Investment & Finance

Coteccons Construction JSC still unstable

(ĐTTCO) - The Coteccons Construction Joint Stock Company (CTD) was expected to see much more development under a new leadership, after Mr. Nguyen Ba Duong, Chairman of Board of Directors, resigned. However, a resignation letter sent by another board member has raised doubts that CTD had not yet overcome its difficulties, and is still rather unstable.

CTD has not yet overcome its difficulties.

CTD has not yet overcome its difficulties.

End of an era

On 2 October 2020, Mr. Nguyen Ba Duong suddenly announced his resignation from the position of Chairman of Board of Directors, citing personal reasons. At the same time, the CTD Board of Directors agreed to elect Mr. Bolat Duisenov on 5 October as their next Chairman to replace Mr. Duong. Thus, the Board of Directors and the Strategic Sub-Committee together with the Executive Board and senior managers in CTD would henceforth supervise all future business activities. Earlier on 25 September, CTD had announced establishing a strategic sub-committee with Mr. Bolat Duisenov as Head of the committee.

Immediately after resigning, Mr. Duong sold off about 1.13 million CTD shares, reducing his ownership from around 4.35 million shares to about 3.22 million shares, which no longer left him a major shareholder at CTD. This move to sell off shares showed the strong grasp of Mr. Nguyen Ba Duong at CTD, which after a long period of seventeen years had finally collapsed.

In his letter to CTD, Mr. Duong strongly emphasized his contribution in making CTD a contender for the number one position. According to Mr. Duong, about 20 years ago, almost all high-rise projects in Vietnam were constructed by foreign contractors, and in the eyes of investors, domestic construction companies could handle few simple projects of upto seven stories only. Most contractors were unable to provide good quality construction, or safe sanitary buildings.

Conflict of interests

In his letter, Mr. Duong described the current situation at CTD very negatively, saying that the brand name of CTD was damaged soon after it reached a peak, and thereon problems began to occur in the company.

According to one major shareholder Kustocem Pte. Ltd (Kusto), a number of members of the Board of Directors (BOD) and the Board of Managers (BOM) at CTD currently hold key management positions at Ricons Construction Investment JSC. These include the position of Chairman of Board of Directors, who along with affiliates own a significant stake in Ricons, and at the same time they are the ones who have the power to decide all activities at CTD. This is the reason why Kusto cannot continue to trust this current BOD and BOM at CTD, including Mr. Duong, the General Director, Mr. Nguyen Sy Cong, and Deputy General Director, Mr. Tran Quang Quan.

Over the years, Kusto has repeatedly questioned this BOD and BOM on serious issues leading to a conflict of interests, party transactions, resource use and the reputation of the Coteccons Group. However, there was no satisfactory answer given by the Board of Directors or the Board of Managers.

In fact, before Kusto decided its coup, investors had raised many doubts about Ricons being the backdoor entryway of some members of the CTD Board of Directors. During the period 2010 to 2014, Ricons conducted a leadership restructuring with the entry of key personnel from CTD. For example, Mr. Duong, Mr. Cong and Mr. Quan became members of the Board of Directors of Ricons, in which, Mr. Quan became Chairman of Board of Directors, and Ms. Ha Tieu Anh, CTD's Chief Accountant, became Head of Supervisory Board of Ricons. With this backing, Ricons began making impressive progress.

Within the first year of restructuring, Ricons recorded a 78% growth rate of VND 2,825 bn, and profit-after-tax increase of 97%, reaching VND 81 bn. According to statistics, Ricons maintained an average growth rate of revenue and profit in the period 2014 until 2018 of 50% and 76%, respectively. Compared to CTD, where net profit-after-tax increased less than five times in past five years, Ricons net profit increased more than ten times over the same period.

Shuffle of posts

It seemed that after Mr. Duong resigned and sold his shares, CTD would enter a new state of normalcy, but suddenly Mr. Nguyen Quoc Hiep, a member of the Board of Directors, sent a letter of his resignation to CTD. Mr. Hiep said that from the beginning, CTD was very concerned about the disagreements between the old management and Kusto, although the old Board of Directors of Coteccons had tried to have a dialogue to clear matters. At the 2020 Annual General Shareholders Meeting, although the two sides had new agreements, according to Mr. Hiep, Kusto's way of doing things after taking control pushed Mr. Duong to resign.

The letter sent by Mr. Hiep was published when CTD began to announce new posts after the departure of Mr. Duong on 2 October. The CTD Board of Directors agreed to elect Mr. Bolat Duisenov to replace Mr. Duong, and also appoint two new Deputy General Directors, namely, Mr. Pham Quan Luc and Mr. Tran Tri Gia Nguyen. Mr. Pham Quan Luc is currently CTD Technical Manager, while Mr. Tran Tri Gia Nguyen was once the Deputy General Director of Hoa Binh Construction Group (HBC). Notably, Kusto nominated its own representative at CTD, Mr. Ly Xuan Hai, former General Director of Asia Commercial Bank (ACB).

Mr. Duong's departure from CTD is being considered as the end of the most controversial acquisition in recent years. All over the world, it is common that well known founding members leave the hot seat when the business goes down, such as Jerry Yang at Yahoo or Steve Jobs at Apple. In Vietnam, many businesses, instead of continuing to consolidate their positions, often have the mentality of reviving individuals to set up backdoor companies for quick profits, especially in fields like finance and real estate.

Kim Giang

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