Vinalines to sell shipyard despite losses

State-owned Vietnam National Shipping Lines (Vinalines) a leading firm in the shipping business has just submitted to the Ministry of Transport its capital divestment plan from Vinalines Shipyard Company Limited (VNLSY) for consideration.

Accordingly, the company wants to transfer its entire stake valued at VND262.5 billion ($11.9 million), 88.6 per cent of the chartered capital, in VNLSY to other stakeholder Vietnam Maritime Development JSC (Vimadeco).

In case Vimadeco refuses to buy the stock batch, Vinalines will sell its share via public auction in the stock market.

The stake sale is expected to bring Vinalines about VND81.7 billion ($3.7 million), according to the price appraisal certificate dated November 9, 2016, by ATC Auditing and Valuation Company Limited.

At such a price, Vinalines will incur an estimated loss of about VND180 billion ($8.2 million) from the deal (as compared to its actual capital contribution to VNLSY).

The divestment would be one of the most critical steps in Vinalines’ restructuring process.

Vinalines acting general director Nguyen Canh Tinh said that the company has no reason to continue running losses in VNLSY.

VNLSY was founded in the southern province of Ba Ria-Vung Tau in 2008, the peak of Vietnam’s shipping business.

Covering a 92.5-hectare area and holding an estimated total investment of VND6.49 trillion ($295 million), the shipyard could handle repair and maintenance for ships up to 40,000 DWT. This would enable it to service Vinalines’ 23-25-strong ship fleet during the 2008-2015 period if only it was completed.

The shipyard is expected to become a regional leader with the capacity to serve 110-120 ships up to 100,000DWT per year by 2020.

According to its business registration certificate granted in 2008, VNLSY will have VND800 billion ($36.3 million) in chartered capital, of which Vinalines contributes 85 per cent, equal to VND680 billion ($30.9 million).

However, by the end of June 2016, the major shareholders only contributed VND296 billion ($13.4 million).

In contrast to the initial rosy expectations, since its establishment, VNLSY almost had no production and business activities.

Since the investment project had yet to be implemented, VNLSY’s main function is to protect and manage the notorious floating dock M83, a material evidence involved in Vinalines’ embezzlement case.

VNLSY sold the M83 dock in April this year and handed it over to the buyer one month later in May.

By the end of June 2016, VNLSY liquidated all labour contracts with the staff maintaining dock M83. Now the company only keeps the minimum personnel of the general director and chief accountant, waiting for further guidance.

VNLSY’s financial statement shows that the company shouldered VND185 billion ($8.4 million) in losses in the first nine months of this year due to selling dock M85 far below the book value.

In addition, after reviewing the Vietnam shipping industry development master planning to 2020, with vision towards 2030, Vinalines recognises that shipyard construction is bad business as even modern shipyards in Vietnam and around the world see little work in the current context of challenging business climate.

“Even in the case of below-par value divestment, the move will help prevent VNLSY from incurring additional expenses and bring opportunities to find potential customers through stake transfer to outside investors,” Tinh said.