The financial problems of Doan Nguyen Duc, president of Hoang Anh Gia Lai Group and one of Vietnam’s most influential businessmen, are widely known. However, it was only until 2016 that his company’s income turned negative.
|Doan Nguyen Duc |
Hoang Anh Gia Lai Group (HAGL), one of Vietnam’s largest firms, has just released its financial report for the fourth quarter of 2016, posting an all-time high revenue along with its first net loss in 10 years.
Fourth-quarter loss smaller than last year
According to its consolidated financial statements, in the fourth quarter, HAGL generated a net revenue of VND1.543 trillion ($67.8 million), a 47 per cent increase from the same period last year, and recorded the cost of goods sold at VND1.307 trillion ($57.5 million). Therefore, fourth-quarter gross profit soared from VND3 billion ($131,910) in 2015 to VND235.9 billion ($10.4 million) this year.
The quarter’s income from financial activities was VND176.6 billion ($7.8 million), down 15.7 per cent from the same period last year, but interest expenses rose to VND400 billion ($17.6 million), higher than the VND350 billion ($15.4 million) in the same period last year.
Also in the last quarter, sales, general, and administrative expenses in total cost nearly VND43 billion ($1.89 million). In this period, HAGL’s income from associated companies was VND15 billion ($659,550), a significant improvement from last year’s loss of nearly VND1 billion ($43,970).
As a result, the parent company in the fourth quarter suffered an after-tax loss of over VND124 billion ($5.5 million), much smaller than the VND706 billion ($31 million) loss in the same period of 2015.
First net loss in ten years despite record revenue
The net loss for the entire year was VND1.02 trillion ($44.8 million), a sharp negative turn of event compared to the 2015 net profit of VND502 billion ($22.1 million), marking HAGL’s first net loss in ten years.
A main driver was sharp increases in interest expenses and losses in most operations.
Interest expenses suffered a sharp 44 per cent increase from VND1.078 trillion ($47.3 million) in 2015 to VND1.557 trillion ($68.4 million) in 2016, reflecting the huge burden that the nearly VND36.103 trillion ($1.6 billion) in debt is putting on the group.
Big one-time losses included VND383.6 billion ($16.9 million) from asset disposal as well as VND502.4 billion ($22.1 million) from the revaluation of fixed assets. Sales and administrative expenses also went up significantly.
Meanwhile, in 2016, HAGL generated a record net revenue of VND6.454 trillion ($283.8 million), a 3.2 per cent growth from 2015.
Cattle breeding has been the biggest source (48 per cent of the net revenue), generating sales of VND3.5 trillion ($154 million) and contributing to 35 per cent of the gross profit.
The group also earned a net revenue of VND879 billion ($38.6 million) from services, VND628 billion ($27.6 million) from sales of goods, and VND483 billion ($21.2 million) from real estate investments.
However, all of HAGL’s businesses, except for services, reported an on-year drop in gross profit. The profit of the cattle breeding business line fell 54 per cent, while sugar and corn saw 69 and 65 per cent drops each. Real estate investment profit declined by 22 per cent, while its rubber business suffered a loss of VND30 billion ($1.3 million).
Burdening debt restructuring
HAGL’s on-going debt burden has increased, as chairman Duc worked to restructure its debts. As of December 31, 2016, total liabilities increased by 9 per cent, to VND36.103 trillion ($1.6 billion), of which short-term liabilities slightly increased to VND13.883 trillion ($610.4 million).
According the group’s financial statements, all six bond holders have extended the due dates for HAGL’s bond volume of VND12.4 trillion ($545 billion). This means that the group now has until 2021-2026 to pay off the bonds that were previously due in 2017-2020.
Meanwhile, HAGL's total asset volume was VND53.015 trillion ($2.3 billion), a 7.7 per cent increase during the year. Its debt-to-equity ratio was 2.13, higher than the 2.03 ratio at the end of 2015.
On the other hand, short term assets were VND10.6 trillion ($466 million), including VND794 billion ($34.9 million) of cash and equivalents, which fell 18 per cent on-year, and VND1.986 trillion ($87.3 million) of inventory, which declined by a sharp 45.6 per cent from last year.