Resolving outstanding debts in basic construction

Struggling to get by

In the past two years, public investment and infrastructure development have been boosted, along with the warming real estate market, helping construction businesses have more jobs.

However, the construction time of a project lasts for many months. If there is a debt, the contractor will have difficulty with financial resources, resulting in debt to subcontractors, construction material suppliers, etc.

Outstanding debt is a concern for construction companies. Photo: Hai Linh

Director of Hanoi BQT Construction Investment Joint Stock Company Nguyen Van Hach shared that most contractors are in arrears, especially the remaining value of about 20 - 25% of the project, although the project has been put into operation for several years but has not been settled. Meanwhile, contractors have to borrow bank credit, paying high interest rates, leading to a situation of arrears lasting from one project to another.

Mr. Nguyen Van Hach added that in reality, there are investment projects that are not synchronized, the bidding packages are divided, the investment phases are not reasonable... so the construction units have completed the contract but cannot hand over and settle the account because the project has not been put into operation. Enterprises have to spend their own money to protect and guarantee, causing costs, and cannot settle the capital recovery according to plan. This leads to the consequence of losing reputation when the units selling materials and supplies are reluctant to sell to contractors while the cause is not the fault of the enterprises.

"This situation occurs not only in project packages using public investment capital and foreign capital for public investment, but also in projects using other capital sources. Many difficulties come to construction contractors. If they are not resolved promptly, they cannot "compensate for losses", new debts and old debts become a big burden" - Mr. Nguyen Van Hach shared.

Outstanding debt is not only a difficult "problem" for small and medium-sized construction contractors, even large enterprises will only prosper when they can manage a part of their capital and restart many projects, reducing the pressure on cash flow to pay contractors. For example, Coteccons Construction Joint Stock Company reported consolidated financial statements for the second quarter of fiscal year 2025 (ie the fourth quarter of 2024) with a profit after tax of VND 106 billion, an increase of 54% over the same period.

However, bad debt last year decreased by VND190 billion, but was still around VND2,163 billion. Bad debt still mainly came from enterprises such as Ngoi Sao Viet Company (under Tan Hoang Minh), Saigon Glory Company (investor of Ben Thanh Quadrangle project) and Minh Viet Company (investor of Tricon Towers).

Meanwhile, the financial report of the fourth quarter of 2024 of Hoa Binh Construction Group shows that receivables still account for the largest proportion. The company has recovered 340 billion VND in debt from partners, but there are still 6,891 billion VND in receivables, equivalent to 45% of total assets and exceeding the whole year's revenue. Bad debts decreased sharply by 1,009 billion VND but still amounted to 1,947 billion VND.

Efforts to remove

In the case of Coteccons, it has recently received a decision from the People's Court of District 1 (Ho Chi Minh City) on debt settlement at a key project. With this agreement, Coteccons has made important progress in bad debt recovery and is expected to exceed the target set at the 2024 Annual General Meeting of Shareholders in the 2025 fiscal year.

Taking advantage of the industry's recovery trend along with the company's internal strength, Coteccons aims for net revenue of VND25,000 billion in fiscal year 2025 and maintains a sustainable growth rate of 20-30% per year for the next 4-5 years. Chairman of the Board of Directors of Coteccons Construction Joint Stock Company Bolat Duisenov shared that the positive progress in debt collection as above mainly comes from Coteccons' proactive work with customers, combined with the positive recovery momentum of the market, helping to speed up the debt settlement process. The cooperation and goodwill of the parties involved, especially the investor, play an important role in reaching these agreements.

“Not incurring new bad debts and minimizing outstanding debts before restructuring are still Coteccons’ priorities. We had an open and transparent dialogue with shareholders about our financial strategy at the 2024 Annual General Meeting of Shareholders and believe that with the recovery of the financial health of investors, debt settlement will make significant progress in the next 12-18 months,” said the Chairman of Coteccons.

As for Hoa Binh Construction Group, in the face of the difficult situation, this unit was forced to go to court with its partners to reclaim their rights. On February 19, the company announced that it had won the lawsuit with its partner, Sunshine E&C Construction Joint Stock Company, and was forced to pay the total amount of principal, interest and fines of more than VND94 billion. The amount in the above lawsuit is still owed from two construction contracts for the Wonder Villas townhouse project and Sunshine International School (Bac Tu Liem district).

Lawyer Pham Viet Thai - Hanoi Bar Association acknowledged that many projects do not have a mechanism to adjust contracts in cases where the contract does not clearly stipulate the principles, methods and scope of adjustment to adjust the contract price when adjusting the design, leading to the contractor not being paid for the value of the performed volume.

"Currently, the State and Government are resolutely adjusting mechanisms and policies to support and remove difficulties for many industries, including the construction industry. A number of circulars and decrees issued recently have actively removed projects that have been suspended due to difficulties and obstacles in adjusting contract prices, affecting business operations," said lawyer Pham Viet Thai.

It can be seen that domestic construction enterprises are making strong changes after a long period of difficulties, bright colors have appeared more frequently. According to MB Securities Company, macro factors are creating favorable conditions for public investment growth, legal problems and shortages of raw materials are gradually being resolved, creating favorable conditions for public investment growth in 2025.

The Law on Public Investment (amended) will take effect from January 2025, aiming to accelerate the implementation of public investment capital in ministries, branches and localities. The National Assembly has passed the Law on Amending and Supplementing a Number of Articles of the Law on Investment under the Public-Private Partnership (PPP) method, encouraging private capital to participate in investing in public projects.

 

With the trend of promoting public investment, MBS believes that the construction group will benefit the most, especially those winning bids for key projects expected to be completed in 2025, such as the North-South Expressway, Long Thanh Airport...

Source: https://kinhtedothi.vn/go-vuong-no-dong-xay-dung-co-ban.html