Duc Giang Chemicals (DGC) Seeks to Remove Two Board Members After Prosecution

Overview

Duc Giang Chemicals Group (DGC) has announced plans to remove two board members who were recently prosecuted by the Ministry of Public Security. The proposal will be put to shareholders at the upcoming annual general meeting on August 13, 2024. The company also aims to elect replacements, though candidates have not yet been disclosed.

Key Facts

• DGC proposes removing board members Luu Bach Dat and Nguyen Quoc Trung, both prosecuted on July 23, 2024.
• Luu Bach Dat also serves as the company’s General Director.
• The annual meeting is scheduled for August 13, 2024.
• DGC’s board currently has three remaining members: Chairman Dao Huu Kha, Nguyen Thi Thu Ha, and Pham Duy Tung.
• Former Chairman Dao Huu Huyen and his son were prosecuted in March 2024 for illegal waste dumping and mining.
• DGC targets 2025 after-tax profit of VND 1,600 billion, down 50% from the previous year.
• The company plans a total 2025 dividend of 80%, equivalent to over VND 3,000 billion.

What Happened

Duc Giang Chemicals Group has released documents for its upcoming annual general meeting on August 13, 2024, which include a proposal to remove two board members: Luu Bach Dat and Nguyen Quoc Trung. Both individuals were prosecuted on July 23 by the Ministry of Public Security’s investigative police agency and have been banned from leaving their place of residence. In addition to his board role, Luu Bach Dat is the company’s General Director.

The company will also ask shareholders to elect two new board members to replace them, though the list of candidates has not yet been announced. This follows earlier leadership upheaval: in March 2024, former Chairman Dao Huu Huyen and his son Dao Huu Duy Anh were prosecuted and detained for illegal waste dumping and mineral exploitation. Individuals related to Dao Huu Huyen currently hold about 45% of DGC’s capital.

Market Context

DGC shares closed at VND 36,750 on July 28, 2024, on the HOSE exchange. The stock has been under pressure amid ongoing legal issues and a sharp reduction in profit guidance. The company’s 2025 after-tax profit target of VND 1,600 billion is half of last year’s result, though it achieved 61% of that target in the first half (VND 871 billion). The planned 80% dividend for 2025, including a 30% interim payment already made, signals management’s confidence in cash flow despite the challenges.

Strategic Significance

The removal of two board members, including the CEO, underscores deep governance instability at DGC. The prosecution of key executives, following the earlier arrest of the former chairman, raises questions about internal controls and compliance. For long-term investors, the key concern is whether the company can stabilize its leadership and restore operational credibility. The halved profit guidance reflects potential disruption from legal proceedings and possibly weaker demand. The high dividend payout may be an attempt to retain shareholder support, but it also reduces retained earnings for reinvestment.

What to Watch

• Outcome of the August 13 annual meeting: approval of board removals and election of new members.
• Disclosure of candidate profiles for the new board positions.
• Progress of legal cases against current and former executives, including any potential fines or restrictions.
• Q3 2024 earnings report to gauge operational impact from leadership changes.
• Any changes in ownership structure, especially related to the 45% stake held by associates of the former chairman.