VIR | Thu, May 8, 2014 03:48:00 PM
As Vietnam’s largest state-owned rice exporter, Southern Food Corporation Limited (Vinafood 2) enjoys numerous incentives from the state while its many member companies are submerged in losses, reported dantri.com.vn.
Vinafood 2 consists of 44 member companies, of which 14 are under its direct management.
By the end of 2013, half of these 14 businesses posted nearly VND1 trillion ($47.6 million) in cumulative losses and irrevocable debts, according to Vinafood 2 reports.
Specifically, Tra Vinh Food Company reported losses of VND134 billion ($6.4 million), An Giang Food and Foodstuff Company VND83 billion ($3.9 million), Bac Lieu Food Company VND42 billion ($2 million), and Tien Giang Food and Agricultural Products Company VND25 billion ($1.2 million).
Poor management is believed to be a major reason behind Vinafood 2 member’s huge outstanding debt in the amount of VND420 billion ($20 million)
Specifically, in late 2012, member Vinh Long Food signed contracts to export 94,000 tonnes of sliced cassava for two other businesses with delivery slated for June 2013. The Thinh Phat Kon Tum Company was responsible for supplying the products.
This deal was questionable, as Vinh Long Food advanced money before receiving the products, got staff members to forge invoices showing receipt of the goods and allowed Thinh Phat Kon Tum staff to sell off products resulting in losses of VND130 billion ($6.2 million).
Other member companies under Vinafood 2 signed contracts to sell rice to Ho Chi Minh City-based Vo Thi Thu Ha Trade – Import Export Company Limited and its two subsidiaries, Tan Hoa Loc and Binh Loi Limited, that are still unpaid for.
As of this time, Vo Thi Thu Ha Limited also owes VND174 billion ($8.3 million) to Vinh Long Food, VND160 billion ($7.6 million) to Hau Giang Food, VND47 billion ($2.2 million) to Dong Thap Food, and VND26 billion ($1.2 million) to Soc Trang Food.
In late April 2014, Vinafood 2 filed a lawsuit against Vo Thi Thu Ha Limited in the People’s Court of Ho Chi Minh City’s Phu Nhuan District, looking to recoup these owed amounts.
Three out of seven of Vinafood 2’s loss-making member firms were put under financial supervision because of these losses.
These firms used short-term bank loans for long-term investments which they are reportedly having trouble paying back.
For instance, Tra Vinh Company, with cumulative losses of VND134 billion ($6.3 million), took out VND82 billion ($3.9 million) in short-term loans for long-term investments.
“This has brought the company’s total debt/equity ratio to VND629 billion ($30 million)/minus VND18.5 billion ($880,000), clearly showing the inability to pay back its debts as well as a fundamental disregard for effective finance amid a difficult time in the market,” said a Vinafood 2 report.
An Giang Food and Foodstuff and Bac Lieu Food face the same issues and Tien Giang and Tra Vinh Foodstuff and Agricultural Products reportedly have plans to suspend their operations.
Despite finding numerous cases of wrongdoing by its subsidiaries, Vinafood 2’s penalties have not been harsh enough. They have been limited to internal chiding, which has allowed the situation to persist.
According to Vinafood 2 former general director Truong Thanh Phong, a combination of factors are behind its subsidiaries repeated losses, most notably a lack of responsibility from their management.
On the Vinafood 2 case, head of the Enterprise Management Department at the Ministry of Agriculture and Rural Development (MARD) Do Van Nam said recently, “The ministry is investigating these consistent losses and we will release an official statement on the case early next week.”
“After making clear Vinafood 2’s receivables, MARD will urge its management to work on plans to speed up its recouping of debts as the company is a state corporation with MARD as the state’s capital representative,” Nam explained.