Coal Industry Pays High Dividends, Shareholders Benefit

 

The coal industry is suffering heavy losses due to the gap between domestic prices and costs, especially favourable prices cover only 70-83 percent of costs. In addition to the favourable price for sale to electricity, sale to other units such as cement, chemical, iron and steel, and construction materials, are also below cost.

 

Another challenge is that the industry is stuck under a lot of duties and taxes, which pose as an obstacle for cost estimates. An irony is that while domestic consumption and exports fell, coal prices as well as export prices dropped as stated above, and tax policies and fees on the industry continued on a rise.

 

Mining is getting more difficult due to the exhaustion of surface mines, which leads to higher production costs, larger mining pressure, higher risk of water podium, fires, explosions and collapses.

 

Up to six out of eight such businesses listed on the floor endured shrunk profit compared to previous year. The average reduction was 45 percent. Only Cao Son Coal (TCS) and Ha Lam Coal (HLC) have strong profit growth, respectively 83 percent and 308 percent. However, these enterprises still maintain a very high level of dividend payment.

 

On Upcom, CZC - Vinacomin - Central Zone Coal JSC (CZC) closes with bonus shares at a ratio of 1:1.1. Vinacomin is not the only coal business that offers high bonus. Some other names that worth mention includes Cao Son Coal (TCS); Ha Tu Coal (THT); Coc Sau Coal (TC6); Mong Duong Coal (MDC); and Deo Nai Coal (TDN).

 

In 2015, Deo Nai Coal (TDN) paid dividend of 6 percent, issuing 13.4 million bonus shares to existing shareholders at the rate of 84 percent. Ha Tu Coal (THT) received dividends in cash in 2015 at 10 percent and bonus at 80 percent; Vang Danh Coal (TVD) in 2015 paid dividend of 7 percent on the chartered capital and issued bonus shares at the rate of only 7 percent.

 

Coc Sau Coal (TC6) paid dividends in 2015 in cash at a rate of 6 percent. At the same time, the company planned to issue 19.5 million bonus shares at the ratio of 1:1.5. With Cao Son Coal (TCS), the dividend rate approved in 2015 was 4 percent, plan for 2016 is 4-5 percent. Cao Son also plans to share bonus with 11.8 million shares equivalent rate of 79 percent. Generally, the ratio of dividends in cash and bonus shares is 81 percent.

 

Suffered seriously from the 2005 flooding, Mong Duong Coal (MDC) escapes loss with low interest rates reached VND85 million while the target was set at VND29 billion, considered to be break-even. The business could not pay the 8 percent dividends as planned, but issued bonus shares at the rate of 42 percent. In 2016, MDC plans to pay cash dividends 6 percent and bonus shares VND63 billion.

 

Deo Nai Coal paid dividend of 6 percent in 2015, the plan for 2016 is 2 percent, deduction from welfare bonus fund nearly VND6.3 billion, equal 33.2 percent EAT, or nearly 68 percent of EAT after the payment of dividends.

 

After the dividend payment, we can see the most part that is set aside is welfare funds. These funds typically represent between 30-50 percent of EAT of the business. The source to issue bonus shares is taken from surplus plans (including development investment funds and other capital of owners). The companies have allocated most of the funds to increase capital.