The story of Vietnam's No. 2 contractor going to collect debt and being collected by debt

On the morning of April 25, before Coteccons held its 2023 annual shareholders' meeting, both gates to the building were blocked.

A group of men from a debt trading company lined up at the building gate, demanding work and payment from Coteccons. The incident was followed by the appearance of the police. The crowd was dispersed.

From debt collection to unsuccessful debt collection

In the meeting, Mr. Vo Hoang Lam, General Director of Coteccons (stock code: CTD), frankly said that it was a group of debt collectors, demanding a debt from 7-8 years ago (during the time of previous Chairman Nguyen Ba Duong - PV).

Speaking to Dan Tri , a company representative said that this debt from the group of subcontractors was from 2016, worth about 1-2 billion VND. At that time, these contractors were not confirmed by Mr. Duong for the volume of work because of incomplete documents.

This is not the first time Coteccons has had an incident involving its previous leaders. Some bigger issues such as trillions of VND in bad debt from 16 projects under Mr. Nguyen Ba Duong’s tenure have also recently been announced and solutions have been proposed by this company.

The story began at the end of 2020, when Mr. Bolat Duisenov became Chairman of the Board of Directors of Coteccons, replacing Mr. Nguyen Ba Duong. That year, Coteccons began to "strongly" set aside risk provisions for problematic projects. The evidence is that the company's audited profit after tax for the whole year decreased by nearly VND 129 billion compared to the self-made report, to VND 335 billion.

Previously, the company said that the company's provisioning mainly depends on the subjective assessments of the board of directors on the receivables of each partner, and only records expenses when there is specific evidence of bankruptcy, loss of lawsuits, etc. However, this does not really ensure the principle of prudence in accounting.

By the end of 2020, the company had reviewed all data and established specific policies for recording provisions based on both qualitative and quantitative factors. The company adjusted the principles of debt age assessment and debt classification in accordance with common practices in the construction industry; sought information through banks, assessed the payment capacity of investors for the project... Therefore, overdue receivables with high average debt age of investors with low financial capacity will have to record provisions.

In short, according to accounting principles, in the first year, this debt is recorded as inventory. After 1 year, if the investor does not confirm the debt, it is accounted for through receivables. From 1 to 3 years, if the investor is confirmed to be bankrupt or insolvent, it is accounted for as bad debt, with provisions made; or under normal conditions, it is collected according to project progress.

Chuyện nhà thầu số 2 Việt Nam đi đòi nợ và bị nợ đòi - 1 — Coteccons has an incident involving previous leaders (Photo: IT)

To date, Coteccons said it has come up with a plan to handle nearly all 16 projects with bad debt. If the debt is recovered, this provision will be reversed to generate profit. In 2022, more than VND44 billion was reversed, generating profit for the company.

In recent years, the company has also made provisions for many projects of investors such as Tan Hoang Minh, Van Thinh Phat... As of the first quarter of 2023, the company has made provisions of nearly VND 1,009 billion for debts of more than VND 1,360 billion from customers. This provision is not expected to stop. Ms. Cao Thi Mai Le, CFO, said that this year, the company will make an additional provision of VND 172 billion for the profit plan of VND 233 billion.

What can you do in 3 years?

At the shareholders' meeting, Mr. Bolat Duisenov recalled that two years ago, he stepped up to the leadership position of Coteccons. At that time, he made a promise: the main task was to stabilize the situation, to lead the company into a better future, a future of development. "I confess that I felt the anxiety and skepticism of many people, not only outside but also inside the company," Mr. Bolat recalled.

However, according to this person, in the past 2 years, what he is most proud of is changing the mindset and thinking of both internal and external parties. Customers no longer doubt Coteccons' capabilities. The company's staff believes in taking control of their own destiny.

Mr. Vo Hoang Lam talks about his 3-year journey with many emotions.

In 2020, when the company had a new chairman after a period of conflict at the top, a customer asked him if the company still had people to do the construction, even though the customer only needed a small factory. Skepticism reached its peak.

However, many large projects were awarded, including the Lego factory project, which "even in my dreams I never thought a domestic contractor could do," said Mr. Lam. The company expanded its customer base to the FDI sector. The repeat sales rate also increased with typical customers being VinFast, Ecopark, etc. In the traditional construction sector, this enterprise followed the path of implementing iconic projects, which are difficult, complex, and top-notch in nature, to affirm its position in the market.

Regarding the business situation in the first quarter, the company had revenue of VND3,129 billion and profit after tax of VND22 billion. While revenue increased by 64%, profit decreased by 25% compared to the same period last year. According to the company's explanation, the reason for the decrease in profit was due to high financial costs, 3 times higher than the same period due to high interest rates.

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