Businesses rush to lower business targets amid continuous bad news

Sep 6th at 13:07

06-09-2012 13:07:37+07:00

A lot of listed companies have lowered the business targets set up at the shareholders’ meeting earlier this year, though the decisions would erode the shareholders’ confidence.

Lowering the bar to make it easier to jump over

Anticipating the big difficulties in 2012, listed companies’ shareholders agreed to set up the “reasonable” business targets to make them “within the range of enterprises. Some companies reportedly set up the profit target lower by 40-60 percent in comparison with 2011. Especially, a lot of enterprises just strived to stop losses.

Nevertheless, the difficulties prove to be bigger than initially thought, which makes the lower bars unreachable for businesses. A lot of listed companies have announced the adjustment of the business plans in August, while experts have anticipated that the business targets would be lowered further in October and November 2012.

In late August 2012, SVC – a general service company – announced the 35 percent decrease in the turnover target in 2012, while pretax and post tax profit targets were lowered by 50 percent and 44 percent, respectively, and the dividends are believed to decrease to 10-12 percent from the initially planned level.

Explaining the decision to lower the business targets, SVC said it tries to ease the pressure on the subsidiaries and extend the implementation of real estate project implementation, thus allowing to get well prepared for the market recovery.

However, the explanation by the board of management did not satisfy shareholders, who expressed their disappointment about the poor business performance.

The Vietnam Investment Securities Company (IVS) has also announced the new business targets for 2012 which shows the sharp falls in the business targets. The company strives to obtain the turnover of 36.5 billion dong instead of 64.72 percent as initially decided. Meanwhile, the total pretax profit target has been lowered by 70 percent.

The decision has been made after the IVS saw the turnover down by 23 percent and post tax profit down by 72 percent compared with the same period of the last year.

PV2’s new business targets after the adjustment are so modest that they are just equal to 5.8-10.3 percent of that of the initial plan. However, the lowered business targets would still be a big challenge for it, because the company’s pretax profit just fulfilled 27.4 percent of the adjusted plan.

Some listed companies still keep the targeted business plan unchanged, not because they got satisfactory business performance in the first six months of the year, but because they initially set up overly high goals while they were taking loss.

VSP, a shipping and real estate company, for example, has been well known as the business which always sets up unfeasibly high goals and fails to fulfill the plan. The company has been forced to delist on the Hanoi Stock Exchange and put shares into transactions on UpCom market after three consecutive years of taking loss.

VHG, an investment and production company has incurred loss for the fifth consecutive year, but it still strives to obtain the turnover of 390 billion dong in 2012.

Lowering targeted profits to obtain higher bonuses

Businesses rush to lower the business targets simply because they hope to get bonuses, if they fulfill the yearly business plans.

Sources said oil and gas enterprises’ boards of management would get the huge bonuses op 10-20 percent of the excessive post tax profit. These would be huge sums of money, if noting that the excessive net profit of oil and gas companies are some hundreds of billions of dong.