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Unprofitable listed companies, who are they?
A lot of listed companies reported losses for 2008 while twelve share items have been put under the state watchdog’s control, which has raised big worries among investors. However, they have been reassured that the situation should not be worried about too much..
The ‘bitter pill’ from financial investments
Finance and securities companies seemed to be the ones which suffered the most from financial investments with Bao Viet Securities (BVS) and Kim Long Securities Companies (KLS) reporting the loss of VND 453 billion and VND 347 billion in 2008, respectively.
The companies in other fields that made financial investments have also incurred losses from the investments. The Refrigeration Engineering Enterprise (REE), whose shares are considered a ‘blue chip’ at the HCM City Stock Exchange, though profiting VND 9 billion in Q4 and got the total turnover of VND 1.1 trillion in 2008, had a loss of almost VND 140 billion in 2008 after making provisions of VND 467 billion for financial investments.
Meanwhile, the finance report of SAM, a cable and telecommunication material producer showed that it suffered the loss of VND 155 billion in Q4 2008 after making provisions of VND 205 billion for financial investments.
Market fluctuations telling on companies
Low sales, big stocks, input material price fluctuations, exchange rate fluctuations all were the reasons that brought loss to many enterprises in Q4.
Ben Tre Seafood Company (ABT) saw the pre-tax profit in Q4 down by 42.62% from Q3, Seafood Company No. 1 (SJ1) down by 34%, while Nam Viet Joint Stock Company (ANV) suffered the loss of VND 46.4 billion in the quarter.
Rubber companies have also suffered from the sharp sales decreases. The Da Nang Rubber Company (DRC) saw the profit in Q4 down by 75% from Q3, Tay Ninh down by 31.5%, while Thong Nhat Rubber (TNC) incurred the loss of VND 11.1 billion.
High financial costs due to the exchange rate fluctuations and high interest rates were also one of the reasons behind the reported losses. Pha Lai Thermopower Joint Stock Company, for example, lost VND 1 trillion in Q4 due to the VND/yen exchange rate fluctuation.
Don’t be panic
Despite the losses reported by listed companies, experts believe that the situation is nothing to really worry about. They have advised investors to calm down as it is still necessary to find out the reasons behind the losses and consider the possibility of the businesses’ recovery.
REE, for example, incurred loss mainly because of the financial investments, while its main business activities have been going well. In January 2009, REE got the pre-tax profit of VND 20 billion, while it plans to obtain VND 1.4 trillion in turnover and pretax profit of VND 250 billion in 2009. While making investment decisions, investors not only consider businesses’ short term profit but also the businesses’ potentials in long term.
Experts have also pointed out that the loss incurred by many companies was caused not by the bad business strategies, but rather this should be seen as the result of the global economic recession.
Explaining the loss of VND 335 billion in Q4 2008, Dang Thanh Tam, Chairman of the Kinh Bac Urban Development Joint Stock Company (KBC) said that the global economic recession has made the companies and their clients suffer. As the result, KBC and the clients had to terminate contracts before they were due. Tam said that KBC wants to share difficulties with the clients because it hopes to welcome the clients again when the national economy betters off and investors again seek workshop premises.
In related news, the HCM City Stock Exchange (HOSE) on February 16 announced that five more share items have been put under control, raising the total number of share items put under control to twelve.
The share items have been put under control after the companies reported losses for 2008. The twelve share items include blue-chips, like REE and SAM.
The HCM City Stock Exchange (HOSE) on February 16 announced that five more share items have been put under control, raising the total number of share items put under control to twelve.
The share items have been put under control after the companies reported loss for 2008. The twelve share items include blue-chips, like REE and SAM.
Vietnamnet
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