Property firms see profits dwindling to zero

Most property companies saw their profits last year declining almost to nil compared to the previous year as the gloomy market continued to adversely affect their operations.
A sharp revenue drop and a build-up of unsold products caused by weak demand in the apartment segment coupled with rising borrowing costs have led to the poor business results of realty firms.

The market leader Hoang Anh Gia Lai saw its profit plunge by 89% year-on-year, from 2.08 trillion dong in 2010 to 224 billion dong last year. The group explained its subsidiaries no longer enjoy profits generated by the parent firm as the latter is now only in charge of management.

Sai Gon Thuong Tin Real Estate Company, better known as Sacomreal, recorded a loss of nearly 40 billion dong in the final quarter of last year. The firm’s revenue from product sales and services in 2011 halved to 540 billion dong from 1.09 trillion dong in 2010.

Sacomreal’s profit was dragged down 83% to a mere 80 billion dong last year, against 485.5 billion dong in 2010.

Phat Dat Property Development Corporation was faring no better. The company in its financial statement reported its 2011 revenue totaled a mere 127 billion dong, a drop of 92% from 1.57 trillion dong in the year before. The company’s profit also dipped to 4.5 billion dong, equivalent to some 1% of the level of 331 billion dong in 2010.

With the loss of over 225 million dong recorded in the last quarter of 2011, the year’s profit of House Vietnam Joint Stock Company dwindled by 96% against the previous year. Similarly, Dat Xanh Real Estate Service and Construction Corporation witnessed its profit decline by a half due to the loss of over 16.5 billion dong in the last quarter.

The business results of ten property companies gathered by Saigon Times Daily show that the combined profits of all ten huge firms in 2011 are still lower than the profit of Sacomreal alone in 2010 and far behind the profit of Hoang Anh Gia Lai in the same year.

Most realty firms ascribed their dismal profits to the continued difficulties faced by the market and poor sales of products, while financial costs, specifically interest rates, put more pressure on many enterprises.

For instance, Thu Duc Housing Development Corporation (Thuduc House) had to pay an interest sum of 49 billion dong last year, a significant rise from 11 billion dong in 2010. Sacomreal had some 249.5 billion dong in loan interest payables in 2011, or an increase of 10% year-on-year.

Pressure of loan repayment, along with stagnant trade, has forced several property enterprises to discount their products in order to rev up demand as well as quickly recover capital to withdraw from the market.

Most real estate companies are now debtors to the banks. Therefore, to boost product sales to pay their debts is currently a big challenge to property enterprises.

In the outlook for the local property market this year, the analysts of VietCapital Securities predicted 2012 would be another tough year for the market given the liquidity crisis and property lending restrictions.

Market observers forecast the trend of project transfer would continue in 2012, and the market would hardly prosper as real estate credit is still tightened.
Saigon Times

Tags: Vietnam Property market, Vietnam real estate, vietnam real estate market