Steel major Pomina to sell two mills for $272 mln to pay debts

Vietnamese steel firm Pomina plans to sell its Pomina 1 and Pomina 3 plants to a domestic investor for VND6.7 trillion ($271.7 million).

Of the sum, about VND1 trillion ($40.6 million) will be contributed to new legal entity Pomina Phu My JSC and the remaining will be used to pay debts, said the company’s leadership at an extraordinary shareholder meeting on Friday.

Pomina Phu My JSC will be set up with a charter capital of VND2.7-2.8 trillion ($113.6 million).

Pomina will contribute in kind all the land, workshops and production lines at Pomina 1 and Pomina 3 to own a 35% stake in Pomina Phu My. The remainder will be contributed in cash by the partner.

Regarding the investor, Pomina's leadership said that because they are in the negotiation process, the partner does not want to reveal its identity. However, Pomina chairman Do Duy Thai affirmed that it is a large domestic investor that has an ecosystem close to Pomina's base.

The Pomina 1 and 3 plants have been valued by auditors at nearly VND6,694 billion (excluding VAT), of which Pomina 1 in the southern province of Binh Duong is worth VND336.4 billion, while Pomina 3 in Ba Ria-Vung Tau province VND6,357 billion.

The Pomina leader shared that they have reached an agreement with the investor for Pomina Phu My to inherit Pomina's brand and distribution system. In addition, the company also wants to merge Pomina 2 into Pomina Phu My to take advantage of its blast furnaces and reduce production costs.

Thai attributed the sale of the two factories to the construction of blast furnaces in 2019-2020. “To do the project, we had to invite experts from China, but due to Covid-19, experts were not allowed to enter Vietnam. Therefore, the project was extended from 2020 to 2021, with huge costs for machinery, equipment and labor. The leadership tried to keep the debt ratio at no more than 50%, but it still went beyond and we ran out of cash,” he explained.

At the end of last year, the company's total short-term debt was VND7.96 trillion ($322.85 million).

Pomina is listed on the Ho Chi Minh Stock Exchange (HoSE) as POM, which closed the Friday session at VND5,260 ($0.21) per share.