Although the profit picture recorded a strong recovery, the increase in interest expenses was a concern in the last quarter. Diversifying capital sources from supply channels and sharing from the banking sector supported businesses.
Although the profit picture recorded a strong recovery, the increase in interest expenses was a concern in the last quarter. Diversifying capital sources from supply channels and sharing from the banking sector supported businesses.
2024 saw a turnaround in the business performance of TNG Investment and Trading JSC. The textile and garment company's profits increased by more than 44%, although its revenue only increased by 9%. The main reason was the improvement in gross profit margin. "Investment in technology and human resources has helped the company improve labor productivity. At the same time, production costs have also been optimized thanks to measures to improve production and management processes," said Mr. Nguyen Van Thoi, Chairman of the Board of Directors of TNG.
However, along with the expansion of revenue, financial expenses in 2024 also increased by more than 14%. With a low financial expense/revenue ratio (under 5%), although this figure increased compared to 2023, TNG's profits were not greatly affected when interest rates increased.
Statistics from VNDirect Securities Company on 1,000 listed and registered enterprises on the stock exchange show that profits in 2024 also achieved impressive growth (nearly 18%). In particular, net profits of listed enterprises in the fourth quarter of 2024 increased by 27.8% over the same period last year, marking the 5th consecutive quarter of growth. However, along with the bright picture of profits, the growth in financial expenses is a point worth noting.
According to experts from VNDirect, interest expenses have skyrocketed to a five-quarter high. The reason comes from the strong demand for corporate credit to expand production in the context of economic recovery and rising interest rates. The debt-to-equity ratio at the end of 2024 reached 74.6%, up from 74% in the last quarter of the year. VNDirect experts consider this a strong increase. The leverage ratio continues to increase despite high interest expenses thanks to strong credit demand.
At some large enterprises, investment and business expansion activities have increased interest expenses and accounted for a significant proportion when compared to total revenue. With the continuously expanding scale of assets and the need for capital to finance, Vinhomes' interest expenses and bond issuance in 2024 reached more than VND 7,300 billion, nearly 2.4 times higher than the previous year. However, with the growth in real estate transfer revenue and income from investment and business cooperation contracts, the after-tax profit of this "giant" still increased by 4.5%, reaching more than VND 35,052 billion.
Relying on a large proportion of debt capital, the business results of some enterprises even fluctuate closely with interest expenses. Duc Long Gia Lai Group's main business reported a net loss. However, the fact that this enterprise paid off its principal debt and had its interest waived by the bank while its business was still facing difficulties brought about a sudden source of income. Thanks to that, the Group reported a profit after tax of more than 250 billion VND.
However, the business has been losing money for many years and having to pay a large amount of interest expenses and business management costs, causing Duc Long Gia Lai to still have an accumulated loss of up to 2,450 billion VND by the end of 2024. On the contrary, Hoang Anh Gia Lai's business results in the fourth quarter of 2024 decreased by more than 80% compared to the same period because it no longer received a reduction in interest like a year ago.
Sharing at the workshop: “Vietnam Credit Focus 2025: Growth, Credit and Capital Markets in the New Era”, Mr. Ivan Tan, CEO of S&P Global Ratings, assessed that one of the weaknesses of Vietnamese enterprises, even in the group of large enterprises, is the proportion of capital sources leaning towards short-term loans. Half of the debt at large enterprises is short-term debt, the above ratio is double that of many countries in the region. The domestic capital market needs a lot of time to increase its depth.
Reducing dependence on loans and diversifying capital sources is what many large enterprises aim for. After a period of a somewhat quiet primary stock market, many large enterprises on the stock exchange are implementing plans to issue shares to existing shareholders or conduct IPOs of subsidiaries to raise more equity capital.
Regarding the capital mobilization channel through bank credit, in Directive No. 05/CT-TTg on key tasks and solutions, breakthroughs to promote economic growth and accelerate disbursement of public investment capital, ensuring the national growth target of 8% or more in 2025, close monitoring and supervision of the development of mobilization and lending interest rates is required, in order to reduce the lending interest rate level, creating conditions for people and businesses to access loans at reasonable costs, cheap capital prices to restore and develop production and business, and promote economic growth. At the same time, the Prime Minister directed credit institutions to continue to reduce costs, be willing to share part of profits to strive to reduce lending interest rates.
Source: https://baodautu.vn/doanh-nghiep-van-nang-ganh-chi-phi-lai-vay-d250854.html
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