Century Fiber (STK) Q2 profit drops 47%, risk of breaking business plan

Century Fiber (STK) continues its long slide in the second quarter, at risk of breaking its 2023 business plan

Century Fiber Corporation (code STK) has just announced its Q2 financial report with not very positive results. Revenue was recorded at VND407.3 billion, down 23% over the same period. Cost of goods sold accounted for VND347.1 billion, down only about 18%.

This caused the company's gross profit to drop by 43% to VND60.2 billion. Gross profit margin dropped from 19.8% to only 14.8%.

Second quarter profit continues to decrease by 47%, risk of business failure, picture 1 — Century Fiber Corporation (STK) is at risk of failing its 2023 business plan due to a sharp decline in profits in the first 6 months of the year (Photo TL)

During the period, both financial revenue and financial expenses recorded negative numbers, at 6.3 billion and 1.1 billion VND. However, it is worth noting that interest expenses increased nearly 3 times, from 1.6 billion to 4.5 billion VND.

Business management costs increased from VND14.5 billion to VND16.6 billion, while sales costs decreased slightly from VND4.9 billion to VND3.9 billion. After deducting all costs and taxes, Century Fiber's after-tax profit reached VND37.5 billion, down 47%.

This is the second consecutive quarter that Century Fiber has recorded a decline in both revenue and profit. By the end of the second quarter, the cumulative revenue of the first 6 months of the year of Century Fiber reached 695 billion, down 41% while after-tax profit was only 39 billion, down 73%.

Compared to the 2023 target of 2,149 billion in revenue and 253 billion in after-tax profit, STK has only completed 32.3% of the revenue plan and 15.4% of the annual profit plan. If the business situation in the 3rd and 4th quarters does not improve, Century Fiber will face the risk of breaking the full-year business plan.

Debt increases, cash flow suddenly turns negative by tens of billions

By the end of the second quarter, the total assets of Century Fiber reached VND2,281.3 billion, up 7.4% over the same period. Of which, cash and short-term deposits accounted for VND228 billion, trade receivables and other receivables increased sharply, from VND315.5 billion in the same period to VND627.4 billion. This shows that a large amount of STK's assets are only on paper, in the form of receivables.

The company's debt record also tended to increase when short-term loans increased from VND308.1 billion to VND357.7 billion. This is also consistent with the record of interest expenses increasing by 3 times compared to the same period, up to VND4.5 billion.

The net cash flow from operating activities of Century Fiber also recorded a negative of VND19 billion while in the same period it was still positive VND225.3 billion. In the net cash flow from investing activities, the company also spent VND216.2 billion to purchase assets, factories and equipment for production and business activities.

Regarding cash flow from financial activities, the company received an additional VND 475.3 billion in loans and spent VND 426.6 billion to pay interest and principal on old loans.

The revenue was not enough for expenses, causing Century Fiber's cash to drop sharply to only 228 billion VND.

The company's business is bad, but STK shares continue to increase in price.

A strange paradox is that despite the poor business results in Q1, which continued into Q2 2023, STK's stock price continued to skyrocket.

Specifically, at the beginning of 2023, STK code was recorded at a price of nearly 22,500 VND/share. After that, although the first quarter business results were not positive, STK still maintained around the price of 23,500 VND/share.

STK's growth momentum started strongly from the trading session on May 22, 2023 at VND 23,629/share. Up to now, in the trading session on July 21, 2023, this code has reached the price of VND 30,400/share.

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