What caused LEC to suffer heavy losses in the first half of 2024?

DNVN - Central Power Real Estate Joint Stock Company (stock code: LEC) has just reported its consolidated business results for the first 6 months of 2024 with a loss of more than 34 billion VND, revenue down more than 55% compared to the same period last year.

According to the consolidated business results report for the first 6 months of 2024 of Central Power Real Estate JSC (stock code: LEC), sales revenue and service provision in the first 6 months of 2024 only reached 31.3 billion VND, down 55.4% over the same period last year (70.2 billion VND).

After deducting expenses, after-tax profit was negative VND34.4 billion, a sharp increase compared to negative VND17 billion in the same period in 2023, equivalent to an increase of 102.3%.

According to LEC's explanation, the loss of VND34.4 billion in after-tax profit in the first half of this year was mainly due to a sharp decrease in consolidated revenue in the first 6 months of 2024 at a rate of 55.4% compared to the same period last year. The reason was that revenue from construction activities at the subsidiary during the period decreased, leading to gross profit in the first half of this year stopping at only VND2.9 billion, a sharp decrease of 52.5% compared to the first half of 2023.

Financial expenses in the period increased sharply compared to the first half of last year, mainly due to financial expenses of VND 18.5 billion arising from the subsidiary (Hoa Binh Sun Investment and Development Joint Stock Company) becoming an affiliated company.

Business management costs in the period decreased slightly by 1.4% compared to the same period last year, while other costs at subsidiaries in the period increased sharply compared to the first 6 months of last year, leading to a loss of 34.4 billion VND in after-tax profit in the first half of this year.

In the first 6 months of 2024, LEC lost more than 34 billion VND, revenue decreased by more than 55% compared to the same period last year.

Meanwhile, the parent company's after-tax profit in the first 6 months of 2024 was a loss of VND564 million.

LEC said that this loss was mainly due to a slight decrease in revenue in the first half of this year of 6.2% compared to the same period last year, due to incorrect revenue adjustment, and a slight increase in cost of goods sold of 4.8% compared to the same period in 2023, resulting in gross profit of only VND 314.2 million.

Business management costs in the first 6 months of 2024 increased sharply by 41.6% compared to the same period in 2023, mainly due to increased auditing costs during the period. At the same time, financial revenue in the first half of 2024 also decreased sharply with a decrease of 100% compared to the same period last year, causing a loss of VND 564 million in after-tax profit in the first half of this year.

Meanwhile, the consolidated business performance report for the first half of this year before and after review differed by VND24.6 billion, corresponding to a 253.5% increase in loss after review.

According to LEC, the main reason for this difference is due to the parent company's incorrect adjustment of revenue from Harmony apartment management costs by VND109.5 million. The subsidiary's adjusted increase in cost of goods sold is VND128.2 million. The subsidiary's financial revenue is adjusted up due to under-accounting by VND763.1 million.

In addition, LEC also adjusted to increase financial costs at subsidiaries, increase management costs at subsidiaries and reduce management costs at parent companies, leading to an increase in consolidated management costs.

LEC also adjusted the increase in corporate income tax due to related party transactions arising at subsidiaries.

“The above adjustments have caused the loss after corporate income tax after review to increase by 253.5% compared to the loss after corporate income tax before review,” LEC's report stated.

Regarding LEC shares, according to a recent announcement by the Ho Chi Minh City Stock Exchange (HoSE), this agency has transferred LEC shares from restricted trading to suspended trading according to regulations.

On June 28, LEC announced that LEC shares were put on warning status from June 25, 2024 according to HoSE's decision because the audited consolidated financial statements for 2023 had an exceptional audit opinion.

In addition, the undistributed profit after tax in the company's audited consolidated financial statements for 2023 is a negative number (taking into account the audit opinion of the auditor regarding the expenditure of undistributed profit after tax). The profit after tax of the parent company's shareholders in the audited consolidated financial statements for the last 2 years (2022 and 2023) is a negative number.

Regarding the recovery roadmap, it is expected that in 2024, 21 apartments in building D of the Soleil Danang project complex, transferred by Hoa Binh Sunshine Investment and Development JSC (subsidiary level 2), will be handed over and put into operation as apartments for rent.

Therefore, all interest expenses related to the loan for the transfer will be handed over to operate as rental apartments. All interest expenses related to the loan for the transfer of these 21 apartments will be directly accounted for in the business expenses in 2024. Therefore, the interest expenses related to the loan for the transfer of these 21 apartments on the long-term prepaid expenses account will no longer be as the auditor's exception opinion in the consolidated financial statements in 2023.

Regarding the parent company's after-tax profit on the audited consolidated financial statements for the last 2 years (2022 and 2023) being negative, the company said it had explained the reasons and announced the loss in the consolidated business results report for 2023 and the retroactive adjustment of the 2022 figures on June 12, 2024.

According to LEC, LEC's production and business situation is still stable. The company is focusing all resources to complete the 2024 production and business plan, striving to achieve profitable production and business results in 2024.

However, LEC's business results in the first half of this year, as mentioned above, were not bright, continuing to lose money and increasing losses compared to the same period last year.

Central Power Real Estate Joint Stock Company (Land Central) was established in 2007 by 4 founding shareholders, including: Vietnam Electricity Group, Central Power Corporation, Da Nang Power Company Limited and Khanh Hoa Power Joint Stock Company.

LEC's main business is real estate business with investment activities to create houses, buy houses, construction works for sale, lease; receive transfer of land use rights...

Thu An

Source: https://doanhnghiepvn.vn/kinh-te/chung-khoan/dieu-gi-khien-lec-lo-nang-trong-nua-dau-nam-2024/20240912084718663