HA NOI (VNS)— PetroVietnam Construction Co (PVX) is facing a number of financial problems due to unwise investment in subsidiaries and non-core businesses that caused huge losses in the first half of this year.
Auditors raised PVX's first half loss from VND254 billion (US$12.1 million) to VND468 billion ($22.3 million) after the report review, while its shares were excluded from margin trading across the entire market. In addition, officials from a subsidiary were arrested for alleged economic violations.
According to the firm's second quarter report, the main losses were caused by Petroleum Machine Executing Co (PVC-ME). PVC-ME lost nearly VND457 billion ($21.7 million) during the period, almost equal to its charter capital.
Four officers from PVC-ME are also facing arrest for allegedly contravening State economic regulations.
Since 2008, operations at PVX have been unstable. While it earned VND630 billion in 2010, profits dropped to around VND200 billion last year, and in the first half of this year, it posted a huge loss of more than VND470 billion ($22.3 million).
According to the audit, as of June 30, PVX also had an overdue guarantee worth VND558 billion ($26.5 million) for 10 subsidiaries that borrowed from five banks.
The company's borrowing costs have increased over the years, from less than VND27 billion ($1.2 million) in 2008 to VND309 billion ($14 million) in 2011. During the first six months of this year, the figure reached VND240 billion ($11.4 million).
Whether PVX could continue operations, according to the company's managing board, depended on its ability to settle debts. One of the causes of PVX's current situation is its investment in non-core business, using short-term funds to facilitate long-term financial investment in subsidiaries and associated companies.
Notably, PVC ME, Petroleum Internal and External Equipment Co and Sai Gon Petroleum Construction and Investment are facing bankruptcy due to heavy investment in real estate. — VNS