Steel maker Pomina posts 9th straight quarterly loss as reshuffle goes on

Vietnamese steel firm Pomina suffered a net loss of VND280 billion ($12.2 million) in the second quarter of 2024, marking its ninth consecutive loss-making quarter as the company is restructuring to stay afloat.

In its freshly released Q2 financial statement, Pomina Steel Joint Stock Company said its net loss hit VND505 billion ($20.22 million) in the first half of this year, raising its cumulative loss to VND2,116 billion ($84.7 million).

Its owner's equity plunged from VND1,595 billion at the beginning of the year to VND749 billion ($30 million) as of June 30.

The company's revenue continued to decline and failed to cover the costs of goods sold. It decreased by 23% to VND616 billion ($24.67 million) in Q2 and to VND1,087 billion ($43.53 million) in H1.

Financial expenses fell significantly but remained high, at VND176 billion ($7.05 million) in Q2 and VND321 billion in H1.

Pomina attributed the business decline in the past three years to the impact of the Covid-19 pandemic, which broke out right when its blast furnace was being built. The pandemic prolonged the installation process, causing the investment to spike.

Other reasons were the impact of the Russia-Ukraine conflict and China's zero-Covid policy, which caused troubles to the Vietnamese economy and froze the real estate industry.

As of June 30, the company had loans totaling VND6,182 billion ($247.55 million), 8.2 times its owner's equity. Of the amount, short-term debt was VND5,382 billion, with the largest creditors being BIDV (VND1,658 billion) and VietinBank (VND2,631 billion).

Restructuring efforts

To surf difficulties, Pomina has had to reorganize its business activities and undergone a holistic reshuffle. It said that the restructuring process has encountered many difficulties related to legal regulations, investor caution, among others.

Specifically, the transfer of shares to foreign investors was hindered by the foreign ownership cap of 50%. This cap could not meet the requirements of the foreign partners who had agreed to acquire a 51% stake of Pomina, forcing the company to seek cooperation opportunities with domestic investors.

In March, Pomina held an extraordinary general meeting to approve a restructuring plan under which it will sell Pomina 1 and 3 plants in the southern province of Ba Ria-Vung Tau to a domestic investor for VND6.7 trillion ($271.7 million), aiming to pay debts and restore business.

To do this, the company will establish a new legal entity, Pomina Phu My Joint Stock Company, 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. Its partners will contribute the remainder in cash.

On August 8, the company announced that it had signed a strategic partnership with Nansei Steel - a major Japanese steel maker at the end of July. The restructuring with the participation of this strategic investor will provide enough raw materials for Pomina 2 to operate at its maximum capacity starting in September, meeting the increasing demand of the market.

The company has also signed a memorandum of understanding with a major investor, helping to resume the blast furnace project in early 2025 to make use of the expected strong recovery of public investment demand and real estate projects next year.

In April, the firm’s POM shares were delisted from the Ho Chi Minh Stock Exchange (HoSE) and moved to the Unlisted Public Companies Market (UPCoM) due to late submission of its audited financial statements for 2023. The stock has also been restricted from trading (only allowed to trade on Fridays) since May 23.

To date, the company has not yet announced its audited financial statements for 2023 or organized its 2023 AGM.