Debt management and payment capacity of Vietnamese enterprises are weak and on the verge of decline, says a survey of the 500 largest companies in Vietnam (VNR500) on their 2012 revenues.
The survey conducted by Vietnam Report JSC was announced last week. As per the survey, debt management at local large firms is poor as proven by their debt-to-asset ratios.
The average ratio of debts to total assets of the State corporate sector is 0.7, while the private sector has a ratio of 0.8 and foreign-invested enterprises (FIEs) 0.5.
“These figures show that Vietnamese enterprises rely heavily on loans. As lending rates cannot go down immediately, debt payment capacity of local firms will likely decline, affecting capital cost and indirectly pushing down their profits,” says a report on the survey.
The revenue growth rate of the country’s largest companies has constantly fallen over the years, the report reveals.
In 2010, their revenue picked up 7.83% against 2009, while the year-on-year growth rates in the two preceding years were over 40%. The rate last year dropped further to 2.37%.
The average return on equity (ROE) of VNR500 firms is 20%, meaning they earn VND2 in profit from every VND10 spent. ROE of FIEs is 39.22%, remarkably higher than the ratios of private firms and State-owned enterprises, at 16.28% and 15.53% respectively.
Thanks to effective cost control, FIEs enjoyed higher profits than the other sectors in the economy.
Samsung Vietnam greatly contributed to the total revenue of enterprises in Bac Ninh last year. For the first time since 2007, Bac Ninh made it to the list of the top five corporate revenue earning provinces.
Although there are only four Bac Ninh-based companies in the VNR500 list, revenues of these firms accounted for 3.18% of the total in VNR500 companies in 2012. Last year also marked the first time that Samsung Vietnam had appeared on the top four list in Vietnam, ranking fourth.
Telecom, chemicals, mechanical engineering and agriculture-forestry were the sectors with the highest ROE, over 25%. In contrast, power suffered a negative ROE.
The Saigon Times Daily