In a recent report to shareholders, the board of directors of Chuong Duong Beverage JSC (Chuong Duong Sarsaparilla, stock code: SCD) revealed a rapidly declining cash flow. The company has delayed payments to suppliers, tightened expenses, and explored fundraising options to maintain operations.

However, two substantial debt repayments to Saigon Beer - Alcohol - Beverage Corporation (Sabeco) are due in October and December. This outstanding debt of nearly 490 billion VND represents 66% of the company's total debt. Chuong Duong Sarsaparilla states it currently lacks the capacity to repay these debts, as doing so would severely deplete its cash flow.

Chuong Duong Sarsaparilla on supermarket shelves. Photo: Phuong Dong

Chuong Duong Sarsaparilla on supermarket shelves. Photo: Phuong Dong

Chuong Duong Sarsaparilla's management is seeking shareholder approval to extend the repayment period for these two debts by up to one year. As the parent company and majority shareholder with over 62% ownership, Sabeco holds significant influence over SCD's fate and can either approve or reject this proposal.

"If this proposal is not approved, the company may face bankruptcy," Chuong Duong Sarsaparilla's management stated in the report.

In its audited financial report for the first six months of this year, Chuong Duong Sarsaparilla indicated no reason why the parent company wouldn't continue its financial support.

Chuong Duong Sarsaparilla’s financial situation is precarious due to 18 consecutive quarters of losses. In the first half of this year, the company's revenue was over 76 billion VND, a 22% decrease compared to the same period last year, resulting in a net loss of approximately 47 billion VND. Management attributed the poor performance to several factors, including lower than expected sales due to an early rainy season, high interest expenses, and high land rental costs.

This latest loss brings the accumulated deficit to 313 billion VND and negative equity to 124 billion VND. As of the end of June, the company's liabilities of nearly 740 billion VND exceeded its assets.

Chuong Duong Sarsaparilla projects 260 billion VND in revenue for this year, a 42% increase compared to last year. This target is based on plans to expand its distribution network in southern and central Vietnam and launch new products. Despite this, the company anticipates a loss of 80 billion VND, 15 billion VND more than the previous year.

In a statement explaining the half-year business results, management outlined efforts to address the losses by increasing market penetration and distribution channels to boost sales volume. Cost optimization is also identified as a key factor in improving business performance.

Phuong Dong