Fecon (FCN) lost 1.4 billion VND in Q2, interest pressure is increasing
Fecon Corporation's (FCN) business results showed a decline from the first quarter of 2023. Revenue in the first quarter of 2023 reached VND 609.1 billion, up 21.4% over the same period. Profit after tax reached VND 2.8 billion. Compared to the previous fourth quarter, Fecon's profit after tax decreased by 17.6 times.
In the second quarter of 2023, Fecon's business results continued to decline despite a slight increase in revenue. Revenue in the second quarter reached VND 674 billion, down 35.1% year-on-year. However, cost of goods sold accounted for VND 549 billion. Gross profit reached VND 124.9 billion, gross profit margin reached 18.5%.
Fecon (FCN) is on the inspection list of the General Department of Taxation (Photo TL)
During the period, financial revenue decreased by half, to only 5.2 billion VND. Meanwhile, interest expense, which accounts for a large proportion of financial expenses, is 70.6 billion VND, up 33.7% over the same period last year. This shows that debt is increasing in Fecon's asset structure.
Selling expenses and administrative expenses in the second quarter reached VND5 billion and VND49.5 billion, respectively. After deducting all expenses and taxes, Fecon recorded a loss after tax of VND1.4 billion. The profit after tax of minority shareholders is currently negative VND11.6 billion while the parent company's shareholders still recorded a profit of VND10.1 billion.
Fecon is on the list of specialized inspection plans for 2023 of the General Department of Taxation.
Recently, in the list of companies subject to specialized inspections issued by the General Department of Taxation under Decision 1326/QD-TCT of the General Department of Taxation, Fecon Joint Stock Company was mentioned. Thus, Fecon is also on the list of 42 companies subject to specialized inspections by the General Department of Taxation in 2023.
Also during this time, Fecon is having to record an asset structure with existing risks when total debt is almost as high as equity.
Specifically, at the end of the second quarter, Fecon recorded total assets of VND 7,681.7 billion, a slight increase of 1.3% compared to the beginning of the year. Notably, cash and cash equivalents accounted for VND 273.5 billion. The company had an additional VND 14 billion in deposits at the Bank.
Short-term receivables from customers are accounting for 1,734.5 billion VND. While bad receivables are accounting for 3.9 billion VND.
Regarding capital structure, Fecon is showing that the proportion of payables accounts for the majority, with 4,279.7 billion VND, equivalent to 55.7% of total capital. A significant part of that is short-term loans and financial leases with 2,018.2 billion VND, an increase of more than 250 billion compared to the beginning of the year.
This means that in just the first 6 months of the year, Fecon has increased its short-term debt by 250 billion VND. Long-term financial debt accounts for 944 billion VND. Thus, Fecon's total short-term and long-term debt accounts for 2,962.2 billion VND, almost as high as equity. Increasing debt will also increase interest payable, creating pressure on the company's revenue.
Fecon's financial health is also reflected in the company's cash flow statement for the first six months of the year. Net cash flow from operating activities was negative at VND122.9 billion, indicating that the company's revenue was not enough to cover expenses. A large cash outlay of VND137.1 billion for interest during the period also showed pressure on the company's cash flow.
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