30.06.2020, 08:49

Vietnam Railways estimates a $60 million loss due to pandemic

Passengers board a train of Sài Gòn Railway Transport.Vietnam Railway Corporation (VNR) estimates a loss of nearly VNĐ1.4 trillion (US$60 million) after tax in 2020. — Photo laodong.vn

HÀ NỘI — Vietnam Railway Corporation (VNR) estimates a loss of nearly VNĐ1.4 trillion (US$60 million) after tax in 2020, a massive blow to the company due to impacts of the COVID-19 pandemic.

In the recent filing to the State Securities Commission on business results in the last three years, the corporation expected this year’s combined production and revenue will decrease by 23 per cent compared to 2019.

Last year, the corporation posted a consolidated revenue of more than VNĐ8.3 trillion and pre-tax profit of VNĐ180 billion.

According to VNR, the loss is mainly due to the falling demand for transportation and travel as the result of the pandemic and the corporation’s re-adjustment of its operation to upgrade and repair the Hà Nội – HCM City railway line.

Of the VNĐ1.4 trillion loss, VNĐ711 billion came from main railway business operation, of which two subsidiaries – Hà Nội Railway Transport and Sài Gòn Railway Transport – are expected to record a combined loss of VNĐ618 billion

The parent company VNR estimates a loss of VNĐ168 billion.

Three subsidiaries in the mechanical industries and 20 railways joint stock companies are the only firms expecting profits of VNĐ75 billion.

Other burdens include financial losses from previous years, provisional expenses for contingency plans and bad debts worth a combined total of VNĐ682 billion. Also depreciation and amortisation expenses reached VNĐ59 billion this year but has no revenue to offset.

In terms of investment, apart from improving infrastructure, VNR plans to invest more than VNĐ602 billion in locomotive assemblies. The corporation also seeks to mobilise VNĐ414 billion from investors to carry out new carriage building project.

Under fierce competition

According to VNR Chairman Vũ Anh Minh, the railway industry is facing fierce competition from other modes of transport, especially low-cost carriers in both air and road transport, while there is a lack of mechanisms and policies to boost railway development.

Last year was also a difficult year for VNR when all business indicators declined.

“The direct infrastructure and the train stations are owned by the Government, but there is no mechanism for enterprises to invest by themselves,” Minh was quoted by vietnamnet.vn.

“The State does not have capital, businesses have money but cannot spend to invest.”

He cited an example of Sông Lũy station in Bình Thuận Province which needs about VNĐ30 billion to extend the railway lines and can generate an annual revenue of VNĐ200 billion but cannot be invested.

Nguyễn Thị Phú Hà, vice chairwoman of the Committee for Management of State Capital, said the railway industry still relied heavily on ticket revenue while its management and competition is weak and infrastructure underdeveloped.

She has asked VNR to work with ministries and local authorities to submit to the Government a plan to improve competitiveness and reshape sector development strategy in the future.

Due to the pandemic, the railway industry saw a decline in number of passengers but still had to maintain operations. Since February, about 3,000 workers have been furloughed or worked only on a shift basis. VNR has proposed the Government support its business with tax exemptions, fee reductions or by freezing debts.

In a move to revitalise the railway industry post-COVID-19, VNR is offering discounted prices and promotion programmes to stimulate domestic tourism, as well as focusing on more on freight transport.

It plans to operate more international freight trains with plans to transport fruits and aquatic products directly from southern provinces to China using refrigerated containers and onward to third countries such as Russia and others in Europe this year. — VNS.