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Current Financial Management Status of Vietnam Oil and Gas Construction Joint Stock Corporation


9

Net operating loss

(138.31)

(189.33)

(158.48)

10

Other income

13.65

11.52

7.31

11

Other costs

0.36

6.00

1.11

12

Other profits

13.29

5.52

6.20

13

Total accounting profit before tax

(125.02)

(183.80)

(152.28)

14

Corporate income tax expense

current

-

-

-

15

Corporate income tax expense

postpone

(1.16)

(1.16)

-

16

Profit after corporate income tax

career

(123.86)

(182.64)

(152.28)

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Current Financial Management Status of Vietnam Oil and Gas Construction Joint Stock Corporation

(Source: Financial report of parent company PVC Corporation)

From Table 2.2 above, it can be seen that the corporation has been losing money for 3 consecutive years. Previously, P VC lost 123.86 billion VND in 2018 and 182.64 billion VND.

Revenue in 2020 decreased sharply compared to previous years, revenue in 2019 also decreased compared to 2018. These were years when P VC's production and business activities faced many difficulties due to many negative fluctuations in the world and domestic economic situation, economic recession occurred everywhere, the financial market encountered many difficulties, the suspension of key projects in and outside the industry under the direction of the Government and the Group caused P VC's source of work to decrease seriously.

Profit in 2020 decreased due to the decrease in revenue from production and business activities in 2019 compared to 2018, in addition, financial expenses in 2019 increased compared to 2018 due to the unit's increased provision for financial investment. Loss in 2019 increased compared to 2018, however, loss in 2020 decreased compared to 2019 due to the decrease in financial expenses in 2020, and the decrease in financial investment provisions compared to 2019.

Along with 2020, the company has had 3 years of negative profit after corporate income tax. Prolonged losses and difficulties in cash sources lead to a shortage of working capital to pay due debts and many other difficulties.


other than those stated in the audited financial statements. Therefore, the auditing organization refused to give an audit opinion on the consolidated and separate financial statements of 2019 of PVC, which are subject to mandatory delisting according to regulations. The reason for the delisting is that in recent years, most of P VC's subsidiaries, associates and other long-term investments have had loss-making business results due to very limited work sources, difficulties in the real estate market, projects being stopped or delayed, thus not being able to cover costs such as management costs, interest costs, outstanding debts that are difficult to recover, etc.

2.2. Current financial management status of Vietnam Oil and Gas Construction Joint Stock Corporation

2.2.1. Financial resource management of Vietnam Oil and Gas Construction Joint Stock Corporation

a. Implemented management policies and regulations

Currently, Vietnam Oil and Gas Construction Joint Stock Corporation conducts financial management according to the Government's guidance on financial management regime for enterprises.

b. Management content

The unit's mobilized capital is mobilized from shareholders' capital contributions, trade credit (including payables to sellers and prepayments from buyers) and short-term bank loans.

According to the indicators in the financial statements of the past 3 years of P VC, the capital proportion of each source has changed over the years, especially in 2019 and 2020 - when the unit operated at a loss, so the equity structure in the total capital source decreased significantly compared to previous years.


Table 2.3 Fluctuation of PVC's capital sources in the period 2018-2020

Unit: billion VND


STT

Target

2018

2019

2020


CAPITAL SOURCE

5,555.85

5,393.27

5,011.60

A

LIABILITIES PAYABLE

4,855.66

4,875.71

4,646.80

I

Short-term debt

4,723.64

4,746.75

4,518.80

1

Short-term trade payables

2,797.37

2,843.16

2,758.77

2

Short term buyers

limit

278.44

216.66

140.27

3

Taxes and payables

State

13.67

2.72

1.63

4

Payable to workers

25.07

21.26

24.26

5

Short-term payable expenses

353.23

319.02

361.46

6

Short-term unearned revenue

limit

4.60

1.90

1.45

7

Other short-term payables

347.01

368.64

367.18

8

Short-term finance leases and loans

limit

911.51

980.65

871.07

9

Bonus and welfare fund

(7.28)

(7.28)

(7.28)

II

Long-term debt

132.02

128.96

127.52

1

Long-term payable expenses

71.06

71.06

71.06

2

Long-term unrealized revenue

limit

59.76

57.87

56.42

3

Other long-term payables

0.03

0.03

0.03

4

Deferred income tax payable

1.16

-

-

B

EQUITY

700.19

517.55

365.27

1

Owner's equity

4,000.00

4,000.00

4,000.00

2

Treasury stock

(0.03)

(0.03)

(0.03)

3

Development investment fund

76.99

76.99

76.99

4

Other equity funds

0.50

0.50

0.50


5

Accumulated loss

(3,377.26)

(3,559.90)

(3,712.18)

In there :

Accumulated loss to the end of the previous year

(3,253.41)

(3,377.27)

(3,559.90)

Loss this year

(123.85)

(182.63)

(152.28)

(Source: Financial report of parent company PVC Corporation)


Through the above table, it can be seen that the capital fluctuation of P VC over the years is uneven. Capital in 2019 decreased by 29.09% compared to 2018 but was still 7.61% higher than in 2020 due to short-term debts and equity. In 2020, it decreased compared to 2018 and 2019 because P VC operated at a loss and was affected by the impact of the Covid-19 pandemic on the world economy in general and P VC in particular, this is the reason for the decrease in equity/capital of P VC. In recent years, the main source of work has depended on two main projects: Thai Binh 2 Thermal Power Plant and Song Hau 1 Thermal Power Plant. While both of these projects still have many problems with mechanisms and financial difficulties that have not been completely resolved. P VC's financial situation is facing many difficulties due to large accumulated losses from previous years, financial shortages causing the company to lack resources to focus on implementing projects, especially the Thai Binh 2 Thermal Power Plant project.

