Nam Mekong (VC3) broke the annual plan, 80% inventory at Bao Ninh 2 project

Nam Mekong (VC3) is at risk of breaking its 2023 plan, after 6 months it has only achieved 5.8% of its annual profit target

With the Bao Ninh 2 Urban Area project, many investors hope that Nam Mekong will improve its business results. However, the reality shows the complete opposite because after the end of the second quarter and almost the end of the third quarter of 2023, VC3's business results are still not outstanding, even potentially breaking the annual plan.

In the semi-annual financial report, VC3 recorded revenue of VND191 billion in the first 6 months of the year. Of which, cost of goods sold accounted for VND126.7 billion, gross profit brought in VND64.3 billion. Gross profit margin reached 33.7%.

During the period, financial expenses accounted for 15.5 billion VND, of which interest expenses accounted for the majority at 9.5 billion VND. Sales expenses and business management expenses both increased sharply compared to the same period, recorded at 2.3 billion and 18.2 billion VND, respectively.

After deducting all expenses and taxes, Nam Mekong's remaining after-tax profit was 25 billion VND, nearly 15 times higher than the same period.

Although profits have increased compared to the same period last year, in reality, if compared with the business results set at the beginning of the year, it can be seen that Nam Mekong is much slower than the initial target.

Since the beginning of 2023, the company has set a revenue target of VND 1,873 billion and a pre-tax profit target of VND 546 billion. Compared to this target, after 6 months, VC3 has only completed 10.2% of the revenue plan and 5.8% of the annual profit plan.

If the situation does not improve in the second half of 2023, it is highly likely that VC3 will fail its planned schedule.

80% inventory is located at Bao Ninh 2 project

A notable point is that in the asset structure of Nam Mekong, the amount of cash and cash equivalents increased from 132.3 billion to 327.6 billion VND. Of which, cash decreased from 49.3 billion to only 5.8 billion VND. The increase was in term deposits under 3 months at banks, accounting for 321.9 billion VND. In contrast, financial investments held to maturity decreased from 312 billion to only 40 billion VND.

Another notable point is that inventory accounts for a large proportion of the structure, up to VND 2,340 billion, equivalent to 64% of total assets.

The risk of unplanned Mekong Delta VC3 has up to 80 tons of inventory in Bao Ninh 2 picture 1 — 80% of Nam Mekong's inventory is located at Bao Ninh 2 project (La Celia City) (Photo TL)

The large inventory of more than 2,340 billion VND is mainly unfinished production and business costs, accounting for 2,339.3 billion VND, the inventory of raw materials only accounts for 677 million VND. Of which, the largest inventory is at Bao Ninh 2 Urban Area Project with 1,843.5 billion VND. The inventory of Bao Ninh 2 Project accounts for nearly 80% of the total inventory of Nam Mekong and 51% of the total assets held by this unit.

Following that is inventory at The Charm Binh Duong Project with 475.2 billion VND. Other construction and real estate projects account for 20.6 billion VND in inventory.

High debt structure, negative business cash flow, more and more difficult

Also at the end of the second quarter, Nam Mekong's capital structure was mainly recorded as debt. Liabilities accounted for VND 2,397.9 billion, equivalent to about 66.2% of the total capital used by the enterprise. Equity accounted for only 33.8%, showing that 2/3 of VC3's assets were debt.

Most of which is short-term debt with VND2,336.9 billion. Notably, short-term loans and financial leases in the second quarter increased sharply from VND120.4 billion to VND293.6 billion. This means that VC3 had to increase short-term debt by 2.4 times in just the first 6 months of the year.

On the contrary, long-term debt tends to decrease from 123.5 billion VND to only 43.4 billion VND. Interest payable is also currently accounting for the majority of the company's financial expenses at 9.5 billion VND.

VC3's cash flow statement also shows that in the first 6 months of the year, the company had a negative net cash flow of VND172 billion from operating activities. This means that VC3 is not earning enough to cover expenses, causing a decrease in cash. At the same time, cash flow from financial activities increased by VND93 billion, once again showing that VC3 is having to increase debt to compensate for the cash flow shortage.

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