36 trillion ($146 million) of its chartered capital of VND5 trillion ($217.4 million).

Currently, Vinafood 2 has two main shareholders, the Commission for the Management of State Capital at Enterprises (CMSC) with 51.43 per cent and T&T Group with 25 per cent.

The biggest loss is the provision of VND662 billion ($27.78 million) for missing rice inventories pending at Tra Vinh Food Company (Imex Tra Vinh) on November 22, 2017. At the end of March this year, the investigation agency under the Ministry of Public Security completed its investigation and transferred the case to the People’s Procuracy to propose an indictment to prosecute 11 defendants for causing losses of more than VND216 billion ($9.39 million) to the state at Imex Tra Vinh.

Accordingly, during the management and operation of the company, from 2012 to October 2017, due to the continuous losses of Imex Tra Vinh, the company’s director directed the accountant, factory, and workshop to write up and sign forged documents of sales contracts and minutes of agreement to buy and sell rice and by-products.

This was to hide Imex Tra Vinh’s losses so that Vinafood 2 would guarantee loans for it.

Other large provisions include VND155.8 billion ($6.77 million) for Hau Giang Food JSC, a subsidiary which has stopped operating and VND140 billion ($6.1 million) for Vo Thi Thu Ha Import Export Trading Service Company.

Former leaders of Hau Giang Food and Vo Thi Thu Ha were prosecuted and tried in early 2018 for the illegal transactions, causing a damage of VND205 billion ($8.9 million) to Hau Giang Food JSC.

Due to the huge losses and too much debt, at the end of 2013, Vinafood 2 petitioned for bankruptcy of Hau Giang Food company.

Vinafood 2 also provisioned VND77 billion ($3.35 million) for Thinh Phat Kon Tum. The leaders of Thinh Phat Kon Tum have also been prosecuted for illegal transactions with former leaders of Vinh Long Food, an affiliate of Vinafood 2.

Vinafood 2 has set aside a provision covering 100 per cent of its investment in many of its subsidiaries, which have contributed to its negative financial performance.