The Extreme Profit Turnaround: A Tale of Unexpected Losses for a Billion-Dollar Venture.

In early 1960, the construction of Vietnam’s first fertilizer plant began on a 40-hectare site in Tho Xuong, located 1km north of Bac Giang town (now Tho Xuong ward, Bac Giang city, Bac Giang province).

After 5 years of construction, the factory was established with a total of 130 facilities. Subsequently, the Heat Power Workshop was transformed into the Ha Bac Thermal Power Plant. In 1975, the government merged the Ha Bac Power Plant, the Ha Bac Chemical Machinery Plant, and various chemical workshops to establish the Ha Bac Fertilizer Plant.

In 1993, it was renamed the Ha Bac Fertilizer and Chemical Company. Seven years later, the enterprise underwent privatization. In 2016, the company transitioned into the Ha Bac Fertilizer and Chemical Joint Stock Company (Habaco). Its charter capital at the present time is VND 2,722 billion.

Habaco’s Business Performance

Habaco, the Ha Bac Fertilizer and Chemical Joint Stock Company, has released its audited financial statements for the first half of 2024. During this period, the company recorded revenue from sales and services of over VND 1,967 billion, a slight decrease compared to the VND 2,086 billion achieved in the same period last year.

In this period, the company’s financial income increased by nearly 35%, reaching VND 10.26 billion. Habaco’s financial expenses also decreased by half compared to the previous year, amounting to VND 167.4 billion, with interest expenses constituting a significant portion.

Both selling expenses and administrative expenses decreased compared to the first half of 2023, amounting to VND 35.2 billion and nearly VND 70 billion, respectively.

The company’s other income witnessed a significant drop, falling from VND 425 billion to VND 243 billion. Overall, Habaco incurred a loss of more than VND 99 billion in the first half of 2024 despite reporting a profit of VND 860 billion in the previous year. Nonetheless, compared to a loss of nearly VND 480 billion in the first half of 2023, this year’s performance is an encouraging improvement.

Explaining these disappointing results, the company attributed the loss to various factors, primarily including unfavorable production conditions due to unusual weather patterns, with frequent hot weather and thunderstorms, and notably, multiple lightning strikes damaging the company’s power transmission lines. These disruptions led to sudden and unexpected halts in the production line, significantly affecting the equipment.

When the company proceeded to address the electrical grid issues and resumed operations, they discovered leaks in the equipment, necessitating extended downtime for repairs and major maintenance. Consequently, the machine operating time was reduced by 45 days compared to the plan, resulting in a lack of production. Additionally, the persistently high prices of raw materials and inputs, particularly coal, also impacted Habaco’s business performance, contributing to the loss.

Notably, in this semi-annual report, the auditing firm provided a qualified audit opinion regarding the final settlement of the renovation and expansion project of the Ha Bac Fertilizer and Chemical Plant.

Habaco stated that they have been working diligently with the contractor to resolve outstanding issues in the EPC contract settlement. However, as of now, the two parties have not reached an agreement on certain matters. Therefore, the A-B settlement of the EPC contract remains pending, and there is insufficient basis for project settlement approval and confirmation of related payables with the contractor.

The company mentioned that they are seeking advice from specialized ministries and actively working with the contractor to resolve the differences and finalize the settlement documents and related payables as soon as possible.