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State groups see drop in profit
State economic groups have seen their business efficiency declining over the years, according to a review meeting held in Hanoi on Friday.
The Ministry of Planning and Investment in a report given at the meeting said all State economic groups made profits in 2010, but the margin was slim, and the profit has been dropping gradually.
Profits falling
According to the ministry, Vietnam currently has a total of 12 State groups mostly established by restructuring certain Corporations 91, which were so named according to the code of the Prime Ministerial decision governing their establishment.
In a report to the Prime Minister on reviewing the trial establishment of State groups, deputy minister Dang Huy Dong said that the business efficiency of these groups was declining. There are 10 out of 11 groups, excluding Vietnam Shipbuilding Industry Group (Vinashin), earning modest profits which have declined over the years, he remarked.
The latest figures from 10 groups showed that the average return on equity (ROE) was 13.6% last year, falling from 18.1% in 2008 and 14.62% in 2009. The after-tax profit on sales also dropped from 9.83% in 2009 to 7.07% last year, while return on assets also declined from 6.97% to 5.32% in the same period.
Besides, there is a great difference in business efficiency between groups. Specifically, some groups earned high ROE such as Viettel with 43%, Vietnam Coal and Mineral Industries Group (TKV) 27% and Vietnam Rubber Group (VRG) 24.55%. Meanwhile, others incurred loss or gained modest profit.
Such a high ROE partly resulted from advantages of each group, for instance, recent high price of rubber or monopoly of coal and minerals, according to the ministry.
The lower business efficiency of other groups was caused by the competition of firms in other economic sectors, especially in construction and manufacture.
Concerns of risks
The ratio of debt to equity of some groups, including Vietnam Industrial Construction Group and Vietnam Electricity Group (EVN), is also at the alarming high, at 3.91 and 4.25 respectively while the maximum level is regulated at only 3.
To evaluate financial risks, the ministry stated the need of understanding business conditions and considering the ratio in correlation with business efficiency of each group.
In some groups having good business results and high ROE, debts will benefit owners as well as the firm. However, debts will make it harder for groups with low business efficiency.
As a result, EVN is facing a high risk while the medium level of risk is seen in construction and property groups. Some subsidiaries of Vietnam Industrial Construction Group such as Dong Banh Cement Company and Construction Machinery Corporation are unable to pay foreign debts which have fallen due.
vietnamnet
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