Loc Troi Group (LTG) Q2 cash flow negative 3,310 billion, additional debt 3,122 billion

Loc Troi Group (LTG) Second Quarter Profit Recovers Thanks to Profits at Affiliated Companies

After a forgettable 2022, Loc Troi Group's Q2 business results have had a relatively positive change. Specifically, Q2 revenue reached VND 3,678 billion, a slight increase of 3.7% over the same period. Cost of goods sold did not increase but was reduced, causing gross profit to increase to VND 526.3 billion.

Financial revenue during the period also increased nearly 10 times, to VND49.4 billion thanks to exchange rate difference profits and bank deposit interest.

However, the company's financial expenses also doubled, from 114.6 billion to 231.4 billion VND. Interest expenses even tripled, from 53.9 billion to 168.4 billion VND. In addition, the company also recorded a profit of more than 326.9 billion VND at its associates in the second quarter. This was a big driving force for LTG's profit to break out in the period.

In addition, sales expenses were reduced from 237.2 billion to only 135.8 billion VND. On the contrary, business management expenses increased from 85.6 to 128.4 billion VND. After deducting these expenses, Loc Troi Group recorded a profit after tax of 424.7 billion VND, a strong recovery compared to the loss of 44.3 billion VND in the same period and the loss of 81.2 billion VND in the first quarter.

Reported large profits but no money has been collected, Loc Troi's "paper" assets increased to more than 2,746.6 billion VND

If only looking at the business results report, investors will see a bright picture of the results that LTG achieved in Q2. However, the company's asset structure revealed some abnormalities.

First, the proportion of cash and cash equivalents decreased by nearly half, from 799.5 billion to only 440.4 billion VND. Meanwhile, bank deposits also decreased slightly from 130.9 billion to 112.7 billion VND. This shows that the flexibility of assets held by LTG is being greatly affected.

The second quarter of the year, the total amount of money in the LTG group's treasury is 3310 billion dong, so it has to borrow an additional 3122 billion dong, image 1 — Loc Troi Group (LTG) reported a profit in the second quarter but its cash flow was still negative 3,310 billion VND (Photo TL)

Next, short-term receivables from customers in the first 6 months of 2023 increased 2.34 times compared to the beginning of the year, from 2,310.2 billion to 5,420.7 billion VND. This means that in the first 6 months of the year, up to 3,110.5 billion VND of Loc Troi's revenue was only reported on paper but the company had not yet collected money, not to mention the amount of receivables recorded from the previous year.

The amount of short-term receivables currently accounts for 48% of Loc Troi Group's total assets. In addition, the company's inventory is also increasing from VND 2,112.8 billion to VND 2,714.7 billion. And the total amount of receivables in the second quarter increased by VND 2,746.6 billion.

Short-term debt increased by 3,122 billion in just the first 6 months of the year, business cash flow is still negative 3,310.8 billion despite reporting profits

In Loc Troi's capital structure, the company is showing an increase in debt. LTG's short-term debt index nearly doubled, from 3,747.8 billion to 6,869.8 billion VND. While long-term debt decreased very little, from 99.4 billion to 79.7 billion VND. This is completely consistent with the situation of interest expenses increasing 3 times, which is weighing on Loc Troi's revenue as mentioned above.

Loc Troi's total liabilities are VND8,791.6 billion, an increase of more than VND3,212 billion compared to the beginning of the year. Meanwhile, Loc Troi's equity is only at VND3,391.9 billion. Liabilities currently account for 72.2% of the company's total assets. In other words, Loc Troi's assets are currently mostly debt.

One point to note is that although Loc Troi is reporting a profit in the second quarter, the unit's operating cash flow in the first 6 months of the year is still negative at 3,310.8 billion VND. The reason is due to fluctuations in receivables up to 2,818.5 billion VND. This has been warned in the above section about the excessively inflated "paper" receivables of Loc Troi.

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