Auditor raised doubts, steel industry giant immediately came up with measures to 'turn the tables'

The steel distribution giant has been constantly working and successfully negotiating with a real estate giant at the last minute, helping the company turn from a large loss to a profit in 2024 and escape delisting. However, there are still many difficulties.

Not yet able to reverse provisioning due to early Tet

SMC Investment and Trading Joint Stock Company (HoSE: SMC) has just sent a document to the Ho Chi Minh City Stock Exchange (HoSE) explaining the emphasized opinion in the 2024 audit report.

The document was announced after the annual general meeting of shareholders on May 22, which approved the audited financial report with a profit after tax of nearly VND12.1 billion, a dramatic reversal from the loss of nearly VND287 billion in the previous self-made report.

With this result, SMC officially returned to profit after two years of losses and escaped the risk of mandatory delisting according to HoSE regulations.

SMC Investment and Trading JSC explained the two points emphasized by the independent auditor. At the same time, it stated that these were not exceptional opinions and did not affect the truthfulness and reasonableness of the financial statements.

SMC is a large enterprise in the field of steel distribution. Photo: SMC

Firstly , related to receivables from Novagroup Joint Stock Company (Novagroup) and related companies.

By the end of 2024, SMC recorded receivables from Novagroup of more than VND 1,115 billion. The provision expense (recorded) on December 31, 2024 was nearly VND 573 billion. However, by April 26, 2025, SMC re-determined the provision expense to be set down to nearly VND 237.6 billion, which is a reversal of more than VND 335 billion (compared to the previous self-made report).

In its report, SMC explained that on December 20, 2024, SMC and Novagroup signed a debt confirmation and payment commitment document. The reason why the provision could not be reversed at the time of preparing the self-prepared report was due to the early Lunar New Year holiday (Tet At Ty), causing the confirmation documents to not be completed in time.

Therefore, SMC was unable to collect all appropriate documents to adjust down (reverse) the provisions for receivables at the time of preparing the 2024 financial statements.

By April 26, 2025 - the time of preparation and announcement of the 2024 financial report - all relevant records and documents have been fully collected and are the basis for SMC to adjust the cost of provisioning for receivables in the 2024 fiscal year.

Specifically, these are the debt confirmation and debt repayment commitment; Housing sale and purchase contract, agreement document; Valuation certificate; Offset agreement...

SMC's management assessed these as events occurring after the 2024 accounting period, resulting in a "significant" change in the company's 2024 earnings, but provided additional evidence of conditions that existed at December 31, 2024, sufficient to justify adjusting the provision.

SMC explains the auditor's two key points. Source: SMC

Second , the auditor raised doubts about SMC's ability to continue operating when the accumulated loss by the end of 2024 was nearly VND 140 billion, cash flow from business operations was negative more than VND 508 billion and short-term debt exceeded short-term assets by nearly VND 623 billion.

However, SMC affirmed that it is still appropriate to meet the going concern assumption because SMC is implementing many measures to improve its financial situation and cash flow; promoting streamlining the apparatus, liquidating assets, and unprofitable activities...

There are many difficulties

Although SMC has returned to profit thanks to the reversal of provisions and delisting, it still faces many challenges. In the context of many fluctuations in the world , the real estate market in China is still weak, so steel companies focus on the domestic market, leading to fierce competition.

Meanwhile, major customers in the real estate industry, typically Novaland , are still facing liquidity difficulties. Therefore, SMC's debt collection may continue to rely on converting debt into real estate products.

SMC also plans to raise more capital, but at the recent shareholders' meeting, the company postponed its plan to issue 73 million private shares to raise VND730 billion to repay loans, supplier debts, and supplement working capital.

In 2024, SMC also restructured a lot, with its workforce sharply reduced from over 1,200 people at the end of 2022 to over 600 people at the end of the first quarter of 2025. SMC also sold many assets such as real estate, shares in other companies... But these are all temporary solutions.

SMC still has a large amount of bad debt and a high leverage ratio. By the end of the first quarter of 2025, SMC's total liabilities amounted to nearly VND 4,072 billion, more than 5 times its equity (less than VND 810 billion).

Of which, short-term loans and financial leasing debts account for VND2,154 billion, long-term nearly VND214 billion. Short-term bad debt provision remains high, over VND365 billion.

Accumulated loss by the end of the first quarter was still 137.7 billion VND. Revenue in the first quarter reached about 1,846 billion VND, down 17% compared to the same period, profit after tax reached only 127 million VND.

SMC shares fell sharply from VND20,000/share in July 2024 to VND6,000/share in February 2025. By May 28, the stock had recovered to VND10,550/share.

Struggling because of the debt of the real estate 'giant', the steel company unexpectedly turns around . The steel giant is constantly turning around but is still in trouble after many years of struggling because of the real estate market and bad debts from the real estate giant.

Source: https://vietnamnet.vn/kiem-toan-neu-nghi-ngo-dai-gia-nganh-thep-dua-ra-bien-phap-lat-nguoc-the-co-2405614.html