Agricultural machinery major VEAM earns big amid 'storm' of executive arrests

The Vietnam Engine and Agricultural Machinery Corporation (VEAM) remains strong with huge annual profits, despite the fact a string of sitting and former executives have been arrested, prosecuted and tried in management-related criminal cases since 2019.

The investigative agency of the Hanoi Police Department last Wednesday arrested Nguyen Thanh Giang, 74, former general director of VEAM; and Ho Manh Tuan, 60, former head of VEAM’s technical department, chairman of VEAM Korea for the 2003-2009 period, and deputy general director of VEAM from 2016 to date, for alleged violations of regulations on the management and use of state assets, causing losses and wastefulness.

According to the investigative agency, between 2005 and 2011, Giang directed a number of his subordinates, including Tuan, to prepare reports and proposals to purchase 305 sets of SV110 car cabin molds, which violated regulations on state-owned enterprises’ investment and purchases of fixed assets. It said the above assets were not used, leading to a loss of nearly VND27 billion ($1.1 million).

From 2019 to 2022, the investigative agency under the Ministry of Public Security conducted legal proceedings against sitting and former leaders of VEAM, including former chairman Tran Ngoc Ha, former general director Lam Chi Quang, and former deputy general director Vu Tu Cong, for a number of criminal violations.

In May 2022, Ha and Quang were sentenced to 11 and eight years in prison, respectively, for violating regulations on the management and use of state assets, causing a total loss of VND183 billion ($7.5 million).

Established in 1990, VEAM is a "giant" in the field of manufacturing and trading agricultural and fishery machinery and spare parts. However, the financial circle remembers a business with a huge amount of idle cash and very effective investments in its joint ventures and affiliates.

Joint ventures and affiliates made the largest contribution to VEAM’s profit, with VND5-7 trillion ($287 million) each year. In the first half of this year, they brought VND2.75 trillion ($112.77 million) in profit to the company, while the figures from financial and core business activities were VND517 billion and VND290 billion, respectively. Its net profit reached VND3.15 trillion ($129.2 million), similar to that in the first half of 2022.

VEAM is investing in eight joint ventures and affiliates, with the three largest being Honda Vietnam, Toyota Motor Vietnam and Ford Vietnam.

It now holds a 30% stake in Honda Vietnam, 20% in Toyota Motor Vietnam, and 25% in Ford Vietnam Limited, three leading automakers in the country. Honda Vietnam brings the largest profit to the corporation, with VND4.5-6 trillion ($246 million) per year.

VEAM's report showed that the original investment in the three joint ventures was just over VND1 trillion ($41 million), but the net value calculated by the equity method hit over VND3.5 trillion ($143.5 million) as of June 30, 2023.

Regarding financial activities, VEAM mainly deposits its money in banks. By June 30, the corporation had nearly VND15 trillion ($615.13 million) in maturing deposits, accounting for 50% of total assets. Agribank, VietinBank, BIDV and SeABank are the main destinations for its cash.

Maintaining large deposits helps VEAM earn VND700-1,000 billion ($41 million) in interest per year. In the first half of this year, it pocketed VND548 billion ($22.47 million) thanks to high interest rates, an increase of 49% year-on-year.

Regarding its main business activities, VEAM has 15 subsidiaries operating in agricultural engine and machine manufacturing, the support industry, and truck production. Before 2019, the consolidated net revenue from these activities reached over VND6 trillion ($246 million) per year, and the gross profit was over VND600 billion (24.6 million). In 2019, the respective figures dropped to VND4.5 trillion ($184.54 million) and VND65 billion ($2.66 million). In 2020-2022, revenue did not recover to pre-2019 levels, but the gross profit rebounded strongly, surpassing VND651 billion ($26.7 million) last year.

VEAM general director Phan Pham Ha said that among the three main areas, the support industry has the highest business efficiency. The corporation plans to continue to promote, expand, and engage more deeply in the supply chain. The agricultural engine and machinery segment operates inefficiently and must be restructured in the direction of strengthening cooperation between units, he admitted.

The truck production segment has suffered deep declines since 2019 due to policy changes that force vehicles using gasoline or diesel engines to apply Euro 4 emission standards or higher, resulting in a large inventory of Euro 2-standard trucks, according to Ha.

Since 2019, the corporation has focused on selling this inventory at its automobile factory, he said, adding in 2022 it held four auctions for these trucks but they all failed.

The factory is expected to launch trucks that apply Euro 5 emission standards at the end of this year or early next year, much slower than planned.

In its medium and long-term development orientation, the general director said VEAM will improve capacity in agricultural machinery manufacturing and supporting industry to capture a proportionate share in the domestic market and expand export markets. The corporation will also actively participate in the global supply chains in the fields of motorbikes, cars and other industrial machinery. It intends to increase international cooperation and raise the localization rate of self-produced truck products.

In addition, VEAM also plans to list on the Hanoi Stock Exchange (HNX) or the Ho Chi Minh Stock Exchange (HoSE).

The Vietnamese manufacturer, registered on the unlisted public company market UPCoM as VEA, closed Friday at VND37,100 ($1.5) per share.