Restructuring imperative of state-owned agricultural firms

Serious implementation of equitization

Pham Quang Hien, the director of the Ministry of Agriculture and Rural Development’s Department of Enterprise Management, said that state-owned enterprises under the Ministry of Agriculture and Rural Development must be restructured as soon as possible. In addition, equitization must be carried out in line with the law and in a transparent manner to prevent losses and protect the state’s interests. For example, the Sugarcane and Sugar Corporation No 1 and the Vietnam Livestock Corporation successfully conducted divestment.

Vietnam Rubber Group General Director Tran Ngoc Thuan said that two units under the group were successfully equitized, earning more than VND2.2 trillion and with a surplus of over VND300 billion. The group is to complete the rest of its equitization plan in the first quarter of this year. Tran Ngoc Thuan said that although rubber prices fell in 2016, the group’s trade and production activities remained stable, focused primarily on timber and rubber latex. In addition, the group recorded profits of more than VND1 trillion in 2016, also due to latex sales and production of other rubber products.

According to the Vietnam Northern Food Corporation (Vinafood 1), the corporation conducted divestment in three subsidiaries and four associated companies during the 2013 to 2015 period. Vinafood 1’s export turnover reached US$288 million in 2016, while total revenues stood at more than VND15.7 trillion and pre-tax profits totaled VND270 billion.
Deputy Minister of Agriculture and Rural Development Ha Cong Tuan said that during the 2011 to 2015 period and in 2016, the equitization of state-owned enterprises achieved important results, chief among them that state capital was basically guaranteed. Joint stock companies recorded revenues increases of 19.71 times, while profits saw a 9.72-fold increase.

IPO for rubber and food

Ha Cong Tuan said that the agricultural sector is actively promoting the restructuring of state-owned enterprises in accordance with the Prime Minister’s Decision 58/2016/QD-TTg dated December 28, 2016. Accordingly, the Vietnam Southern Food Corporation (Vinafood 2) and the Vietnam Rubber Group will conduct initial public offerings (IPO). Vinafood will sell state shares, organize a first general meeting and operate as a joint stock company in the second quarter, while the Vietnam Rubber Group will take the same steps in the third quarter of this year.

The prime minister approved an equitization plan for Vinafood 2 last year, and the corporation’s value is being checked by the State Audit of Vietnam. At the same time, the Vietnam Rubber Group has virtually finalized its corporate value assessment. It is working with the State Audit of Vietnam on the value assessment and improving an equitization plan. In particular, the two corporations are looking for strategic investors. According to Tran Ngoc Thuan, rubber prices in 2017 are expected to reach VND40 million a tonne, on average. In addition to the Chinese market, the Vietnam Rubber Group is expanding exports to other markets such as India, the US and Japan. “Rubber shares might be unattractive in the short term, but they could have potential in the long term, depending on rubber prices,” Tran Ngoc Thuan said.

The Ministry of Agriculture and Rural Development is proceeding with plans to assess the value of the Vietnam National Coffee Group (Vinacafe) and the Vietnam Northern Food Corporation (Vinafood 1), as well as the Ha Long Seafood Trading Company Limited.

But along with the results already achieved, the restructuring process in some corporations and groups remains slow. In particular, some units under corporations and groups have failed to sell shares as expected. Nguyen Nam Hai, the general director of Vinacafe, said the group equitized three units, declared bankruptcy for one unit and conducted divestment for two units during the 2012 to 2015 period. However, four remaining units are unable to sell shares because they run at a loss. Huynh The Nang, the general director of Vinafood 2, also said that the corporation’s restructuring process has encountered many obstacles.

According to Pham Quang Hien, looking for strategic investors with strong financial potential is particularly important in the process of equitization. In addition, businesses need to cooperate more closely with consultants to correctly determine their corporate value.