Bangkok--22 Oct--Master Mind Communications
L.V. Technology Public Company Limited (LVT), a listed company specializing in engineering consultancy services with ongoing operations in various parts of the world, has embarked on an ambitious new corporate strategy which is aimed at turning the company around from financial losses into profitability and longer-term growth.
LVT founder and managing director Hans Jorgen Nielsen told a press conference in Bangkok today (Oct 17) that the key thrusts of the new strategy centre on more effective costs management and revenue recognition and a new focus on capital investments that will grow assets and generate recurrent revenue for the company into the longer-term future.
To speed up the financial turnaround, the company is also divesting some overseas investments to generate additional revenue on top of ongoing engineering projects in about 10 foreign countries in various parts of the world. Of particular importance is LVT’s plan to divest parts of LNVT, a profitable joint venture in India, which will generate about 180 million baht in revenue. The sum is expected to be booked as extraordinary income in the current quarter.
LNVT, a joint venture engineering consultancy set up in 2002 in which LVT holds a 49% stake is reported to be highly profitable because it specializes in the cement industry which carries strong growth potentials in the Sub-continent. Operating from its headquarters in Chennai, LNVT services the booming cement industry in southern India plus Sri Lanka and Nepal and generates annual revenue of about US$40-50 million. The expected extra revenue of 180 million baht will be derived from the sale of 25% of LVT’s 49% stake in LNVT to new investors from China.
Mr. Nielsen expressed confidence that LVT’s financial turnaround is now gaining momentum as the result of tighter costs control and more effective internal audit. To ensure maximum results, the respected financial advisory services firm Deloitte has recently been appointed to take charge of internal audit while KPMG has been retained as the company’s auditor.
He stated that a gradual and more consistent revenue recognition system that has been put into place will ensure that there will be no more sharp fluctuations in LVT’s financial position. The company swung around from handsome profits of 221.9 million baht and 144 million baht in 2008 and 2009 respectively into losses of 239 million baht and 23.8 million baht in 2010 and 2011 respectively. For the six months ending June 2012, LVT reported losses of 93.4 million baht.
To illustrate his conviction that LVT’s finances are improving, Mr. Nielsen stated that the company has accumulated a backlog of about 2,500 million baht as of end-September and this will increase to about 3,200 million baht by the end of this year — thanks to negotiations on several new projects which are expected to be concluded soon. Of the total backlog, Mr. Nielsen estimated that a combined revenue of about 1,000 million baht will be booked in Q3 and Q4.
The bulk of this expected revenue recognition will come from two key projects in Brazil — namely the Apodi Project and Elizabeth Project — which are being executed within estimated project costs. The satisfactory execution of these two projects has come as the result of a more efficient contract management system which has been put into place over the last two years, Mr. Nielsen stated. The procurement of equipment for both projects will likely be completed by the end of this year and LVT is currently negotiating a third, new project in Brazil which is expected to be finalized soon.
LVT’s operations in Brazil are just part of a string of engineering consultancy and supply works as well as support to joint ventures in more than 10 countries around the world. These include places like Malaysia and Myanmar in Asia, Saudi Arabia and Yemen in the Middle East, Mozambique in Africa as well as Honduras and the Dominican Republic in Latin America.
Mr. Nielsen maintained that LVT’s financial position today has much improved and is solid enough to support a backlog of more than 4,000 million baht. And to reinforce his commitment to the success of the company, Mr. Nielsen has pledged his personal shareholdings in LVT as collateral to obtain better back-up L/C facilities.
As far as the ongoing operations are concerned, there should have been no need for any capital increase. “But as responsible management, I believe it is important to look ahead and try to grow company revenue and profitability into the longer-term future,” he stated.
That is why LVT has called for a substantial capital increase in order to support new joint-venture investments in cement production in Myanmar, that will provide the foundation for LVT to grow assets and generate recurrent revenue into the long run.
LVT expects to raise approximately 500 million baht from the new rights issue which will be used to fund a joint venture with Max Manufacturing Company Limited to produce cement from two plants near the Myanmar capital of Naypyidaw. The Myanmar counterpart, Max Manufacturing, is headed by U Zaw Zaw, a well-known successful Burmese tycoon who has extensive business, financial and manufacturing interests in Myanmar.
Subject to shareholders’ approval at an extraordinary shareholders meeting set for November 19, the capital increase will cover the issuance of 396,692,350 new shares of one baht par each. Of the proposed total new issue, some 51 million shares will be allocated for a private placement while the remainder will be allocated to existing shareholders at the ratio of 3 old shares for 2 new shares at 1.25 baht each.
In light of the improvement in various aspects of the company’s operations, Mr. Nielsen said he is hopeful that the proposed capital increase will be endorsed by the shareholders at the forthcoming EGM. “This is an important turning point that will put our company into a more solid footing so that we can grow our assets and revenue into the long-term future,” he stated.