2019 business results: Why did somebusinesses suffer big losses?

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Unfinished construction of fruit orchards is costing a lot of Hoang AnhGia Lai. Photo: ST.

Loss due to high costs

According to the consolidated financial statements for the fourth quarter of 2019, Hoang AnhGia Lai Joint Stock Company recorded a turnover of VND2.082 billion, down 61% over the same period a year earlier. Losses after tax wereVND1,609 billion. The company suffered heavy losses due to interest expenses, conversion costs and large asset revaluation. Accordingly, by the end of 2019, the total assets of this enterprise reached nearly VND38,600 billion, but the unfinished basic construction costs for orchards, rubber orchards and palm oil gardens are accounting for the majority of29%. With this result, the company only fulfilled 41% of the revenue plan and did not complete the profitplan before tax of VND88 billion.

Another company that also had losses of trillions of dong is Tien Len Steel Joint Stock Company. In the whole year of 2019, the revenue of this enterprise decreased by 9% to VND5,396 billion over the same period in 2018.

The holding companies’ loss after tax wasVND143 billion, while in the same period in 2018sawprofit of VND85 billion, failing to fulfill the plan of VND102.1 billion of after-tax profit. The losses of this enterprise aredue to high financial costs. In the fourth quarter, costs of Tien Len Steel increased by 18% and management costs increased sharply by 70% to VND101 billion due to increased provision expenses.

Although the whole year still saw a profit of over VND350 billion, in the fourth quarter, Masan Resources Joint Stock Company reported a loss of over VND120 billion for the first time.

The main reason was the high cost, in particular, selling expenses increased by 20% to VND25 billion and management expenses tripled over the same period, to VND64 billion.

Previously, this company escaped a loss in the second quarter thanks to the reimbursement of corporate income tax. Similarly, another subsidiary company of Masan Group reported a loss in the fourth quarter – Masan MEATLife. Accordingly, this company in the fourth quarter lostVND37 billion of profit after tax of the holding company’s shareholders, while net sales decreased by 6.3% over the same period, but financial and selling expenses increased by 61% and 32% to VND111 billion and VND241 billion, respectively.

Expanding investment is not favorable

It can be seen that the main reason of businesses in losing money is due to high operating costs. In addition, the expansion of investment and business also caused many businesses to accept losses in the short term, to achieve better results later.

Typically, FPT Retail Joint Stock Company (FPT Retail) has for the first time reported a loss since its IPO in the fourth quarter, with a 1% decrease in revenue and a negative net profit of VND26 billion. According to the company, the reason for the negative profit is the provision for bad debts of F-Friends and Subsidy programs, investing in digital conversion for the store chain. At the same time, FPT Retail is also in the process of expanding Long Chau drugstore chain to increase market share after the trial period. This has made the company's 2019 revenue of more than VND16,600 billion (up 9%) and profit after tax of nearly VND204 billion (down 41%). Compared to the plan set out at the beginning of the year, the revenue achieved 94% and the profit after tax reached 49%.

For GTNfoods Joint Stock Company, although it has become a subsidiary of Vinamilk, the business results have not yet been positive. Accordingly, at the end of 2019, this company recorded revenue of VND2,970 billion, down 1%, losing the holding company's profit aftertax of over VND60 billion. The company implemented 89% of revenue plan and did not complete the profit plan of VND90 billion for the holding company's shareholders. Part of the reason whythis business lost money is the business operations of the joint venture company, ineffective links and strong financial costs due to the loss of divestment of investments.

Although many businesses reported losses in 2019, experts still think there are many bright spots in the business picture in general.

According to the Investment Strategy Report of VnDirect Securities Company, the profits of private businesses will improve in the coming years when the investment is effective, especially the Government continues to maintain the policy of promoting growth through cutting business costs and maintaining incentives for priority industries and sectors.

Financial report for fourth quarter: Seafood enterprises gain good revenue

Therefore, in 2020, experts predict that the retail and food and beverage (F&B) industry will continue to shine in the context of strong domestic consumption growth and consumer optimism. Moreover, the support of policies and the rise of private capital inflows can help the manufacturing and technology industries take off in 2020. In addition, logistics and industrial enterprises continue to enjoy benefits from FDI growth and trade mobility. Flexible monetary policy may put the banking industry on the investment focus in 2020.