Coteccons begins new chapter, hopefully, after resolving feud with shareholders

On June 22 the construction giant announced the resignation of Nguyen Sy Cong and Tran Quyet Thang, and their places will be taken by representatives of Kustocem and The8th, two Singaporean investors with 18.23 percent and 10.42% stake in the company.

The decision was made at the company's annual general meeting on Tuesday along with an official apology from chairman Nguyen Ba Duong to shareholders, who admitted the board was negligent in letting the company know. conflicts of interest between management and shareholders.

Following Duong's apology on Tuesday, Coteccon's CTD stock, listed on the Ho Chi Minh City Stock Exchange and among the largest VN30-limited stocks, hit the ceiling twice, up six times. time.9 percent and 7 percent for two consecutive days.

Disagreements between the two major shareholders and management began in mid-2017 when the company's business was booming.

From a strategic partnership, the relationship turned confrontational after Kustocem twice called for extraordinary shareholder meetings in October 2019 and early June to elect a new board of directors and order special examination of management activities.It even wants Duong to resign as chairman.

By June, it was able to get backing from a number of domestic and foreign shareholders who own about 45% of the shares.

Coteccons had until then made a number of counter arguments, including that Singaporean investors had in fact engaged in a hostile takeover bid.

But everything changed when Vietnam's leading construction company announced its resignation on June 22.Kustocem's representative publicly thanked Mr. Duong for acting in the best interests of the company and shareholders, while he said that the geographical distance, cultural difference and difference of opinion among major shareholders and the Coteccons board of directors is the main cause of the "noise" past."

"Resolving these bottlenecks is the start of a new chapter for Coteccons," he said.

The two new directors that Coteccons said will be appointed soon are Bolat Duisenov, CEO of Kusto Vietnam, and Herwig Guido H.Van Hove, general manager of The8th.

Duong and Nguyen Quoc Hiep will be the only Vietnamese directors on the board, and Hiep will be an independent board member.

While some minority shareholders expressed concern that most foreign employees do not have much experience or specific knowledge about the Vietnamese construction market, the company dismissed the concerns and said that it was important to More importantly, the Board of Directors can find a common voice.

It said it would hire more experts to provide financial advice, transparency and manage transactions with its subsidiaries and sister companies.

Mr. Duong said that in the past one or two years, the company had to refuse many large construction deals because there was no consensus from the board of directors.

Once it stabilizes internally, it will seek to use more than 3 coins.3 trillion ($142.4 million) cash and cash equivalents to diversify and engage reputable investors, many of whom have difficulty accessing cash as the State Bank of Vietnam tightens credit to the sector real estate in recent years, he said.

“If Coteccons only focused on construction, it would not be able to achieve 30-40% growth like in 2016-18 due to many competitors in the industry and limited jobs."

The company has been the general contractor for most major projects in Ho Chi Minh City, Hai Phong and the northern Quang Ninh province, but still failed to meet last year’s revenue targets, he said.

“Coteccons will invest in real estate differently than other companies.We will not bid or buy back the project, but will directly cooperate with investors to be safer."

The company also has the capacity to undertake infrastructure construction, but would wait for a better time because of the segment’s great risks, he said.

Cong, General Director who is about to resign, said that one of the top priorities is that Coteccons remains the number one contractor with a market share of about 5%.

The audited report for 2019 shows that the company's profit after tax decreased by 53% year-on-year to VND 107 billion ($30.64 million) on a 17% lower revenue of 23 dong.73 trillion ($1.02 billion).

According to management, the sharp drop in profit was due to some projects taking longer than expected to complete, rising fixed costs and pressure from competitors causing prices to drop, especially in the context of low prices. scene this year there is less work.

Construction accounts for nearly all of Coteccons' revenue, with a modest amount coming from leasing of construction equipment, offices and selling materials.

The company expects revenue and profit to drop 32.6 percent and 15.5% respectively this year as the Covid-19 pandemic depressed the market.

Duong said it is reviewing the merger with Ricons Construction and Investment Joint Stock Company, an associate company that this company holds.87 percent shares.

The proposal was not approved by the board last year, but if the new board passes, the matter will be brought before shareholders next year, he added.