SDP Joint Stock Company (UPCoM: SDP) has approved a decision to divest from Sotraco Mineral Investment and Exploitation Company Limited. This move comes amidst the company’s challenging financial situation. The divestment aims to prevent Sotraco’s financial standing from impacting SDP’s overall performance and to recover a portion of its investment.
The Board of Directors has authorized General Director Pham Truong Tam to find buyers or partners for the capital contribution, maximizing the company’s interests. Additionally, the transferee must agree to prioritize settling SDP’s payable debts first upon debt recovery.
Established in 2009 and headquartered in Hanoi, Sotraco primarily engages in stone quarry operations in Phu Man, Quoc Oai, Hanoi.
However, since 2017, Sotraco has faced challenges with no output and revenue from other business activities. Consequently, the Ha Dong Tax Office enforced a tax collection due to arrears in exploitation rights, land rent, and late payment fees, totaling over VND 16 billion. As of 2023, the tax debt has exceeded VND 30 billion.
Sotraco’s situation also led to a qualified opinion in SDP’s 2023 financial statements. A&C Auditing Firm could not provide a consolidated opinion due to Sotraco’s cessation of operations several years ago.
In response, SDP explained that Sotraco’s mining operations encountered significant challenges, including high costs for removing the overburden, land-related issues, and transportation difficulties. These factors, coupled with uncompetitive pricing compared to other units, resulted in unprofitable operations, leading to a halt in activities since 2014.
As of the end of 2023, Sotraco’s registered charter capital was VND 50 billion, with actual contributions of approximately VND 17.7 billion (100% owned by SDP). However, its owner’s equity was negative, at VND 12 billion, while SDP’s investment value was approximately VND 33.6 billion.
SDP’s leadership expects a divestment price of no less than VND 100 per share, given the book value is negative VND 6,800 per share. If successful, SDP could recoup approximately VND 177 million.
SDP itself is facing numerous challenges, with consecutive years of losses. As of December 31, 2023, the company’s accumulated loss was nearly VND 204 billion, and owner’s equity was negative VND 57 billion.
According to SDP, their projects have encountered difficulties in production, resulting in unprofitable operations for the past few years. The company’s weakened financial position has made it challenging to secure new business, recover capital, and maintain relationships with financial institutions.
Moreover, some customers, aware of SDP’s financial struggles, have not cooperated in confirming accounts receivable, further complicating the situation. As a result, the percentage of unconfirmed accounts payable remains high.
Currently, SDP is rated in debt group 5 (the riskiest category), leading to stricter lending and guarantee conditions from banks. To obtain new work involving guarantees, the company must provide 100% collateral and escrow.
Additionally, SDP is in the process of fulfilling two civil judgment enforcement obligations at the Ha Dong Enforcement Office, totaling nearly VND 14 billion. This situation poses significant risks to the company’s cash flow and asset management.
SDP acknowledges that with its current debt situation, it is likely to face more lawsuits in the future. For instance, Minh Duc Construction Company has obtained a first-instance judgment, and Colavi Company has filed a lawsuit.
As of the end of 2023, SDP’s total assets were approximately VND 232 billion, including VND 225 billion in accounts receivable from customers. Nearly VND 60 billion was provisioned for doubtful debts. The auditors expressed concern about the company’s ability to continue as a going concern, given that its current liabilities exceed current assets.
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