Financial pressure weighs heavily on Dong A Plastics Group

Dong A Plastic Group is facing many difficulties, accumulated losses have exceeded equity, difficulty in accessing loans and risk of losing capital from provisions.

Accumulated loss exceeds equity

Recently, the Ho Chi Minh City Stock Exchange (HoSE) issued a decision to transfer shares of Dong A Plastics Group Joint Stock Company (code DAG) from restricted trading to suspended trading from August 15, 2024, due to violations of regulations on information disclosure.

However, the stock code DAG is facing even greater pressure, which is forced delisting, when Dong A Plastic's accumulated losses have exceeded its equity. Specifically, in the consolidated financial report for the second quarter of 2024 prepared by Dong A Plastic, the Company's undistributed profit after tax is negative 641 billion VND. Meanwhile, the owner's equity is 603 billion VND.

According to Clause 1, Article 120, Decree 155/2020/ND-CP detailing the implementation of a number of articles of the Securities Law, one of the cases that causes shares to be delisted is the production and business results are losses for 3 consecutive years, or the total accumulated losses exceed the actual contributed charter capital or negative equity in the audited financial statements of the most recent year before the time of review.

In the first half of 2024, Dong A Plastic recorded revenue of only 55 billion VND, equivalent to 6% of the figure achieved in the same period last year. Operating below cost price, plus having to bear expenses such as loan interest, business management costs, etc., caused Dong A Plastic to have a net loss of 67 billion VND.

Previously, Dong A Plastic's audited financial report for 2023 recorded a net loss of VND606 billion, mainly due to a sudden increase in inventory price reduction provisions, from VND34 billion to VND404 billion.

It should be recalled that Dong A Plastics was once known as an effective business enterprise, with revenue growing steadily since 2007 and peaking at over VND 2,200 billion in 2022. However, unexpected developments from 2023 to now have "blown away" all of the Company's accumulated achievements.

At the 2023 Annual General Meeting of Shareholders, General Director Duong Ngoc Dieu said that the main reason for Dong A Plastic's decline was the pandemic and the reduced product life cycle. In addition, the increasing pressure on interest rates has caused profits to decline (in 2023, interest expenses were VND90 billion, an increase of 34% compared to 2022; in the first half of this year, interest expenses were VND36.5 billion).

Swap shares for creditors to relieve debt pressure

The financial report for the second quarter of 2024 shows that Dong A Plastic has many long-term loans from the Company's leaders, such as borrowing 100 billion VND from Board of Directors member Pham Ngoc Hinh, borrowing 40 billion VND from former Board of Directors Chairman Tran Viet Thang; borrowing nearly 184 billion VND from Board of Directors member Nguyen Ba Hung.

To restructure its debts, Dong A Plastics plans to issue more than 28.3 million shares to creditors to convert VND283 billion in debt into equity. Accordingly, Mr. Pham Ngoc Hinh will receive 10 million shares and Mr. Nguyen Ba Hung nearly 18.4 million shares.

If the debt swap issuance plan is successfully implemented and the 2024 business targets of VND 642.2 billion in revenue and VND 9.5 billion in after-tax profit are met, Dong A Plastics will "escape" the mandatory delisting penalty.

However, difficulties will still persist in the near future. At the 2024 Annual General Meeting of Shareholders, Mr. Duong Ngoc Dieu said that 2024 will continue to be difficult, because banks have simultaneously downgraded their credit groups to group 5, so access to loans will be difficult to restore to maintain production and business activities.

The financial report for the second quarter of 2024 shows that Dong A Plastics has a total debt of 1,367.5 billion VND, a slight increase compared to the beginning of the year. Of which, short-term loans and financial leases are 733.6 billion VND, long-term loans and financial leases are 412 billion VND.

In addition, Dong A Plastics has large reserves, with the risk of losing capital. Specifically, the Company is setting aside reserves for short-term receivables that are difficult to collect up to 118.5 billion VND, and reserves for inventory depreciation of approximately 362 billion VND.

Mr. Duong Ngoc Dieu said that Dong A Plastic will research and orient options for restructuring assets and debts to reduce financial pressure and find solutions to maintain and ensure capital for production and business activities.

Source: https://baodautu.vn/ap-luc-tai-chinh-de-nang-tap-doan-nhua-dong-a-d223693.html