Quang Ngai Road (QNS) deposited 4,850 billion in the bank and then had to borrow 1,400 billion for business.

After reporting positive business results, Quang Ngai Sugar (QNS) was fined and had to pay 156 million VND in back taxes.

Quang Ngai Sugar Joint Stock Company (QNS) was formerly known as Quang Ngai Sugar Company, under the Ministry of Agriculture and Rural Development . Established in the 70s of the last century, Quang Ngai Sugar is now the owner of the Fami Soymilk brand, a subsidiary of Vinasoy.

Recently, the Quang Ngai Provincial Tax Department announced the administrative penalty for tax violations of Quang Ngai Sugar Joint Stock Company.

Quang Ngai QNS had 4850 billion deposited in the bank and then had to borrow another 1400 billion for business, picture 1 — Quang Ngai Road (QNS) was fined and had to pay back 156 million VND in taxes (Photo TL)

Of which, QNS was administratively fined 21 million VND for false declaration leading to a shortage of personal income tax payable. The company was charged 104 million VND in personal income tax arrears and a late payment penalty of more than 31 million VND.

Thus, the total amount of administrative fines and tax arrears of QNS is 156 million VND.

The fact that Quang Ngai Sugar was fined for tax violations occurred right in the context that the company had just publicly announced large profitable business results in the first quarter of 2023. However, the revenue scale expanded too quickly, leading to an imbalance in cash flow arising during the period.

Sugar consumption increases, first quarter revenue grows 17.4%

Quang Ngai Sugar's first quarter of 2023 recorded strong growth in sales and service revenue from VND 1,813.3 billion to VND 2,129.6 billion, an increase of 17.4% over the same period.

According to Quang Ngai Sugar, in the first quarter of this year, sugar consumption increased by 90%, revenue from this segment also increased by 80%, contributing a large part to the revenue growth. However, products such as Milk, Mineral Water, Beer, and Confectionery recorded a decrease in consumption.

Cost of goods sold in the period accounted for VND 1,533.9 billion, gross profit reached VND 595.7 billion, a sharp increase over the same period. Gross profit margin also increased from 26.7% to 28%.

Financial revenue during the period nearly doubled, from VND37.9 billion to VND71.4 billion, mostly from interest on deposits at the Bank. Meanwhile, financial expenses increased from VND21.8 billion to VND38.4 billion, mainly due to increased interest expenses.

At the end of the first quarter, QNS's profit after corporate income tax reached 316.5 billion VND, an increase of 80% over the same period last year.

Cash flow imbalance, QNS deposited 4,850 billion VND in the bank to earn interest but still had to borrow an additional 1,400 billion VND

Quang Ngai Sugar's financial picture is relatively bright with clear growth in both revenue and profit. However, it should be noted that this unit has a rather strange way of distributing and using capital.

At the end of the first quarter of 2023, QNS's total assets reached VND 11,814.5 billion, an increase of 15.1% compared to the beginning of the year. Cash and cash equivalents were recorded at VND 331.1 billion, an increase of nearly one and a half times compared to the beginning of the period.

Notably, QNS is depositing 4,850 billion VND in the bank to earn interest. This figure at the beginning of the period was 4,296 billion VND, corresponding to QNS not withdrawing money but also depositing 554 billion VND in the bank to earn interest in the first quarter. This huge deposit has brought in outstanding financial revenue of up to tens of billions recorded in QNS's business results report above.

Taking thousands of billions of dong of idle money to deposit in banks to earn interest, then recording financial revenue from deposit interest, but QNS had to increase short-term borrowing.

Specifically, in the first quarter alone, QNS's short-term loans and financial leases increased from VND 1,895.9 billion to VND 3,295.1 billion. Correspondingly, QNS borrowed nearly VND 1,400 billion more in the first quarter.

Increasing idle money deposited in banks but on the other hand having to borrow more short-term debt up to 1,400 billion VND causes interest expenses to increase. This shows an unreasonable in coordinating cash flow of QNS.

The cash flow records of Quang Ngai Sugar in the first quarter also showed an imbalance when this unit had a negative cash flow from business activities of up to 416.8 billion VND. Net profit from business activities was not enough to cover the cash needs arising during the period, causing a heavy negative cash flow.

The record of cash flow from financial activities also shows that QNS received an additional VND 2,225.4 billion from loans during the period, and also had to spend up to VND 826.1 billion to repay loan principal, and VND 301.4 billion to pay dividends and profits to owners.

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