In addition, the units in the divestment plan are mostly loss-making or have large accumulated losses, creating difficulties for P VC and its member units in restructuring and divestment as planned. In addition, most of the locations of the real estate projects of the member units are in areas that are not really favorable for attracting investment capital, causing P VC's revenue and capital to decrease sharply.

52


Table 2.4 PVC's capital structure in the period 2018-2020

Unit: Billion VND



Content

2018

2019

2020

Comparison 2019/2018

Comparison 2020/2019

Amount

%

Amount

%

Amount

%

-/+

%

-/+

%

Liabilities

4,855.66

87.40

4,875.71

90.40

4,646.80

92.72

20.05

0.41

(228.91)

(4.69)

Short-term debt

4,723.64

85.02

4,746.75

88.01

4,518.80

90.17

23.11

0.49

(227.95)

(4.80)

Long-term debt

132.02

2.38

128.96

2.39

127.52

2.54

(3.06)

(2.32)

(1.44)

(1.12)

Equity

700.19

12.60

517.55

9.60

365.27

7.29

(182.64)

(26.08)

(152.28)

(29.42)

Total capital

5,555.85

100.00

5,393.27

100.00

5,011.60

100.00

(162.58)

(2.93)

(381.67)

(7.08)

(Source: Financial report of parent company PVC Corporation)


Regarding capital structure: Through the above table, it can be seen that the capital structure of Vietnam Oil and Gas Construction Joint Stock Corporation has not changed much. In 2019, equity accounted for 9.60% of the company's total capital, by 2020, the equity ratio decreased to 7.29%. It can be seen that Vietnam Oil and Gas Construction Joint Stock Corporation's debt ratio is around 90% and equity is 10% during the difficult period of the enterprise. In recent years, Vietnam Oil and Gas Construction Joint Stock Corporation has been in a difficult period, so the payable debt is quite large, so P VC is not financially proactive and the level of financial autonomy is not high.

Regarding equity: This is the safest and most important source of funding because equity determines the autonomy of the enterprise in all business and production activities. Having a safe and stable source of funding will ensure competitiveness when facing the current market mechanism and continuous changes, especially in the business sector. The equity of Vietnam Oil and Gas Construction Joint Stock Corporation has changed over the years. In 2019, equity was 517.6 billion VND, down 26.08% compared to 2018. By 2020, this indicator decreased again compared to 2018 by 29.42%.

Regarding payables: This is one of the important indicators in the capital sources of enterprises in particular and the economy in general. In the process of production and business, enterprises have to face many arising needs for debt, including commercial credit and bank loans, but depending on the characteristics of each different industry and the cost of using each debt, the debt ratio of the enterprise to be paid will be high or low.

Through the table, we can see that the payables of Vietnam Oil and Gas Construction Joint Stock Corporation tend to decrease in value but increase in proportion compared to the capital of the enterprise. The payables in 2019 were 4,875.71 billion VND, accounting for 90.40% of the total capital. By 2020, the payables had decreased to 4,646.80 billion VND, but the proportion of payables to the total capital in 2020 increased to 92.72%.


Table 2.5 Fluctuation in PVC's capital structure in the period 2018-2020

Unit: %


STT

Target

2018

2019

2020

1

Loan/total capital ratio

capital

17.69

19.50

18.80


2

Credit capital ratio

trade/total capital


61.61


63.57


65.17

3

Equity ratio

Ownership/Total Capital

12.60

9.60

7.29

4

Capital ratio

other/total capital

8.10

7.33

8.77

(Source: Financial report of parent company PVC Corporation)

Through the table above, we can see that P VC's capital structure has not changed much over the years; the proportion of equity has decreased since 2019. P VC's borrowings include short-term loans and financial lease payments, long-term payables and other long-term payables. P VC's trade credit includes short-term payables to sellers, prepayments from buyers and other short-term payables. Trade credit has increased gradually over the years. This shows that the Corporation is occupying a large portion of customers' credit capital. The proportion of equity decreased from 12.60% in 2018 to 7.29% in 2020, because in the period of 2018-2020, PVC operated at a loss with the total accumulated loss between 2017-2018 being 3,377.26 billion VND, 2018-2019 being 3,559.90 billion VND and by 2019-2020 increasing to 3,559.90 billion VND. Equity is nearly 400 billion VND while owner's contributed capital is 4,000 billion VND.

2.2.2. Management of capital allocation and use of Vietnam Oil and Gas Construction Joint Stock Corporation

* Management policies and regulations are enforced


Any enterprise must have a certain source of capital. The source of capital shows where the assets of that enterprise come from and the enterprise must have economic and legal responsibilities for those assets. The management, allocation and effective use of capital for enterprises in general and the Vietnam Oil and Gas Construction Joint Stock Corporation in particular is an extremely important step. The Government allows P VC to invest in many fields other than the field of oil and gas construction and installation, from joint venture capital contribution, investment in the financial sector to investment in other business fields in the period of economic integration, implementing the policy of enhancing the autonomy of joint stock companies to encourage the development of state-owned economic businesses to play a leading role.

Therefore, in terms of capital and asset management, to serve the business of constructing and installing specialized oil and gas works and activities directly related to construction and installation business activities according to the provisions of law, P VC is responsible for effectively managing and using all capital and assets invested by the owner and other legal sources of operating capital.

According to the financial management regime for enterprises and joint stock companies, the investment, construction, purchase and depreciation of fixed assets, mortgage, lease, pledge of assets, transfer of capital investments outside the enterprise, liquidation and sale of fixed assets, management of receivables, payables, exchange rate differences, management of inventory, inventory and revaluation of assets of the Corporation are carried out.

* Management content

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