The HCM Stock Exchange has warned that shares of Truong Thanh Furniture Corporation (HOSE: TTF) could be delisted as its accumulated losses might have exceeded the company’s charter capital.

A wood production line at Truong Thanh Import-Export Co., Ltd’s factory at north-west Dong Hoi Industrial Park in the central province of Quang Binh.

According to the company’s revised first-half financial report, Truong Thanh Furniture recorded negative VND1.46 trillion (US$64.9 million) in the undistributed post-tax profit as of June 30, equal to 98 per cent of the company’s charter capital.

The report was released in late August after the State Securities Mission rejected the company’s request to extend the deadline for financial report submission to September.

According to auditors Ernst & Young, the amount of VND84.6 billion in loan interest included by the company in its financial report as income was ineligible under current regulations.

Truong Thanh Furniture said in a note to the State Securities Commission and the HCM Stock Exchange in late August that the loan interest was erased by its creditors as they found the firm’s business plan was possible to achieve.

The lenders were Viet A Commercial Joint Stock Bank, Kien Long Commercial Joint Stock Bank and Sai Gon-Ha Noi Commercial Joint Stock Bank.

If Truong Thanh Furniture had failed to record that amount of money as its income in the financial report, the company would have suffered a net loss of VND83 billion for the first six months of 2017, raising its undistributed post-tax profit to negative VND1.5 trillion.

The potential amount of undistributed post-tax profit could exceed the firm’s charter capital by VND55 billion.

The HCM Stock Exchange said in its statement last week that the company’s share could be delisted from the stock market in accordance with the Article 60, Decree 58/2012/ND-CP issued by the Government on July 20, 2012.

The article states that a company’s shares will be delisted if that company suffers losses for three consecutive years or its accumulated loss exceeds its charter capital, according to the firm’s latest financial report.

In order to avoid being delisted, the company has to either reduce its accumulated loss, which was reported in the six-month financial report, or increase its charter capital.

At the end of May, the company announced it would increase its charter capital in the second half of 2017 to restructure the firm’s financial system and provide an increase in its working capital, improving the company’s performance.

The company planned to issue about 100 million shares in the third quarter of this year in an attempt to collect at least VND1 trillion.

The share issuance plan was submitted to the company’s shareholders in mid-June 2017, but no decision has been made up to now.

Shares of Truong Thanh Furniture, listed on the HCM Stock Exchange as TTF, fell 3.6 per cent on Monday to close at VND8,000 per share. The company’s shares have fallen about 81 per cent from its all-time high of VND43,600 per share hit on July 18, 2016.

The sharp fall of Truong Thanh Furniture’s shares came after the firm in mid-2016 failed to sell a part of its capital to Tan Lien Phat Construction Investment Company, a member of property developer Vingroup. 

VNS