Many companies lowering 2008 business targets
Construction Joint-stock Company No 5 (SC5) has announced its 2008 turnover plan of VND818bil is kept intact, but the targeted pre-tax profit has been lowered to VND40.48bil from VND87.2bil.
Invesco, an investment and construction development, has lowered its targeted production value from VND660bil to VND480bil, targeted turnover from VND570bil to VND400bil, and pre-tax profit from VND30bil to VND17bil.
Vinaconex 11, a construction company, has cut its 2008 turnover target from VND500bil to VND380bil, and post-tax profit from VND22bil to VND13.2bil.
It has come as quite a surprise that these companies did not begin consulting with shareholders about adjustments of production and business plans until December. UIC, an investment and urban development company, is another example. It is asking for shareholders’ opinions about the lowering of its post-tax profit target from VND19.48bil to VND13.172bil, and dividends from 15% to 13.5%. It announced that the collection of opinions would last from December 10 to December 22. When will the company make a final decision on the adjustment then?
Explaining the adjustment of its business plan for this year, a representative of SC5 said that earlier this year, when drawing up the 2008 business plan, the company anticipated that fuel and construction material prices would increase in 2008, which prompted the company to ask partners to sign open contracts (contracts which allow for adjustments of material prices in accordance with price increases in the market).
However, the company could not anticipate other changes. Bank interest rates increased sharply, high petrol prices were kept for a long time, and the wages the company has had to pay have increased from VND40-50,000 to VND120-150,000 per day. All these increases have led investment costs to skyrocket. As a result, the company thinks that it will still be able fulfill its turnover plan, but not the targeted profit one.
Why has the company just announced its new targets recently? The representative said that even in Q3, the company still believed it would be able to fulfill the plan thanks to the open contracts. However, the company is now sure that the previously set profit target is impossible, and that the more realistic profit goal is VND40bil.
“We have made the announcement so that shareholders know exactly how much profit we will earn this year. We want to provide updated information for investors; the tardiness in making the announcement should not be seen as a deliberate action,” he said.
Vietcombank, one of the biggest banks in Vietnam, has also consulted with shareholders on adjusting its 2008 business plan. The total assets of Vietcombank are expected to see a decrease of VND9tril to VND200tril, the credit growth rate is expected to reach only 15%, while the capital mobilisation growth rate 0%.
A member of Vietcombank’s board of directors said that the bank believes it will still be able to fulfill the planned profit target, but fail to fulfill the plans on capital mobilisation and non-performing loans.
In fact, investors well understand the reasons why listed companies have to adjust their business plans. However, Nguyen Hong Quan, acting Director of An Binh Securities Company, said that in general, companies do not adjust business plans in the ‘last days of the year’ as this affects investors.
Nguyen Thi Hoang Lan, Deputy Director Hanoi Securities Trading Centre (HASTC), also said that it is quite normal for companies to adjust their business plans. However, companies need to announce target adjustments earlier in order to help investors make the right decisions.
Lan said that listed companies should change their viewpoints about information exposure. Enterprises tend to conceal information about labour-cost cuts and production decreases, which they consider ‘bad information’. Lan stressed that investors need to be well informed about the health of businesses, or they will seek unofficial information in the market.
