HoSE Delists Hòa Bình Construction Group’s Shares Following Release of 2023 Audited Financial Statements
The Ho Chi Minh City Stock Exchange (HoSE) has recently announced the mandatory delisting of shares of Hòa Bình Construction Group JSC (coded HBC) after receiving the company’s separate and consolidated audited financial statements for 2023.
According to the 2023 consolidated audited financial statements, the company’s undistributed after-tax profit as of December 31, 2023, was negative VNĐ3.24 trillion, exceeding its paid-up capital of VNĐ2.741 trillion. As per regulations, HBC shares fall under the mandatory delisting category, and HoSE will proceed with the delisting of these shares.
From a 5-engineer, 20-worker office to Vietnam’s first listed construction contractor
“It has been a challenging journey of nearly 30 years for Hòa Bình Construction Group to transform from a backward enterprise with poor project management to an international-standard construction company that ensures environmental hygiene,” shared Mr. Lê Viết Hải, Chairman of Hòa Bình Construction Group, in September 2016.
Founded in 1987, Hòa Bình Construction Office was led by Mr. Lê Viết Hải, a native of Thừa Thiên – Huế who graduated from Ho Chi Minh City University of Architecture. With only 5 engineers and 20 workers, the company primarily took on private residential design and construction projects.
Within the first year, the company generated VNĐ1.2 billion in revenue, and by the tenth year, it had reached VNĐ30 billion. This growth was attributed to their unwavering spirit and willingness to learn from foreign contractors.
“In 1995, when I was working on Legend Hotel, the Japanese contractor had very strict requirements. They only allowed a 0.5-liter plaster layer for wall inspection and had precise standards for angles, straightness, and coverage. Many subcontractors had to leave because they couldn’t meet these standards, but I decided to take on the challenge, believing that facing difficulties would lead to progress. Many techniques that are considered normal today were unfamiliar to our workers back then,” recalled Mr. Lê Viết Hải.
Between 1997 and 2000, Hòa Bình worked as a subcontractor for various projects in Phú Mỹ Hưng. From 2004 onwards, they shifted their focus to small-scale projects for high-rise buildings, involving both underground construction and structural work.
According to Mr. Hải, the first ten years of Hòa Bình’s journey were dedicated to learning complex construction techniques. The following decade was about elevating their quality to international standards and gradually replacing foreign contractors in medium-scale projects. Subsequently, Hòa Bình took on the role of main contractor for large-scale projects, replacing foreign contractors.
Hòa Bình evolved from a subcontractor to a main contractor, offering comprehensive construction services, including structural and interior finishing, as well as mechanical and electrical installations. In late 2006, they became the first comprehensive construction contractor in Vietnam to be listed on the stock exchange, with a chartered capital of approximately VNĐ54 billion.
Years of Turbulence and Triumph
When asked about the biggest challenge he has faced, Chairman Lê Viết Hải recalled the year 1999, when their rented office space was taken back, leaving them with a lack of working capital. He made the difficult decision to sell his parents’ house to purchase a new office building in Ho Chi Minh City, with the entire family living on the rooftop.
In 2008, the global economic crisis hit, forcing him to sell the Hòa Bình Tower project, a labor of love, at a loss of nearly half of his investment, which included $12.8 million along with land clearance and land use rights expenses.
Mr. Hải’s decision to take Hòa Bình Construction Group public was considered a wise move, as it helped enhance their financial resources and facilitate expansion. However, the stock price faced challenges, dropping from VNĐ31,000/share in 2011 to VNĐ18,700/share. To prevent a potential takeover, Mr. Hải wrote a letter to the company’s employees, urging them to use their idle money to buy HBC shares.
After overcoming these difficulties, Hòa Bình Construction Group stabilized its growth trajectory, with a remarkable surge in after-tax profit to VNĐ567 billion in 2016, up from VNĐ83 billion in the previous year. This upward trend continued in 2017, with a record profit of VNĐ859 billion and revenue of VNĐ16,034 billion.
