Major Vietnamese construction contractor Hoa Binh reports extra $4.3 mln profit after audit

Hoa Binh Construction Group's 2024 audit report revealed significant improvements in the major Vietnamese contractor's financial position compared to the previous year.

However, the company still faces substantial debt, with provisions nearing VND2,000 billion ($78 million), according to its audited consolidated financial statements for 2024.

2024 profit hits VND963 billion ($37.57 milion)

Specifically, Hoa Binh Construction Group, registered on the Unlisted Public Companies Market (UPCoM) as HBC, saw a revenue increase of VND46 billion ($1.79 million) compared to its previously self-reported figure, bringing the total revenue to VND6,421 billion ($250.5 million) for 2024. Profit after tax surged by VND111 billion ($4.33 million) to VND963 billion ($37.57 million).

In comparison to 2023, the company’s revenue dropped by 14%, but profit saw a significant turnaround, improving from a loss of VND1,115 billion ($43.5 million) to a positive VND963 billion (($37.57 milion).

This boost was primarily driven by the reversal of provisions for bad debts and asset liquidations.

In June 2024, Hoa Binh Construction finalized asset transfer agreements worth VND587.6 billion ($22.92 million), excluding VAT. These transactions included the transfer of a 32.31% stake in Anh Viet Mechanical and Aluminum Glass JSC to Mai Dinh Chi Quoc for VND29.3 billion ($1.14 million), and the sale of 47.82% of Jesco Hoa Binh Engineering JSC to Pham Dieu for VND 38.3 billion ($1.49 million).

Previously, the company sold 100% of Matec Construction Machinery Co., Ltd. to Le Quang Hong Dung, Ho Hoai Phuong, and Phan Ngoc Tho for a total of VND105 billion ($4.09 million).

Additionally, the company’s equity improved significantly in 2024, rising from VND93 billion ($3.62 million) to VND1,748 billion ($68.2 million), thanks to a debt-to-equity swap share issuance which boosted its charter capital.

Chairman Le Viet Hai mentioned that the equity improvement in the second half of 2024 would enable the group to compete for and win large project bids.

Between September 2024 and March 2025, the company secured 11 projects (six from old investors and five from new investors) with a combined value exceeding VND7,600 billion ($296.5 million).

The board of directors recently approved the 2025 business plan, which projects revenue of VND9,000 billion ($351 million) and profit after tax of VND360 billion ($1.4 million), representing a 41% increase in revenue but a 63% decrease in profit compared to 2024.

Debt of tens of millions of U.S. dollars proves difficult to verify

However, the audit firm raised concerns over thousands of billions of VND in receivables and payables (VND1,000 billion = $38.74 million), issuing a qualified opinion on Hoa Binh Construction’s financials.

Specifically, AFC Vietnam Auditing Company noted that it was unable to verify all necessary information to assess the existence and completeness of VND2,251 billion ($87.8 million) in short-term receivables from customers, VND814 billion ($31.75 million) in short-term prepayments to suppliers, VND882 billion ($34.4 million) in other receivables, VND2,327 billion ($90.8 million) in short-term payables to suppliers, VND863 billion ($33.67 million) in advance payments from customers, and VND82 billion ($3.2 million) in other short-term payables.

The auditor noted that due to the nature of the company’s production and business activities, Hoa Binh Construction recognizes revenue based on the volume confirmed by the investor’s supervision and contract pricing. As such, the company believes its revenue is reliably estimated.

However, the construction contracts specify that contractors are paid based on the volume of work completed and verified by the client. Revenue is recognized only once confirmation is received from the customer, as reflected in payment certificates and financial invoices.

As of the audit report date, AFC Vietnam had insufficient information to determine the full impact of this on the financial statements.

The auditor also highlighted that the company had an accumulated loss of VND2,299 billion ($89.7 million) and some overdue debts, raising concerns about the company’s ability to continue as a going concern.

At the close of 2024, Hoa Binh Construction reported short-term receivables of VND11,012 billion ($429.65 million), representing 71% of total assets. These receivables are primarily from customers, construction contracts, and other receivables.

Of these, VND2,422 billion ($94.49 million) was overdue debt, a decrease of VND 841 billion ($32.8 million) from the start of 2024. The company has set aside a provision of VND1,897 billion ($74 million).

On the liabilities side, Hoa Binh Construction owes suppliers VND4,171 billion ($162.73 million), customers VND2,273 billion ($88.68 million), and loans totaling VND4,350 billion ($169.72 million). The company’s total debt stands at VND13,664 billion ($533.1 million), which is eight times hijgher than its equity.

The group maintains that it has a business plan in place to collect receivables. In pursuit of international expansion, Hoa Binh Construction began work on The Grove Apartments project in California, the U.S. in April 2024 and is preparing to launch two projects in Cambodia.

Domestically, the company is collaborating with several investors to renovate apartments and urban areas across major cities and provinces like Ho Chi Minh City, Hanoi, Hai Phong, Vinh Phuc, Bac Giang, Quang Nam, and Danang.

Regarding debt recovery, the company has employed various measures, including legal action through courts and arbitration. Debt collection efforts for ongoing and past projects are expected to generate substantial cash flow for business operations and debt repayment.

Finally, the board of directors is optimistic that government policies will continue to support the real estate market, and that the State Bank of Vietnam will approve an extension for restructuring policy applications.