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PetroVietnam construction arms crumble in crisis

Update: March, 13/2013 - 19:04

Workers at PetroVietnam Construction in the southern province of Ba Ria-Vung Tau. Several unwanted records were bestowed onto four PetroVietnam construction companies as a result of last year's poor performance in the stock market. —VNA/VNS Photo Hoang Hai

HA NOI (VNS)— Several unwanted records were bestowed onto four PetroVietnam construction companies as a result of last year's poor performance in the stock market, including worst losses, lowest share price and highest debt to equity ratio.

The companies in question were PetroVietnam Construction (PVX), Petroleum Saigon Construction And Investment (PSG), PetroVietnam - Nghe An Construction (PVA) and Mien Trung Petroleum Construction (PXM).

Shares in the oil and gas industry are typically assumed to be gold mines for both companies and investors. However, last year's economic crisis hit this sector almost as hard as the property industry.

Among PetroVietnam's listed construction arms, PVX is the largest in terms of capital and is also the parent company of the other three businesses. As a result, excluding banks and financial institutions, PVX carried the largest 2012 loss in the stock market, a staggering VND1.22 trillion (US$58 million).

Meanwhile, PSG topped the list last month, losing VND250 billion ($11.9 million).

The two other firms both reported losses of over VND100 billion ($4.7 million) in 2012.

Each company had its own reasons for the failures, such as high provisioning or increasing costs, but generally the deadlock in the construction sector was the key factor affecting business.

Another common issue was high debt to equity ratios. Use of financial leverage can often help businesses take advantage of their capital, boosting both revenue and profits. However, as the crisis hit, debt burdens became increasingly vulnerable, leading to large losses .

In PSG, last year's accumulated loss ate almost all of its capital, leaving only VND16 billion ($761,900) in equity, causing the debt to equity ratio ballon to 63:1.

With unsecured business operations and financial indicators, PSG was among the top 10 lowest share prices at just VND1,200 (5.7 US cents). Inthe past six months, the price has never exceeded VND2,000.

PVA and PXM closed yesterday's session priced at VND5,600 and VND2,400 per share respectively.

As the largest firm in terms of scale, PVX shares remained slightly more expensive at VND6,000 (28.5 US cents) yesterday.— VNS

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