VietNamNet Bridge – Five cement companies have reported big losses, including the four belonging to state owned economic groups or general corporations – Dong Banh, Cam Pha, Thai Nguyen and Ha Long.

Cement manufacturers owe money from right and left

High hopes were put on the Dong Banh cement project in Lang Son province, the one whose three big shareholders are all the “big guys” – COMA, the mechanical engineering corporation, MIE, the machine and industrial equipment corporation, and the Lang Son Cement Company. Of the three, COMA, a giant in its field, holds the controlling stakes of 88.23 percent.

The giant-backed project then received a lot of preferences from banks. It could borrow 272.142 billion dong from the Vietnam Development Bank (VDB), 183.467 billion dong from Agribank, and 747.850 billion dong from ANZ (the loan from ANZ is guaranteed by the government).

However, the well-known cement plant has to stop operation since the first quarter of 2012 after incurring the huge loss of 197 billion dong, while it would have to pay over 600 billion dong in principal and loan interest in the next five years.

Due to the big loss, the Ministry of Finance has to come forward and pay 3.5 million dollars back to ANZ for the Dong Banh plant. Since the plant has stopped operation, it’s still unclear how it can arrange money to pay debts.

The Cam Pha Cement Plant developed by Vinaconex, a giant in the civil engineering sector, is also facing the huge debt of 1259 billion dong after three-year operation.

In an effort to escape from “the Cam Pha trouble”, Vinaconex is considering selling stakes and withdrawing capital from the project. The shares prove to be very cheap, offered at below 10,000 dong (the face value) per share, which means that Vinaconex would have to incur a big loss from the deal.

The Ha Long Cement Plant in Quang Ninh province had reported the loss of 1215 billion dong by the end of March 2012. As scheduled, the plant would have to pay back the loans guaranteed by the Government to foreign banks. These include 437 billion dong to Natixis and 28 billion dong to the Northeast Investment Bank.

Since incurring big losses, Ha Long has to borrow money to pay the due debts. By the end of the first quarter of 2012, the company had reportedly borrowed 2 trillion dong for debt payment. It is now facing the accounts payable worth 1200 billion dong in 2012-2015.

The Thai Nguyen Cement Plant, which also received a lot of preferences, including the low-interest rate loans and guaranteeing for foreign loans, has reported the loss of 77 billion dong.

Meanwhile, it still runs at below 60 percent of the capacity, with which the production cost would be very high and unprofitable enough to cover the loan interest rates. The plant needs to run at 80 percent of capacity at least to ensure profit.

The Ministry of Finance, as the guarantor for the loan, had to pay 4.2 million euro to BNP Paribas in July 2011, because the Thai Nguyen Cement now does not have money to pay debts.

The bitter lesson

Experts have pointed out that all the above said cement projects are listed in the cement industry development strategy and they enjoyed a lot of investment incentives. However, despite the preferences, they still incur losses and owe money from right and left.

The experts have also pointed out that the loss incurred by cement plants should be seen as another bitter lesson about the state owned enterprises’ movement on making investment in multi-fields.

Tran Thuy