Vietnamese firms record huge profits thanks to debt restructuring

Many businesses in Vietnam recorded sudden income spikes from debt restructuring in the fourth quarter of 2023, which contributed to improving their annual profits.

Agricultural giant Hoang Anh Gia Lai (HAGL), listed on the Ho Chi Minh Stock Exchange (HoSE) as HAG, reported a record net profit of over VND1 trillion ($40.58 million) in Q4, 4.2 times higher than the same period last year.

As a result, its net profit in 2023 reached VND1.7 trillion ($69 million), up 52% year-on-year.

The outcome, however, did not come from business activities but from the exemption and reduction of nearly VND1.43 trillion ($58 million) in loan interest from Eximbank (HoSE: EIB).

In December 2023, HAGL announced that it had paid the full amount of VND750 billion ($30.44 million) to Eximbank to settle credit contracts, including principal of VND587 billion and interest of VND163.2 billion.

This was considered a big step forward in debt restructuring – a focus of the company in recent times. Chairman Doan Nguyen Duc has also expressed determination to pay off all debts by 2026.

Similarly, Habac Nitrogenous Fertilizer & Chemicals JSC, registered on the Unlisted Public Companies (UPCoM) as DHB, suffered a loss from its main business activities of VND153 billion ($6.2 million) in Q4/2023, but thanks to the restructuring of loans worth VND1.8 trillion ($73 million) at the state-run Vietnam Development Bank, its after-tax profit reached VND1.65 trillion ($67 million), 19.4 times higher than the figure in Q4/2022. Thanks to that, the company posted a profit of VND861 billion ($34.9 million) for the whole year.

Shipping firm Vinaship (UPCoM: VNA) incurred a net loss of nearly VND11 billion ($446,430) from its business activities in 2023 due to plummeting shipping prices and imports and exports. However, in the last quarter of the year, the company recorded profits of VND56 billion ($2.27 million), helping it gain a net profit of VND36 billion ($1.46 million) in 2023.

Vinaship still records more than VND20 billion ($811,690) in other income each year from bank debt restructuring after transferring its debts to the Vietnam Debt and Asset Trading Corporation (DATC). The figure soared to VND61.3 billion ($2.5 million) and VND59 billion ($2.4 million) in 2022 and 2023, respectively.

The parent company of Vinaship - Vietnam Maritime Corporation (UPCoM: MVN) - also reported that its bank debt worth VND175 billion ($7.1 million) had been cleared and restructured, helping its Q4/2023 after-tax profit increase 2.4 times to VND419 billion ($17 million).

In late April 2023, the State Bank of Vietnam (SBV), the country's central bank, issued Circular 02 requiring credit institutions and foreign bank branches to reschedule debt repayment deadlines and keep debt categories unchanged to support customers facing difficulties. The circular is effective until June 30, 2024.

According Ha Thu Giang, director of the SBV’s Department of Credit for Economic Sectors, by the end of 2023, nearly 188,000 customers had their debt repayment deadlines rescheduled and their debt categories kept unchanged with a total principal and interest value of over VND183.5 trillion ($7.45 billion).

At an online conference on promoting bank credit in 2024 last Monday, leaders of many banks stated that if Circular 02 expires on June 30, businesses will face difficulties repaying their debt. Therefore, they hoped that the SBV will extend the circular.

SBV Deputy Governor Dao Minh Tu said that it is necessary to consider extending Circular 02, but it needs to be considered carefully.