By November 2021, after years of lagging behind its rival Coteccons, Hòa Bình Construction Group had become Vietnam’s largest contractor, with a market capitalization of over VNĐ5,700 billion. Prior to this, Hòa Bình had already surpassed Coteccons in both revenue and profit.
Internal Strife within the Board and Dismal Financial Performance
On the first day of 2023, Hòa Bình Construction Group grabbed headlines due to a dispute within its upper management.
“At that time, I had intended to step back, but I had to return to the position of Chairman of the Board of Directors to steer the ship of Hòa Bình,” wrote Mr. Lê Viết Hải in a message to shareholders in April 2024.
The turmoil began when Mr. Lê Viết Hải submitted his resignation from the position of Chairman of the Board of Directors and withdrew from the Board, effective January 1, 2023. Mr. Nguyễn Công Phú was expected to take on the role of Chairman. However, before this decision could take effect, Hòa Bình Construction Group unexpectedly announced the postponement of the implementation of the personnel changes, including the two decisions to dismiss Mr. Lê Viết Hải and appoint Mr. Nguyễn Công Phú.
The internal conflict within the leadership of Hòa Bình Construction Group continued to unfold, with Mr. Nguyễn Công Phú declaring his intention to take legal action if Mr. Lê Viết Hải did not step down. In response, Mr. Hải warned that he would send a denunciation letter to the investigative agency, requesting that they consider the criminal responsibility of Mr. Phú for disclosing internal and confidential information of the Group to the public.
Ultimately, in February 2023, Mr. Nguyễn Công Phú withdrew from the Board of Directors. Mr. Lê Viết Hải resumed his role as Chairman of the Board of Directors and Legal Representative of HBC.
Mr. Lê Viết Hải (left) and Mr. Nguyễn Công Phú.
Parallel to this internal strife was the dismal financial performance of Hòa Bình Construction Group, set against the backdrop of a stagnant real estate market and an increasingly competitive construction industry. In 2022, the company recorded a record loss of VNĐ2,594 billion after the audit, with equity decreasing by 70.5% compared to 2021, amounting to only VNĐ1,196 billion.
According to the 2023 audited financial report, Hòa Bình Construction Group achieved a revenue of over VNĐ7,531 billion, equivalent to 60% of the plan. This was the second consecutive year of losses for the company, amounting to more than VNĐ1,115 billion. Equity stood at just over VNĐ93 billion, a decrease of 92% compared to 2022.
“The competition in the market has become more intense than ever. Many contractors have offered prices significantly lower than the capital, sometimes by several dozen percent. At the same time, some large contractors have employed unethical competitive strategies to secure projects,” explained Chairman Lê Viết Hải.
He also clarified that according to the report prepared by the company’s Finance and Accounting block, Hòa Bình’s equity was VNĐ5,539 billion, nearly 60 times higher than the audited result. The discrepancy between the two reports stems from differences in real estate valuation methods, depreciation calculations, provisions for expected credit losses, and accounts receivable.
In the second quarter of this year, Hòa Bình Construction Group received good news as their net revenue reached nearly VNĐ2,160 billion. Thanks to a reversal of provisions of over VNĐ220 billion and a surge in other income of VNĐ515 billion, the company reported an after-tax profit of VNĐ684 billion. The after-tax profit attributable to the company’s parent company reached a record high of over VNĐ682 billion.
However, just a few days later, bad news arrived as HoSE announced the mandatory delisting of HBC shares. In his communication with the media, Chairman Lê Viết Hải stated that they would initiate the necessary procedures to list HBC on the UPCoM exchange.
He also mentioned that the basis for HoSE’s decision to delist HBC shares, which was the “accumulated loss exceeding the paid-up capital,” had been addressed in Hòa Bình Construction Group’s consolidated semi-annual financial statements for 2024.
In the event that HBC shares are compulsorily listed on the UPCoM exchange, Mr. Hải affirmed that Hòa Bình Construction Group plans to relist HBC on the HoSE as soon as they meet the requirements, ensuring that shareholders are not adversely affected.
Minh Anh
