Vina 2 (VC2) borrows hundreds of billions to maintain operations, negative cash flow

Profit target slightly reduced

Vina 2 Investment and Construction Joint Stock Company (VC2) recently announced documents for the 2023 General Meeting of Shareholders.

Vina 2 (VC2) borrowed hundreds of billions to maintain operations. Photo source: TL

In particular, the Company set a business plan for 2023 with a consolidated revenue target of VND 2,297 billion, 2.25 times higher than the 2022 figure, but the after-tax profit target decreased slightly by 1% compared to the same period, down to VND 29 billion.

In 2023, regarding construction activities: VC2 said it will speed up construction of contracted projects, ensuring the progress required by investors and general contractors.

Including the I-Tower project, the structural construction of both buildings is being carried out as well as focusing on accelerating the completion of the project; the Vina2 Paranoma project will complete the entire project and hand it over to customers in the third quarter of 2023; the commercial street project of 3/2 Street extending Hau Nghia - Duc Hoa - Long An will also be completed in its entirety and handed over to the investor...

Regarding bidding: The Company is also waiting for the bidding results of 16 packages with a total target bid value of VND 3,261 billion. At the same time, it is implementing internal project bid packages invested by the Company with an estimated value of about VND 250 billion. In addition, it is researching and seeking bids for packages from other investors with an estimated value of VND 1,300 billion.

To implement projects and orientations for 2023, the Company also needs to urgently prepare human resources and especially financial resources.

The financial solutions offered by the Company are very specific such as:

Continue to increase charter capital to at least 700 billion VND to meet the Company's production and business requirements, while improving capital efficiency and avoiding scattered investment.

In addition, the Company emphasized the need to recover capital from the value of unfinished volume, inventory, outstanding and uncollectible debts.

In particular, focus on debt collection for Investors in projects that the Company has completed such as Aqua Park Bac Giang , Apec Thai Nguyen, Apec Hai Duong, Royal Park Bac Ninh, Tower A, B, C Project - Intracom, An Khanh Splendora Zone 8 Project, Hanovid Project...

Regarding the capital mobilized to implement the projects, currently VC 2 is also facing great debt repayment pressure when on February 7, Vina2's bondholders held a bondholders' conference and agreed to postpone the maturity date by one year for the bond code VC2H2122001 (amount of 118.7 billion VND). At the same time, the commitment to pay all accrued interest to bondholders is calculated at 150% of the announced interest rate (11.5%/year).

The above one-year bond lot was issued by Vina2 to raise capital for the following purposes: increasing the scale of operating capital and supplementing capital for the construction of the I-Tower Quy Nhon apartment service and trade center. The investor of the above project is Do Thanh Real Estate Investment and Development Joint Stock Company.

Profits plummet, cash flow is negative

According to the Financial Report for the first quarter of 2023, the Company recorded revenue of 123 billion, down 40% year-on-year. Gross profit margin decreased from 16.4% to 13%. After deducting expenses, VC2's net profit was only 2.3 billion VND, down 81.6% year-on-year and only achieved 8% of the year's profit plan.

In addition to declining business results, VC2 also encountered difficulties in cash flow. It continued to record a negative cash flow of VND439 billion from business activities, while in the same period last year it also recorded a negative VND402 billion.

Business activities do not generate cash flow when the cash outflow is too large. The large payment of more than 527 billion VND in the period for payables and payables is the main reason why the business's cash flow is increasingly shrinking, while the increase in inventory value to more than 60 billion is also the reason that significantly affects the cash flow from the business activities of the business.

At the same time, details on cash flow from financial activities also show that the Company is borrowing 570 billion to finance operations during the period. This figure is 3 times higher than the same period recorded.

As of March 31, 2023, payables accounted for 69% of the company's total capital, at VND 1,531 billion. Of which, short-term debt accounted for the majority at VND 1,383 billion. The capital structure shows that the company is operating based on 63% short-term debt, which is a significant liquidity pressure for the Company.

In the asset structure, short-term receivables amount to VND 1,175 billion, accounting for 53% of the company's total assets, showing that the company's capital is being occupied by other parties. Of which, MST Company owes VND 122 billion, Vietnam Construction and Import-Export Corporation owes VND 68 billion, and receivables from construction teams are VND 168 billion.

Source: Financial report Q1/2023

According to the first quarter financial report, MST also recorded a 96% decrease in after-tax profit when it recorded less than 500 million while in the same period last year, it made a profit of more than 12 billion VND. The Company's cash holdings as of March 31, 2023 were also only more than 900 million VND.

Similarly, Vietnam Construction and Import-Export Joint Stock Corporation also recorded a sharp decline in business efficiency when its after-tax profit was only nearly 19 billion VND, down 98% compared to the first quarter of 2022.

With the declining business situation and the low cash balance of its major customers, VC2 certainly cannot expect its short-term receivables to be paid soon.

Source: https://www.congluan.vn/lai-rong-quy-1-boc-hoi-82-dong-tien-am-nang-vina-2-vc2-vay-no-hang-tram-ty-de-duy-tri-hoat-dong-post252398.html