How can TNS escape its difficulties?

TNS has just released documents for its Annual General Meeting of Shareholders, scheduled to take place on March 19, 2025, in Vung Tau. According to the documents, TNS reported a net profit of VND 49.474 billion in 2024, achieving 4.974% of its annual target and increasing by 1,210% compared to the previous year. Throughout the year, the company arranged cash flows to repay debts owed to parent companies, subsidiaries, credit institutions, and customers, amounting to VND 71.477 trillion by the end of 2024, including VND 70.245 trillion in principal and VND 1.2 trillion in interest.

Stock Trading Remains Restricted

Recently, TNS received a notification from HNX about maintaining trading restrictions on its stock. The reason is that TNS’s 2024 financial statements were not fully accepted by the auditors. The company’s financial reports in 2023 and 2022 also had audit opinions that included exceptions and disclaimers.

In its audit report, AASC stated that TNS did not fully account for interest expenses payable to Vietnam Steel Corporation - JSC (TVN - UPCoM) and late payment interest to Phu My Sheet Steel Co., Ltd. (PFS). The unrecorded amount reached nearly VND 55 billion by the end of 2024, leading to discrepancies in the balance sheet, with overstated net profit and "other short-term receivables."

TNS explained that, due to financial difficulties, it had negotiated repayment plans with TVN and PFS and had not included interest on outstanding debts in its financial statements for the years 2016 to 2023.

According to TNS, debts due for payment before December 31, 2024, remain a challenge. Given its financial struggles, this company has repeatedly requested debt rescheduling, interest rate reductions, and extended payment terms. TNS continues striving to meet its repayment obligations as planned.

As of 2024, this company's overdue debts stood at VND 154 billion, down from VND 219 billion at the beginning of the year. However, short-term liabilities still exceeded short-term assets by VND 113.5 billion. The quick ratio dropped to 0.1 times from 0.18 times at the start of the year. TNS is also burdened with accumulated losses of VND 122 billion, with total debt 4.7 times higher than equity, despite reporting a profit.

Ongoing Challenges

AASC auditors emphasized in their report that TNS has not yet secured crucial agreements for debt restructuring, making it difficult to manage financial resources for debt repayments.

One notable development in 2024 was the company’s efforts to ease financial pressure through negotiations, which resulted in significantly lower interest expenses after reaching payment agreements with Vietcredit, TVN, and PFS. This contributed to a fivefold increase in Q4/2024 profit compared to the same period the previous year, helping the company remain profitable.

For 2025, TNS forecasts a stable short-term domestic steel market but warns that international fluctuations could impact steel prices. Anti-dumping investigations in Europe, the U.S., and India could also affect Vietnamese steel exports, particularly those using HRC from China. TNS has set a target production volume of 190,000 tons per year and aims for a profit of VND 15 billion. The company has outlined three key strategies related to business operations, technology, and finance.

According to a document signed by CEO To Ngoc Huy, TNS will continue controlling costs to lower production expenses and managing cash flow prudently to sustain operations and meet debt obligations.

However, an auditor noted that TNS’s financial strategy remains somewhat vague. The proposed debt rescheduling and interest rate reductions may face obstacles, as the company has yet to reach significant agreements on debt restructuring.

The TNS Supervisory Board also acknowledged that despite repaying over VND 71 billion in 2024, the company’s short-term liabilities still exceed its short-term assets, directly affecting liquidity. Therefore, they recommend that TNS formulate a concrete repayment plan for 2025.

Due to its financial losses, TNS has no plans to distribute dividends in 2025. The company's stock is currently trading below VND 5,000 per share and is only available for trading on Fridays, significantly limiting its ability to raise capital through equity issuance.