Hs Vietnam Chemical Co., Ltd (Vietnam)

The subject was founded in 2008 as a wholly-owned subsidiary in Vietnam of HWASEUNG INDUSTRIES CO., LTD (from South Korea), which participates in processing shoes of the Reebok and Adidas brands. The subject is now specialized in processing parts of shoe soles then all of its output products are supplied to HWASEUNG VINA CO., LTD, whose parent company in South Korea and HWASEUNG INDUSTRIES CO., LTD are in the same group. All materials for the subject's processing activities are supplied by HWASEUNG VINA CO., LTD, as revealed.Noticeably, according to Ms. Tran Thi Huong Huyen - the chief accountant, due to the strong fourth outbreak of the Covid Pandemic, the subject had to applying the social distancing solution based on the directive No. 16 of the government from early Jul 2021 to mid-Oct 2021. Hence, in the days of social distancing, the subject's main factory just operated with below 5% of production capacity with about 100 workers at work only following the “three on-site” model (eating, staying and working on the site for workers) in the company's campus.In mid-Oct 2021, the subject started production activities again with about 3,000 workers. Anyway, thanks to continuing to recruit more workers after those days of social distancing, the subject's production has become stable again, she added.However, the fourth outbreak of the Covid Pandemic has affected negatively the whole economy and the subject is not an exception. Nearly ceasing production activities in the third quarter of 2021, the subject's net sales in 2021 would decrease by over 30% of the volume in 2020, she added.Noticeably, according to Ms. Tran Thi Huong Huyen, due to directions of the group, the subject had to supply products to HWASEUNG VINA CO., LTD with prices lower than costs of goods sold in both 2019- 2020. Thus, with a negative gross profit margin due to that transfer pricing policy, the subject reported big losses in these years. In detail, the accumulated losses amounted to VND 228.7 billion as of 31 Dec 2020, which equaled 2.8 times of the owner's investment capital. Thus, the subject's financial structure became very risky since 2019 and Transactions with the subject could be proceeded under strict monitoring. Accordingly, we did not give out credit limit recommendations in this case.