Fecon (FCN) won 5 consecutive bid packages with a total value of more than 500 billion VND in July despite gloomy business.
Fecon Joint Stock Company (Code FCN) is formerly Fecon Foundation Engineering and Underground Construction Joint Stock Company, established in 2004. Its main field of operation is construction, specializing in foundations and underground construction.
In the first 6 months of 2023, Fecon's business results showed a gloomy decline in both revenue and profit. However, the company still won many large contracts despite the difficult business situation and volatile macroeconomic conditions.
In July alone, Fecon won 5 bids with a total value of over 500 billion VND. Including: The bid package for infrastructure design and construction of the TH Healthcare project worth 172.8 billion VND; the bid package for construction of mass piles and diaphragm walls and Kingpost of the Han River Tourist Service Area Project worth 75.9 billion VND; the Betrimex Office Building Project worth 44.8 billion VND; the Phu Thu Intersection Construction Investment Project and the road connecting Tien Hiep Commune, Phu Ly, Ha Nam worth 65 billion VND; the bid package for manufacturing gravity anchor blocks for the offshore wind power project in the Malaysian sea worth 178.6 billion VND.
It is worth mentioning that Fecon continues to win bids for new projects despite signs of a downturn in business in the first half of 2023. The company even suffered losses in the second quarter with interest expenses increasing sharply, putting great pressure on revenue.
Q2 profit drops, losses due to sharp increase in interest expenses
Fecon's gloomy business situation has started since the first quarter of 2023. In the first quarter, Fecon recorded revenue of VND 609.1 billion, an increase of 21.4% over the same period last year. Profit after tax reached VND 2.8 billion. Although it increased compared to the same period, compared to the previous fourth quarter, Fecon's profit after tax decreased by 17.6 times.
Entering the second quarter of 2023, FECON achieved revenue of 674 billion VND, down 35.1% compared to the same period in 2022. Of which, cost of goods sold accounted for a large proportion of 549 billion VND. Gross profit reached 124.9 billion, gross profit margin 18.5 billion VND.
Fecon's (FCN) short-term debt increased by 250 billion, loss in Q2 (Photo TL)
Financial revenue in the period reached 5.2 billion VND, down half compared to the same period. Notably, financial expenses increased to 71.7 billion VND. The main part of which was interest expense at 70.6 billion VND, up 33.7% compared to the same period. This shows that the company is increasing its debt, causing interest payments to increase sharply.
Sales expenses were reduced while administrative expenses increased, recorded at VND5 billion and VND49.5 billion respectively. After deducting expenses and taxes, the company recorded a loss after tax of VND1.4 billion. The profit after tax of minority shareholders was negative VND11.6 billion while the parent company's shareholders still made a profit of VND10.1 billion in the second quarter.
Total debt is almost equal to equity, short-term debt increased by 250 billion in the first 6 months of the year
The problem that Fecon is facing comes not only from its business results but also from its asset structure. At the end of the second quarter of 2023, FCN's total assets reached VND 7,681.7 billion, a slight increase of 1.3% compared to the beginning of the year.
Of which, cash and cash equivalents account for VND273.5 billion. The company holds an additional VND14 billion in deposits at the bank. Short-term receivables from customers account for VND1,734.5 billion, bad receivables account for nearly VND3.9 billion. Inventories during the period also increased slightly to VND1,738.7 billion.
In Fecon's capital structure, liabilities account for a large proportion of 55.7%, equivalent to VND 4,279.7 billion. Notably, short-term loans and financial leases account for VND 2,018.2 billion, an increase of more than VND 250 billion compared to the beginning of the year.
Long-term financial loans are also accounting for 944 billion VND, 3 billion VND higher than at the beginning of the period. The total short-term and long-term loans of Fecon currently account for 2,962.2 billion VND, almost equal to the owner's equity.
The increase in debt during the period also partly explains the pressure on interest expenses to increase to more than VND 70.6 billion in the second quarter alone.
Regarding cash flow activities, in the first 6 months of 2023, Fecon's net cash flow from operating activities was negative VND 122.9 billion, showing that the company's revenue from operating activities was not enough to cover expenses. The largest cash expenditure in the period was the interest paid during the period, amounting to VND 137.1 billion. Once again, interest became an issue on FECON's financial statements.
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