State shipper Vinalines suspected of hiding losses

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Vietnam National Shipping Lines reported a full-year profit of VND62.15 billion in 2011, despite worsened business conditions in the shipping sector.

Several subsidiaries of Vietnam National Shipping Lines have continued to post huge losses for last quarter, raising doubts about the impressive profits the state shipper has reported.

Some of the subsidiaries have been trying to reduce losses by selling old vessels, but their efforts have failed to steer them back into the black.

Vietnam Ocean Shipping Company, for instance, incurred losses of VND245 billion (US$11.7 million) in 2011 even after it sold two vessels to earn some cash. In the first three months of this year, the company had an additional VND60 billion in losses.

Other subsidiaries of Vietnam National Shipping Lines, also known as Vinalines, are in the same situation.

Vinaship Joint Stock Co., a transporter and provider of logistical services in the northern port city of Hai Phong, posted VND17.6 billion in losses over the first three months.

Its stock, VNA, was designated as a stock on alert by the Ho Chi Minh Stock Exchange starting May 3. A statement from the exchange said it was necessary to inform and protect investors after auditors warned about the company's ability "to operate continuously."

But while many of its subsidiaries have struggled, Vinalines has managed to surpass its own profit targets every year since 2007 at least that is what it has claimed.

In 2010, it posted a gross profit of VND1.24 trillion ($59.6 million), up 40 percent from 2009. Government estimates, however, have suggested that the company actually incurred a VND1.27 trillion loss due to the poor performances of many of its subsidiaries. Vinalines also accumulated huge debts valued at VND36.6 trillion ($1.75 billion), or 91.45 percent of its equity.

The company then announced a loss of VND660 billion ($31.7 million) in the first half of 2011, the highest ever in its 15 years of operation.

Even if the losses of five businesses transferred from state-owned shipbuilder Vinashin were not included, Vinalines still had losses of more than VND500 billion on its own.

But only six months later, the company reported a full-year profit of VND62.15 billion, despite worsened business conditions in the shipping sector.

Economist Le Dang Doanh said Vinalines should be audited thoroughly in case it intentionally reported profits even though it was making losses.

Doanh said state auditors looked into the company last year and he expected their findings, which have not yet been publicized, to shed some light on the situation.

More investment

According to Vinalines, its 154-ship fleet with a total load capacity of 3.4 million tons accounted for 45 percent of Vietnam's shipping capacity at the end of last year.

The company mostly leases its ships, with Vietnam Ocean Shipping Company being the only unit that handles all shipping services with its own fleet. Analysts said the leasing business is not a stable source of revenue for Vinalines, while it also exposes the company to liabilities.

The Ministry of Transport has announced a plan to invest VND100 trillion ($4.8 billion) into Vinalines so that the shipper can expand its fleet. In the first stage, it will receive VND30 trillion to increase its fleet capacity to 15 million tons by 2015.

Critics have voiced concerns over the plan, saying the investment is too large for a company whose performance is in question.

Nguyen Van Thu, former president of the Institute of Transport Planning and Management, said most transporting of goods in and out of Vietnam is now handled by foreign shipping lines. It's more important to improve the management of Vinalines and make it more competitive than to give it more money, he said.

The company simply does not need more ships, Thu added.

"A master plan approved by the prime minister only sets the target of increasing Vietnam's total shipping capacity to 13.5 million tons by 2020, so I don't see why Vinalines should have a 15-million-ton fleet," he said.

Do Xuan Quynh, general secretary of the Vietnam Shipowners' Association, said the government should focus on helping local shipping lines increase their market share. A few companies are enough, as long as they can operate effectively and survive the competition, he said.

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