The Auditors’ Report: Unraveling VEAM’s Web of Issues

Vietnam Machinery for Industry and Agriculture Corporation – Joint Stock Company (VEAM, stock code: VEA) has recently announced its reviewed consolidated financial statements for the first six months of 2024.

According to the report, VEAM’s net revenue for the first half of 2024 reached VND 1,923 billion, a 2.8% decrease compared to the same period last year. However, thanks to a 4.4% increase in profit from joint ventures and associates, along with reduced expenses, VEAM’s post-tax profit slightly increased to VND 3,218.6 billion.

Despite the profitable results, VEAM has been subject to several qualifications and exceptions by the auditing firm.

As of June 30, VEA has not assessed the collectability of receivables past due with a value of nearly VND 46 billion (compared to over VND 44 billion at the beginning of the year). The auditors were unable to obtain sufficient appropriate evidence regarding this past-due receivable and determine whether it is necessary to establish provisions for doubtful accounts or adjust the figures of related items.

Additionally, VEA has not assessed the net realizable value of stagnant and slow-moving inventory, amounting to nearly VND 72 billion. The auditors could not perform alternative procedures to determine if the inventory allowance established by VEA was sufficient and if adjustments to related items were necessary.

There are also suspended expenses totaling VND 466 billion, including interest expenses, depreciation, land rent of the foam factory that ceased operations in 2015, and the Bac Kan branch of Matexim Joint Stock Company. These expenses are currently reflected in the pre-paid expenses and production-business-in-progress cost items.

The auditors also highlighted the issue of the stalled medium-sized tractor production project, stating that the value of unfinished construction in progress may depend on the future judgment of the competent authorities.

Furthermore, the “Project to Relocate and Build a New Small Tractor Factory,” approved by VEAM’s Board of Directors on July 31, 2024, with an implementation period from Q4 2016 to Q1 2023, has not been completed due to pending project extension procedures.

It is important to note that as of the date of this financial statement, the competent authorities have not officially approved the equitization settlement of VEAM’s parent company.

Mechanical Tran Hung Dao One-Member Limited Company has not recognized the value of its investment in Pacific Financial Investment Joint Venture Company, worth VND 40 billion, due to insufficient documentation from related partners.

Finally, there is an issue with land rent at the Southern Engine and Agricultural Machinery One-Member Limited Company (SVEAM). Currently, they are temporarily recognizing the land rent of the Dong Nai Province Department of Natural Resources and Environment without reflecting the notices of land rent payment from the Dong Nai Province Tax Department.

SVEAM has sent dispatches to the competent authorities, requesting to continue applying the land rent price listed on December 30, 1995, by the Ministry of Finance. However, there has been no response to this proposal yet.