How did DHB escape losses?

At the end of 1Q24, Ha Bac Fertilizer and Chemicals Joint Stock Company reported a net revenue of about 1,010 billion VND, a 15% decline from the same period previous year. Although the cost of goods supplied reduced by 11% during the same time, it remained very high at 984 billion VND, leaving the fertilizer company's gross profit at only 25 billion VND, a severe 69% fall from the previous year.

Most of DHB's business indicators decreased during this period, with borrowing costs falling by 70% to 46 billion VND from the previous period; sales expenses and administrative expenses fell by 25% and 23%, respectively, to 20 billion VND and 29 billion VND, but the company still lost 104 billion.

The only bright light in this company's economic landscape was its other earnings, which surprisingly grew to 142 billion VND from 0.2 billion VND in the same period previous year, or a 58,853% gain. This is also why the firm avoided losses in the first quarter, reporting a post-tax profit of 38 billion VND versus a loss of 129 billion VND in the same time previous year. According to the explanation, this covers the Vietnam Development Bank's (VDB) accumulated interest on overdue interest from January 1 to December 21, 2023.

According to the business performance report for Q1/2024, firm management claimed that the production system maintained steady operations while satisfying market needs, with Urea production exceeding quarterly plans and exceeding the same period in 2023.

The fertilizer market exhibited favorable tendencies in Q1/2024, with domestic urea prices rising marginally as a result of the Red Sea War. Meanwhile, NH3 prices fell and stayed low, creating severe rivalry between domestic producers and imports.

Furthermore, in Q1/2024, borrowing rates were much lower than the same time last year, thanks to the government's approval of the company's debt restructuring plan with the Vietnam Development Bank.

Furthermore, in 2024, the company's loan interest from January 1, 2023 to December 21, 2023 was forgiven by the Vietnam Development Bank - Northeast area, totaling 242.8 billion VND. The interest forgiven in Q1 was 141.7 billion VND, which greatly improved the company's commercial performance compared to the same time in 2023.

This interest is believed to have accumulated on a loan of about 4,100 billion VND from the Vietnam Development Bank in September 2008, which was used to invest in the Ha Bac Fertilizer Plant refurbishment and expansion project. This project has been "on hold" for more than 15 years, requiring the corporation to "sink" more than 5,000 billion VND into it. It is also one of 12 projects in the Industry and Trade sector that the government considers slow-moving and useless.

Since 2015, DHB has routinely sustained losses as a result of interest payments. From 2015 until 2023, DHB's interest payments were regularly greater than 400 billion VND, reaching 980 billion VND in 2021. Overall, DHB's interest expenses were more than 6,700 billion VND from 2015 to 2023, with the majority of that coming from the aforementioned loan.

The repair and extension project of the Ha Bac Fertilizer Plant not only resulted in considerable losses for DHB but also put its shares continually under warning owing to audit views except as represented in the financial statements.

At the beginning of April, HNX continued to caution DHB shares since the financial statement for the year had not received an audit opinion in three years or longer. According to DHB officials, from 2020 to 2023, the auditing agency has given audit views except for the settlement of the project completion of the rehabilitation and extension of the Ha Bac Fertilizer and Chemical Plant.

DHB leaders stated that, in accordance with the Vietnam Chemical Group's directive to complete the project settlement by 2017, the company completed the project settlement report for the renovation and expansion of the Ha Bac Fertilizer Plant on December 1, 2017, independently settling the EPC contract.

Over time, the corporation has coordinated and pressed the contractor to finish the settlement papers. However, due to several outstanding concerns, the EPC A-B contract settlement and project settlement approval have not to be finalized, nor have the relevant debts been verified with the contractor.

According to business management, on January 17, 2023, the firm addressed a letter to the EPC contractor about the current challenges and complications with the EPC contract, requesting that the contractor bring staff to Ha Bac Fertilizer business for direct negotiations in February 2023.

On February 18, 2023, the EPC contractor responded to DHB regarding sending a delegation on February 27, 2023, to discuss and settle the outstanding concerns with the Investor. "To date, both parties are still actively trying to overcome the issues between them so that the settlement papers and associated debts may be finalized as soon as possible," the DHB leaders stated.