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Giant rice exporter incurs huge loss

VietNamNet Bridge - The Southern Food Corporation, also known as Vinafood 2, one of two of Vietnam's largest rice exporters, has reported an accumulative loss of VND1 trillion. 
VietNamNet Bridge - The Southern Food Corporation, also known as Vinafood 2, one of two of Vietnam's largest rice exporters, has reported an accumulative loss of VND1 trillion ($45 million). 

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Vinafood 2’s latest report showed that the corporation has had difficulties since 2012. It made a pretax profit of VND167 billion in 2012, but then took a loss of VND268 billion in 2013 and VND900 billion in 2014.

Explaining the bad business performance, Vinafood 2 blamed the stiff competition in the world market. In the high-end market segment, Vietnam has to compete with Thailand, which has lowered selling prices in an effort to clear its stocks. 

Meanwhile, in the low-cost market segment, the plentiful supply from India makes it difficult for Vietnam to export products.

When asked about the huge loss of VND900 billion in 2014, Vinafood 2 said when it won the bid of providing 600,000 tons of rice to the Philippines, the domestic rice price unexpectedly increased. As a result, Vinafood 2 had to collect rice at high prices to fulfill the contract and incurred a loss of VND213 billion.

In fact, 74 member companies of the Vietnam Food Association (VFA) were assigned to implement the contract. However, as the domestic price surged, they all gave up. 

Despite the loss of VND1 trillion, the salaries paid to Vinafood 2’s managers are still high. It paid VND30 million to managers in 2015 and plans to pay VND45 million in 2016.

Only Vinafood 2, as the major business, had to fulfill the contract.

In 2015, Vinafood 2 admitted the bad business performance in 2014. However, with drastic measures taken, Vinafood 2 began making profit. In 2015, it reportedly made a pretax profit of VND155 billion.

Thanks to the profit, the accumulative loss of the rice exporter fell to VND948 billion by the end of 2015.

Also according to Vinafood 2, the total accounts receivable by the end of 2015 had reached VND2.337 trillion, including VND653 billion worth of irrecoverable debt. The figure represented a VND50 billion decrease compared with 2014.

The giant has asked the state to allow it to apply a special policy to deal with irrecoverable debt and unused assets waiting for liquidation.

Prior to that, in March 2016, the enterprise proposed to the Prime Minister to exclude it from subjects for supervision to help it access bank loans more easily.

In late 2015, the government inspectors found wrongdoings at VInafood 2. The holding company was discovered violating the laws in lending and acting as a guarantee for loans worth VND1.7 trillion.

As a result, it has to pay debts for some of its subsidiaries, totalling VND258 billion.

Despite the loss of VND1 trillion, the salaries paid to Vinafood 2’s managers are still high. It paid VND30 million to managers in 2015 and plans to pay VND45 million in 2016.

Gov't to audit value assessment of Vinafood 2

Deputy Prime Minister Vuong Dinh Hue has asked the State Inspectorate to audit the result of the corporate value assessment of Viet Nam Southern Food Corporation (Vinafood 2) and resolve its financial issues.

The deputy prime minister instructed the inspectorate to complete the audit before December 1, 2016.

Earlier, the Ministry of Agriculture and Rural Development submitted to Prime Minister Nguyen Xuan Phuc its equitisation plan for Vinafood 2. Under the plan, the corporation will sell part of the State-owned capital in the corporation and issue more shares to raise its charter capital.

The corporation estimated its charter capital at VND5 trillion (US$224.2 million), equal to 500 million shares at VND10,000 per share. It will issue an additional 16.5 million shares to raise its charter capital.

Under the plan, the Government will retain 65 per cent of its stake, equivalent to VND3.25 trillion, after equitisation. The corporation plans to sell 25 per cent stake to strategic investors and 8.95 per cent through auction to domestic and foreign investors. The remaining stake will be sold to its employees.

Vinafood 2 earned VND22.75 trillion in revenue in 2015, a decline of VND3.55 trillion compared with 2014. The corporation last year incurred a loss of some VND9 billion, bringing total cumulative losses to VND1.06 trillion in the last three years.

The corporation was established under the Prime Minister's decision in 2010. It is one of the country's largest businesses in rice exports. However, its business results have shown continuous losses in recent years.

The corporation has proposed that relevant sectors implement special policies to resolve debts, which it failed to collect from its partners, and unnecessary assets in accordance with current regulations that are applicable on a certain businesses that conduct equitisation.

In March 2016, the corporation also asked the Prime Minister to remove it from the list of businesses under special supervision to create conditions for it to maintain credit relations with banks. — VNS


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