Hyosung Chemical's (298000) Vietnamese subsidiary Hyosung Vina Chemicals returned to profit in the first half, but accumulated losses of more than 1 trillion won have raised warning signs about its ability to continue as a going concern.
Hyosung Vina Chemicals posted revenue of 675.2 billion won and net profit of 45.2 billion won in the first half of this year, according to foreign media reports and Hyosung Chemical's semiannual report released on the 8th. The result marks a turnaround from a net loss of 105.1 billion won a year earlier.
But Ernst & Young Vietnam, the company's external auditor, said in a recent semiannual review report that while it issued an unqualified opinion on Hyosung Vina Chemicals' financial statements, "material uncertainty exists regarding the company's ability to continue as a going concern," citing accumulated losses and the burden of current liabilities.
As of the end of June, Hyosung Vina Chemicals reported assets of 1.7358 trillion won, liabilities of 1.1118 trillion won and equity of 624 billion won. Equity and assets both increased along with liabilities, but the problem is the depth of losses built up over years. EY Vietnam noted that the company's accumulated losses reached 20.798 trillion dong, or about 1.2188 trillion won, and that current liabilities maturing within one year exceeded current assets by 6.482 trillion dong. The semiannual report applied an exchange rate of 5.86 won per 100 dong.
Established in May 2018, Hyosung Vina Chemicals began commercial production of polypropylene in April 2020 but has continued to run losses, posting a net loss of 231.1 billion won last year. The support burden on parent company Hyosung Chemical also continues. Hyosung Chemical currently provides Hyosung Vina Chemicals with 861.8 billion won in debt guarantees and a long-term loan of 204.2 billion won carrying an interest rate of 6.62%. In July, it decided to extend a $60 million debt guarantee by another year.
Hyosung Chemical holds a 51% stake in Hyosung Vina Chemicals, with the special purpose company Hyosung Vina Je1cha holding the remaining 49%.
