Strategic shareholders avoid direct capital contribution to Pomina Steel

Pomina Steel Corporation (code POM - HoSE) announced additional documents for the 2024 Extraordinary General Meeting of Shareholders, the meeting is scheduled to be held on March 1 in Ho Chi Minh City.

In order to synchronize the steel smelting and rolling stages to optimize production capacity and at the same time improve the financial structure, Pomina Steel restructured by establishing a new legal entity, Pomina Phu My Joint Stock Company.

In which, Pomina Steel will contribute capital in kind including all land, factories, equipment lines and strategic investors will contribute capital in cash.

Pomina Steel added that it will use the money recovered from the new legal entity to pay short-term and long-term debts to banks, debts payable to suppliers and the remaining capital to supplement working capital.

In fact, with the establishment of a new legal entity, the group of strategic shareholders when contributing capital to Pomina Phu My Joint Stock Company, the group of strategic shareholders is only responsible for Pomina Phu My Joint Stock Company, not responsible for obligations related to Pomina Steel.

It is known that Pomina Steel is facing many notable problems from accumulated losses, using short-term capital to finance long-term assets...

Previously, in January 2024, the Board of Directors of Pomina Steel passed a resolution to temporarily suspend the implementation of the private offering plan to strategic investor Nansei (Japan). The detailed reason for this decision was not announced by the Board of Directors of Pomina Steel.

The offering plan was approved at the annual general meeting of shareholders in mid-July 2023. Initially, the company planned to issue more than 70.17 million shares to Nansei Steel at VND10,000 per share to raise nearly VND702 billion. The purpose of the mobilization is to increase equity, supplement working capital, and prepare finances to implement the plan to restart the blast furnace in 2024. The private placement is expected to be divided into two phases. Phase 1 will issue about 10.6 million shares in August 2023 and phase 2 will issue the remaining shares in September 2024.

However, in mid-September 2023, Pomina Steel asked shareholders for written opinions to postpone the start of the private offering to the third quarter of 2023. The reason for extending the offering time beyond the original plan, Pomina Steel Company said, was due to the waiting time for the State Securities Commission to grant the issuance license beyond expectations. At that time, the company also provided specific information about the plan to use the proceeds. Accordingly, the company plans to spend 500 billion VND to pay off bank debts and nearly 202 billion VND to supplement capital for production and business operations.

According to the plan, if the offering is successful, Pomina Steel's charter capital will increase to VND3,498 billion. Strategic investor Nansei Steel owns 20% of the charter capital.

Pomina continues to lose another 959.7 billion VND in 2023

In terms of business activities, in the fourth quarter of 2023, Pomina Steel recorded revenue of VND 333.28 billion, down 81.5% over the same period, the parent company's after-tax profit recorded a loss of VND 312.7 billion compared to the same period of VND 459.4 billion.

During the period, the Company no longer operated below cost price, resulting in a positive gross profit of VND 22.17 billion compared to the same period of negative VND 241.6 billion, an increase of VND 263.8 billion. In addition, during the period, financial revenue decreased by 71.7%, equivalent to a decrease of VND 21.72 billion, to VND 8.59 billion; financial expenses decreased by 2.6%, equivalent to a decrease of VND 4.8 billion, to VND 180 billion; sales and business management expenses decreased by 47.2%, equivalent to a decrease of VND 14.22 billion, to VND 15.92 billion; other profits recorded a loss of VND 148.3 billion compared to the same period of a loss of VND 35.3 billion, an increase of VND 113.1 billion; and other activities fluctuated insignificantly.

Thus, in the last quarter of 2023, gross profit only generated 22.17 billion VND while financial expenses amounted to more than 180 billion VND, and other activities lost more than 148 billion VND, these were the two main reasons leading to losses in the fourth quarter.

Explaining the continued loss in profit in the fourth quarter, Pomina Steel said that the Pomina 3 Steel Plant is still inactive but has to bear many costs, including interest expenses. The company is restructuring and has found a new investor. All procedures are awaiting approval from the General Meeting of Shareholders, scheduled to take place on March 15, 2024. After the General Meeting of Shareholders, the Company will put the Pomina 3 Steel Plant back into operation, expected in the first quarter of 2024.

In addition, Pomina Steel also said that the real estate situation is still frozen, steel consumption demand and revenue in the period decreased sharply, while fixed costs and high interest rates caused large losses in the period.

Accumulated in 2023, Pomina Steel recorded revenue of VND 3,281.2 billion, down 74.6% over the same period and profit after tax of parent company shareholders recorded an additional loss of VND 959.7 billion compared to the same period of loss of VND 1,166.9 billion.

It is known that in 2023, Pomina Steel Company plans to have a revenue of 9,000 billion VND and a loss of 150 billion VND in after-tax profit. Thus, the loss in 2023 has far exceeded the planned loss of 150 billion VND.

In addition, with continued losses in 2023, as of December 31, 2023, Pomina Steel's total accumulated loss is VND 1,270.96 billion, equal to 45.4% of equity.

In terms of cash flow, in addition to the second consecutive year of business losses, in 2023, Pomina Steel's main business cash flow also recorded a negative VND 331.3 billion compared to the same period of positive VND 15.3 billion. In addition, investment cash flow recorded a positive VND 8.2 billion and financial cash flow recorded a positive VND 127.1 billion.

Current liabilities exceed current assets

As of December 31, 2023, Pomina Steel's total assets decreased by 5.7% compared to the beginning of the year, equivalent to a decrease of VND 627.3 billion, to VND 10,404.3 billion. Of which, the main assets were long-term unfinished assets recorded at VND 5,808 billion, accounting for 55.8% of total assets; short-term receivables recorded at VND 1,603.2 billion, accounting for 15.4% of total assets; fixed assets recorded at VND 1,446.2 billion, accounting for 13.9% of total assets...

Regarding capital sources, by the end of 2023, total short-term and long-term debt increased by 1.5% compared to the beginning of the year, equivalent to an increase of VND 93.83 billion, to VND 6,312.47 billion and equal to 395.8% of equity (at the beginning of the year, it was recorded at VND 6,218.64 billion, equal to 238.1% of equity).

It is worth noting that, as of December 31, 2023, total short-term debt was VND 7,963.6 billion and short-term assets recorded VND 3,099.3 billion. Thus, short-term debt is VND 4,864.3 billion larger than short-term assets, or it can be understood that the Company is using VND 4,864.3 billion of short-term capital under 1 year to finance long-term assets with a term greater than 1 year.

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