Post-Review, DWC Receives Qualified Opinion

20 August, 2024

DWC’s Business Targets for the First Half of 2024

Source: VietstockFinance

For the first two quarters of 2024, DWC recorded a revenue of 146 billion VND, a 30% increase compared to the same period last year. After deducting cost of goods sold, gross profit reached 85 billion VND, a 57% surge year-over-year.

All expenses increased significantly, with financial expenses witnessing the highest rise of 30 billion VND, 2.3 times higher than the previous year. Nonetheless, thanks to the substantial gross profit, the company still ended the first half with an after-tax profit of 18 billion VND, a 47% increase compared to the same period last year. In terms of the targets approved by the 2024 Annual General Meeting of Shareholders, the company has accomplished over 51% of its revenue goal and surpassed the profit-before-tax target by 78% just within the first half.

Source: VietstockFinance

In its explanation, DWC attributed the positive results to the approval of the People’s Committee of Đắk Lắk Province to adjust and increase water prices since the beginning of 2024, leading to higher revenue compared to the same period last year. Moreover, the volume of commercial water supplied to customers increased due to higher consumer demand.

Regarding expenses, the significant rise in financial costs was mainly due to exchange rate fluctuations, as the USD/VND exchange rate for the ADB (Asian Development Bank) loan was adjusted during this period. Nevertheless, the increase in expenses was still lower than the growth in revenue and gross profit, allowing the company to achieve profit growth.

Received a qualified opinion during the privatization process

As of the end of June, the company’s total assets stood at nearly 784 billion VND, unchanged from the beginning of the year. Current assets accounted for 204 billion VND, a 24% increase. Cash and cash equivalents witnessed a substantial surge to nearly 81 billion VND, four times higher than at the start of the year.

Inventories increased by 9%, reaching nearly 24 billion VND. Construction in progress decreased by more than half to 7.2 billion VND. Notably, these two items also received a qualified opinion from the auditing organization, AFC Vietnam.

Specifically, AFC Vietnam stated that as of January 1 and June 30, 2024, these two items included some unfinished projects with a total value of over 2 billion VND, which were carried over from previous years and not continued in the current year. The company has not yet conducted an assessment of the recoverable value of these projects. With the available documents, AFC could not obtain sufficient appropriate audit evidence regarding the accuracy and recoverability of these amounts, as well as their potential impact on the semi-annual financial statements for 2024.

Additionally, DWC has not yet finalized the privatization cost settlement and determined the value of state capital to be transferred to the joint-stock company due to unresolved financial issues. The value of the amount payable to the state for privatization is currently recorded under other payables at nearly 2.5 billion VND. This figure may change depending on the decision of the managing authority.

Furthermore, the company’s accounts receivable and payable, including receivables from customers of over 4 billion VND, prepayments to suppliers of nearly 238 million VND, other receivables of approximately 1.5 billion VND, and payables to suppliers of nearly 497 million VND, also received a qualified opinion from AFC Vietnam. The auditing firm stated that they could not obtain sufficient appropriate audit evidence regarding the accuracy, existence, and recoverability of these balances and their potential impact.

Lastly, the company is monitoring other payables amounting to nearly 8.1 billion VND, which is a loan from the Government of Japan according to a decision dated April 5, 2002, by the People’s Committee of Đắk Lắk Province regarding the investment project for the Quảng Phú Town Water Supply System in Cư M’Gar District. As of the reporting date, the company has not yet identified the lender, the loan term, and the interest rate.

DWC has since provided a written explanation. The company stated that despite being privatized since July 1, 2019, it has not yet received an official approval for the settlement and transfer of capital and assets from the state-owned enterprise to the joint-stock company, as well as for the unfinished construction costs, capital construction in progress, and the accounts receivable and payable mentioned in the qualified opinion. DWC has repeatedly sent documents to the People’s Committee of Đắk Lắk Province, and the matter is currently under consideration, with instructions for relevant agencies to resolve the issue and address the company’s concerns.

Apart from the aforementioned issues, AFC Vietnam opined that the semi-annual financial statements for 2024 fairly present, in all material respects, the financial position and performance of DWC for the current period.

In terms of capital structure, DWC maintains a healthy financial position. Short-term debt as of the end of June stood at 98 billion VND, a slight increase compared to the beginning of the year. The current and quick ratios are both very high, exceeding 2 and 1.8, respectively.

Regarding borrowings, the company had short-term debt of 52 billion VND, a 9% increase year-over-year, comprising short-term loans from MB and long-term loans due from ADB. Long-term debt amounted to 365 billion VND, a slight increase, representing loans from ADB.

Chau An