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Construction companies suffering from decrease in profits due to Covid-19

Construction companies suffering from decrease in profits due to Covid-19

Wednesday 04, 11 2020
Due to the impact of the Covid-19 epidemic and the downturn in the real estate market, most construction companies in Vietnam have experienced a sharp decline in business results. It is believed that the construction industry will face with a lot more challenges in the coming time.

Profits of construction giants are plunging

Hoa Binh Construction Group Joint Stock Company has just announced its 3Q2020’s consolidated financial statements with net revenue of VND 2,634 billion, and parent company's after-tax profit of VND 52.4 billion, decreasing 43% and 3%, respectively, over the same period last year. This is the company's most profitable quarter since the beginning of the year.

However, in fact, Hoa Binh saw a net loss of VND 14.4 billion in the last quarter. The company may have reported a bigger loss if it had not profited from cheap buying interest of VND 74.7 billion. In the same period last year, the company didn't have this profit.

Hoa Binh Construction Group Joint Stock Company

The business results of Hoa Binh Construction Group partly reflect the difficulties faced by the construction industry from the beginning of 2020. Due to the impact of the Covid-19 outbreak and the decline in the real estate market, most construction companies in Vietnam have experienced a sharp decrease in business results.

Experiencing the same situation is Coteccons Construction Joint Stock Company. Its net revenue and net profit in Q3 reached VND 2,776 billion and VND 88.7 billion, down 55% and 46%, respectively. This is the lowest quarterly profit of Coteccons since 2016.

Coteccons Construction Joint Stock Company

The company said that due to the impact of the pandemic, many projects have extended construction time, resulting in lower revenue. At the same time, the company witnesses a revenue deduction of VND 31 billion in the settled works, leading to a decrease in gross profit.

Coteccons has to not only face with common market difficulties but also deal with internal issues. In the third quarter, the company had a big change in personnel, when the founder and Chairman Nguyen Ba Duong resigned. Business activities of Coteccons, therefore, are forecasted to suffer from negative impacts.
Coteccons Construction Joint Stock Company

In the first 9 months of 2020, Coteccons’ net revenue reached VND 10,301 billion, a decrease of 37% over the same period last year. Its profit after tax was over VND 369 billion, a decrease of 23%. Compared to the year plan, the company has achieved 64% of revenue and 62% of profit.

As of September 30, the total assets of Coteccons reached VND 14,056 billion, down 13% over the same period last year. The company continues to be in a defensive state whilst keeping a large amount of cash and not having financial payables.

Another household name in the construction industry, Ricons Construction Investment Joint Company, after being clearly separated from Coteccons and changing to a corporate model, has fallen into the same state as the other two. Ricons' 3Q2020 consolidated financial statements recorded revenue and profit of VND 1,987 billion and VND 54.5 billion, respectively, which is a decrease of 24% and 47%, respectively.

Ricons’ 9-month net revenue reached VND 4,723 billion, decreasing by 9%, while profit after tax was nearly VND 147 billion, decreasing by 28% over the same period last year. As of September 30, unearned revenue was VND 6,556 billion, down 44% over the beginning of the period. 

Ricons Construction Investment Joint Company

Similar to Coteccons, Ricons also has a strategy to maintain a large amount of cash along with not getting loans from the bank. The company has more than VND 1,196 billion of idle money, an increase of 36% over the beginning of the period.

After changing its name and operating under the corporate model, Ricons has 3 direct subsidiaries, Riland, Quihub and Sunny, which are all operating in the real estate sector. Rihitech is an indirectly owned subsidiary of Ricons, operating in the field of wholesaling construction materials and other installation equipment.

Industry forecast

Mr. Nguyen Quoc Hiep - Chairman of the Vietnam Association of Construction Contractors said that the construction industry really faced with a lot of difficulties in the first 6 months of this year. The first difficulty is Covid-19 which caused construction sites to stop deploying. The other difficulty is stemming from the real estate market when hundreds of projects are congested due to legal procedures.

While in 2019, the number of projects in the construction industry decreased by 20-30%, in 2020, the figure is 50%. Many small construction businesses do not have projects, and some are on the verge of bankruptcy. 

The real estate market will continue to suffer from difficulties in the last months of 2020. Therefore, the construction industry will also be negatively affected. Construction businesses need to restructure and prepare financial plans to face with challenges in the coming time.

Source: theleader

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