Why is HAG suspected of its going conern?

According to the newly issued audited consolidated financial statement for 1H 2024, HAG achieved net revenue of roughly VND 2,796 billion, a more than 11% decrease from the same period in 2023. The firm reduced its cost of products sold by more than 29% during the same time, to more than VND 1,781 billion. As a result, its gross profit grew to more than VND 980 billion, up 56% over the same period the previous year. HAG's earnings after tax were more than VND 500 billion, up roughly 30% from the same time last year.

According to HAG leaders, the main fluctuations were caused by indicators such as: gross profit increased by more than VND 352 billion, primarily due to an increase in gross profit from fruit trading compared to the same period in 2023; losses from financial activities decreased by nearly VND 121 billion, primarily due to a decrease in interest expenses. At the same time, currency rate differential losses have lessened as compared to the same period in 2023. In addition, its other earnings fell by more than VND 269 billion, owing mostly to benefits from the low-cost acquisition of Bolaven High-Tech Agriculture Company Limited in 1H2023. These things did not appear in the same time of 2024.

Despite reporting strong non-business results in the first half of 2024, auditors continue to question HAG's going concern. They stressed the company's cumulative loss of more than VND 957 billion as of June 30, 2024. On this day, HAG's short-term debt outweighed its short-term assets by more than VND 350 billion.

Furthermore, HAG has failed to meet some obligations under the bond arrangement and has yet to pay loans and bonds that are due. As a result, the auditors concluded that these situations point to the presence of a material uncertainty that might put serious doubt on HAG's going concern.

Explaining the above auditors' exception, HAG's leaders stated that, at the time of preparing the audited consolidated financial statements for 1H2024, HAG had developed a business plan for the next 12 months that included the expected cash flow generated from the liquidation of a portion of financial investments, the liquidation of assets, the recovery of loans from partners, loans from commercial banks, and operating cash flow generated from ongoing projects.

"HAG is continuing to work with lenders to alter the violated conditions of the linked loans and bond contracts, as well as discussing the restructuring of some outstanding payments. Pig and banana farming will continue to provide significant revenue in 2024, according to the HAG chief.

HAG Chairman of the Board of Directors Doan Nguyen Duc assured shareholders at the 2024 Annual General Meeting of Shareholders that the company will do everything necessary to reduce accumulated losses this year. According to him, accumulating losses are a key impediment for HAG. If cumulative losses are removed, several funds will invest in HAG.

He also expressed regret for not growing the pig herd sooner, starting in 2023, when the price of live pigs is now high. However, with the assistance of LPBank Securities JSC, HAG is restocking the pig herd. HAG also intends to make profits by the end of the year.

Although sluggish, with the benefit of a barn area and self-sufficiency in food supply from bananas, HAG has high plans for 2024. Gia Lai Livestock Joint Stock Company (a subsidiary of HAG) now owns up to 2,000 hectares of land; in addition to resources from LPBank Securities JSC, HAG is seeking an IPO for Gia Lai Livestock Company.

In the fruit sector, HAG raised the durian area by 447 ha in the first half of 2024, while the banana area stayed at 7,000 ha.

Mr. Doan Nguyen Duc further stated that the firm will harvest 300-400 hectares of durian this year, including in Vietnam and Laos, representing a tenfold increase in harvested area by 2023.

Mr. Duc estimates that with an area of up to 1,200 hectares, HAG's earnings from durian in Laos might reach thousands of billions of VND by 2025. Currently, the majority of HAG's durian is sold to China, a prospective market given China's rising demand for durian in recent years.