Recently, the Board of Directors of Coteccons Construction Joint Stock Company announced that the term of Mr. Vo Thanh Liem, General Director, would not be extended. Thus, after about seven months in his position as General Director, Mr. Liem, one of the last key persons working under Mr. Nguyen Ba Duong, has officially left CTD. Before that, Mr. Duong had to leave the position of Chairman of the Board of Directors after more than 16 years, in order to make way for Mr. Bolat Duisenov, a representative of Kustocem Pte. Ltd (Kusto), a group of shareholders that acquired CTD.
It is not only the key staff members, but many skilled workers have also decided to leave CTD, after Vietnam's leading construction corporation went into the hands of a group of shareholders represented by Kusto. According to the financial fourth quarter report of 2020, the number of employees working at CTD by the end of the year were 1,659, down by 613 people compared to the beginning of the year. Although attrition in human resource is a frequent occurrence in construction companies, it is unusual for CTD, because CTD has a very good welfare system. CTD has also been voted as the best company in Vietnam by Anphabe, for having the best working environment, and leading in the construction industry for six consecutive years.
It is undeniable that CTD's position today is in no small part due to the management ability of the company in the past, and the dedication for many years of strong leaders, especially Mr. Duong. Therefore, Mr. Duong and many other leaders left many key positions at CTD temporarily vacant. This brain drain at CTD has continued since key leaders such as Mr. Duong left the company. At the 2020 annual shareholders meeting, the two sides had agreed on his position as Chairman of the Board of Directors, but within just three months after taking office, Kusto forced Mr. Duong to resign. Using the example of CTD, Mr. Hiep, currently the Chairman of the Vietnam Association of Construction Contractors (VACC), sent a warning to Vietnamese brands to be cautious of foreign partners in seeking investments.
Facing mass attrition of employees, the new CTD Board of Directors has begun to make many shocking decisions. In February, CTD announced that all employees would be rewarded with a minimum ten-month salary, to be paid for holidays such as Tet Lunar New Year, and other bonuses for meeting production targets and completing project schedules. The CTD Board of Directors also announced the decision to register for purchase of the Covid-19 vaccine for more than 8,000 staff members and their relatives. CTD also has plans to spend hundreds of billion dong to buy 4.9 million treasury shares, equivalent to 6.18% of outstanding shares. The purpose is to prepare the stocks for employee elective share issuance (ESOP). The capital source to buy back treasury shares was taken from the share capital surplus, and at VND 70,000 per share, CTD has to spend about VND 345 bn for this plan.
This plan received a stiff response from shareholders because CTD is having difficulties in its production and business activities. According to the financial statement of 2020, revenue at CTD decreased by 38%, reaching VND 14,597 bn, and profit after tax of CTD decreased by 35%, reaching VND 463 bn. This is the first year CTD has had a negative growth after many years of maintaining a two-digit growth rate. Even though so many employees have quit their jobs, CTD expenses increased sharply in 2020, from VND 134 bn to VND 223 bn. This is an unusual phenomenon because this increase mainly comes from labor costs.
Backlog of projects
The departure of Mr. Duong led to more serious consequences for CTD, which is facing a heavy backlog of project orders. During the golden period from 2015 to 2018, CTD always outstripped its competitors, with an average of VND 27,000 bn per year. CTD bidding was usually 3% to 5% higher than competitors due to its prestige and professional management. However, the newly released numbers show that the drop is at an alarming rate. For example, in the first quarter of 2020, CTD announced a new backlog valued at VND 5,000 bn, but no numbers were released for the next two quarters. According to Ban Viet Securities (VCSC), the Covid-19 pandemic and the ongoing internal restructuring will put more pressure on the value of the new contracts signed in 2020, leading to the possibility of delays or cancelations. Contracts have been included in CTD current backlog and the major projects constructed by Coteccons now belong to the new contractor Newtecons, overseeing projects such as the Grand Marina Saigon or One Central HCM. This is the reason why CTD's new boss has made confusing and shocking decisions.
According to Mr. Bolat Duisenov, in 2021, CTD set a revenue target of USD 1 bn for strategic areas of infrastructure, renewable energy, finance, and EPC construction. Meanwhile, the goal by 2025 is to develop into a multidisciplinary corporation with five new pillars of industrial and real estate; construction materials; logistics and transportation; information technology and software development; insurance and financial services. With this goal, construction will no longer be CTD's core business. Mr. Bolat Duisenov's assertion further shows the discrepancy between his words and the implementation by the new set of CTD Board of Directors.
Previously, in letters to employees, Mr. Bolat Duisenov always affirmed that CTD will innovate strongly, take bold steps and speedy leaps to ensure it is always the leading company in the construction industry. However, even with the new direction of CTD, shareholders are not very confident, because these are new areas of business, not the forte of the company, except for the real estate sector. While enterprises receiving capital from foreign investors create a trust factor with shareholders by a strong breakthrough, CTD is making shareholders lose confidence in the future of the business.