Hoa Binh Construction Group (HBC)'s second-quarter financial report reveals a profit after tax of nearly 42 billion VND, a 16-fold decrease compared to the same period last year. According to the management board, the main reasons are increased business administration expenses and a decrease in other profits.

Business administration expenses reached almost 94 billion VND, while in the same period last year, there was a reversal of over 220 billion VND, resulting in a net increase of nearly 314 billion VND. This is primarily due to the parent company's increase in bad debt provisions of nearly 261 billion VND, with the remainder attributed to provisions made by subsidiaries.

Bad debt provisioning involves setting aside funds to cover potential losses from overdue receivables and those not yet due but likely to become uncollectible. This is a crucial measure for companies to identify risks, ensure accuracy and honesty in financial reporting, and better manage debt.

As of the end of June, HBC had over 10,100 billion VND in short-term receivables. More than 62% of this consists of customer receivables, followed by receivables based on construction contract progress and prepayments to sellers. While the company did not specify the exact amount of bad debt, they have recorded over 1,823 billion VND in provisions.

This figure aligns with information previously mentioned by Le Viet Hai, chairman of HBC's board of directors, during the annual meeting in late April. Hai stated that the company has around 1,800 billion VND in overdue debt, but expects to fully recover it within three to five years. This year alone, HBC anticipates collecting approximately 400 billion VND.

HBC's leadership believes that debt collection is a complex issue, with each project having unique circumstances. The company will collaborate with investors to address difficulties, potentially converting debt into products, shares, or co-investing in projects to ensure their completion. Legal action will be pursued only as a last resort. The company added that it has never lost a lawsuit and has always recovered both principal and interest.

In addition to the bad debt provisions, the company's profit was also impacted by a decrease in other profits, down over 393 billion VND to just over 121 billion VND in the second quarter. This is attributed to a decline in income from the disposal of machinery and equipment. Without this income, HBC might have incurred a loss this quarter, as their net profit from business operations was negative, exceeding 74 billion VND.

Le Viet Hai, Chairman of the Board of Directors of Hoa Binh Construction Group. Photo: Thanh Tung

Le Viet Hai, Chairman of the Board of Directors of Hoa Binh Construction Group. Photo: Thanh Tung

As of the end of June, the company's total liabilities were approximately 13,596 billion VND, a slight decrease of 68 billion VND compared to the beginning of the year. Almost 91% of these liabilities are short-term, with financial debt amounting to about 4,145 billion VND, down almost 5% from the beginning of the year.

Speaking to shareholders at the late April meeting, Le Viet Hai asserted that HBC's difficulties stemmed solely from cash flow imbalances, and the company possesses sufficient internal resources to recover. The company's main driving force comes from expanding into foreign markets such as Kenya, Cambodia, Australia, the US, and East African countries.

This year, Hoa Binh Construction aims for 9,000 billion VND in revenue and 360 billion VND in after-tax profit. After six months, the company has achieved just over 18% of its revenue target and over 13% of its profit target.

Tat Dat