Rise and fall of two giant companies (HAG)
Rise and fall of two giant companies (HAG)
Hoang Anh Gia Lai and Duc Long Gia Lai both have trillions of dong (VND1 trillion=$43.1 million) worth of debts and face a question mark over their future.
Bui Phap (L) and Doan Nguyen Duc. Illustration by VnExpress/Ta Lu |
In the early 90s, there was a wave of migration by young people seeking livelihoods from the central Binh Dinh Province to the Central Highlands province of Gia Lai. Two of them, who were working at a handmade wooden furniture business, Doan Nguyen Duc and Bui Phap, set up a private business with a factory, and converted them into two companies named after the province: Hoang Anh Gia Lai, an agricultural firm, and Duc Long Gia Lai, a woodwork producer.
Over time both listed on the stock exchange and expanded their business lines and markets.
Hoang Anh Gia Lai went into property, energy and agriculture, and rapidly increased its assets. Hospitality, and mining enabled Duc Long Gia Lai to currently grow to more than 830 times since inception.
During its golden era Hoang Anh Gia Lai earned profits running into the thousands of billions of dong annually from 2009 to 2011 and ranked among the 30 largest stocks by market capitalization.
Duc Long Gia Lai had revenues of VND3 trillion a year from 2016 to 2019.
This year both faced a similar problem: being doubted continuously by the auditors for their operation ability and placed on a list of under control stocks by the HCM Stock Exchange (HoSE) for different reasons.
Hoang Anh Gia Lai's half-yearly financial statements showed accumulated losses of more than VND7.37 trillion due to switching from property to agriculture, which it sought to lead not only in the country but also the region. The further it went down this path, the more its loans ballooned.
In 2016, the company reported its first loss since listing on the stock exchange, and liabilities exceeded VND36 trillion.
At one point every VND100 of capital included VND68 worth of bank loans, bonds and the chairman's personal money. A failure to service its debts led to the business being discredited in the eyes of its shareholders and partners.
"My company was saved by the government’s policy of extending the bank loan repayment period by five years," Doan Nguyen Duc said at an event earlier this year.
Duc Long Gia Lai may have had less debts than Hoang Anh Gia Lai, but it still owed VND5.6 trillion, including about VND1.8 trillion in overdue payments.
Duc Long Gia Lai's list of creditors includes big banks such as BIDV, Sacombank and Agribank and corporate and personal lenders, and debt interest. Some loans are guaranteed by the chairman Bui Phap and his wife.
Most of Duc Long Gia Lai's profits from its core business go toward paying the debts.
When queried by suspicious auditors, both companies initially claimed their business situation was stable, and future cash flows could solve their problems.
In written explanations, Hoang Anh Gia Lai general director Vo Truong Son and Duc Long Gia Lai general director Tran Cao Van listed possible solutions such as planning a divestment route, liquidating underperforming investments, focusing on debt recovery, and negotiating with lenders.
