Struggling firms slash targets for 2012
Struggling firms slash targets for 2012
With over a month left in 2012, about 40 enterprises listed on both of the nation's stock exchanges have estimated losses or revised down their profit projections for the year, citing an economic climate that has been more difficult than expected.
Phu Hung Securities Co (PHS) decided to sharply reduce its target for the year from a modest profit of only VND1 billion ($48,000) to a loss of nearly VND95 billion ($4.5 million). As of September 30, PHS had posted a loss on the year of VND66.5 billion ($3.2 million).
And the number of companies following suit was expected to increase, since many must obtain shareholder approval of plans to adjust business targets.
The most dramatic case was Post & Telecommunications Investment and Construction Co (PTC), which sought shareholder approval to adjust its projections from a profit of VND12.5 billion (US$598,000) to a loss of VND23 billion ($1.1 million).
The move followed PTC posting a cummulative loss of over VND28 billion ($1.3 million) in the first nine months of this year. Despite the writing on the wall, PTC shareholders refused to approve the new target.
Passing adjusted business plans does not make much sense to investors, according to some market insiders. Inefficient businesses will see their share values decline and small shareholders who bought shares at high prices would be victimised.
However, with losses inevitable for many of these enterprises, transparency about them is not necessarily a bad sign, especially when it offers companies an opportunity to restructure their operations.
A large number of successful companies have proposed cutting their business targets by 15-50 per cent. Even banking giant Vietcombank (VCB) and coffee processor Vinacafe Bien Hoa (VCF) plan to lower their earnings targets.
Capital shortages accompanied by a weak real estate sector have also forced many real estate developers to revise their business plans.
Phat Dat Real Estate Development Co (PDR) reduced its profit target by 94 per cent, from VND50 billion ($2.4 million) to just VND3 billion ($143,500), while PVC Construction & Investment Co, an affiliate of construction giant Vinaconex, lowered its projections by 95 per cent, from VND140 billion ($6.7 million) to VND2 billion ($95,700).
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