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Coffee giants in Central Highlands in agony because of big debts   2012-05-14 - Lao dong

A lot of “big guys” in the Central Highlands – the leading coffee exporters in Vietnam – are now on the verge of bankruptcy due to the heaped up debts.

The head office of Inexim Dak Lak
Burdened with heavy debts

Vinacafe Buon Ma Thuot was the biggest coffee exporter of Dak Lak province, the coffee metropolis of Vietnam, in the 2010-2011 crop with 93,000 tons of coffee exported, which brought the export turnover of 189 million dollars.



However, despite the big exports, the big guy is incurring big debts with the total debts of 1600 billion dong owing to eight local commercial banks.



Besides, Vinacafe Buon Ma Thuot has become the defendant in a lawsuit relating to the dispute over 18,000 tons of coffee. If the company loses the case, it would have to pay hundreds of billions of dong. Meanwhile, its total assets, including storehouses, real estate, 55 Hino trucks) are valued at 1200 billion dong only.



Another “coffee giant” in Dak Lak – Inexim Dak Lak – is also incurring the debt of 350 billion dong. After successfully getting equitized in 2007, Inexim Dak Lak increased its chartered capital by two folds to 70 billion dong. It was known as the first enterprise in the locality that joined the forward coffee market with the annual turnover of nearly 1 trillion dong.



However, after the initial success, the company took loss continuously in the next years. By April 2011, Inexim Dak Lak had incurred the accumulative loss of over 80 billion dong, while the stockholder equity had dropped to 3.6 billion dong. Meanwhile, the accounts payable had reached 365 billion dong.



The debts had accounted for 99 percent of the total assets and 10 times higher than the stockholder equity of the company. As such, even if selling all the assets, the company would not have enough money to pay the huge debts.



Truc Lam Company in Buon Ho Town of Dak Lak province has stopped its operation since 2011. The company’s director has escaped, leaving the debt worth trillions of dong.



In Lam Dong province, Vinacafe Da Lat has been confirmed by the inspectors of the Ministry of Agriculture and Rural Development as having incurred the loss of 99 billion dong, eating into the stockholder equity.



What leads the giants to distress?

In fact, the current bad situation of coffee giants has been anticipated. The production and business of the companies has been stagnant for many years already, but the enterprises have not made any adjustments in their business plans to get adapted to the new market conditions.



In the difficult economic conditions, Vinacafe Buon Ma Thuot still invested 300 billion dong to build a bonded warehouse in the Hoa Phu Industrial Zone in Dak Lak province which covered an area of 175,000 square meters.



The project was completed in mid 2011, but the General Department of Customs has recently stopped the operation of the warehouse, because it had not been put into operation six months after the completion.



Similarly, Vinacafe Da Lat has also wasted money in investment, when it build a coffee processing plant with the capacity of 100,000 tons a year, while the actual operation scale is 60,000 tons only.



Economists have also pointed out that the financial resources of coffee companies are limited. As the companies’ working capital has been relying on bank loans, they would fall into difficulties once banks refuse to lend. Even if the companies can access bank loans, they have to pay overly high interest rates. Meanwhile, the business has been going badly, thus making their debts heavier.



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