Duc Giang Chemicals (DGC) Faces New Prosecutions, Q2 Profit Halves

Overview

Duc Giang Chemicals Group (DGC) has disclosed that three more senior leaders were prosecuted on July 22 for environmental and resource violations, adding to a widening legal probe. Simultaneously, the company reported a 50.5% year-on-year drop in Q2 net profit to VND 441 billion, as revenue fell 16.5% and input costs surged. DGC shares closed at VND 37,950 on HOSE on July 23.

Key Facts

• Three DGC leaders were prosecuted on July 22: CEO Luu Bach Dat and Deputy CEO Phung Trong Tu for “causing environmental pollution,” and board member Nguyen Quoc Trung for “violating regulations on resource exploration and extraction.”
• This follows the March 17 initiation of a criminal case against DGC and related entities for environmental, resource, and accounting violations.
• Earlier, Chairman Dao Huu Huyen, Vice Chairman Dao Huu Duy Anh, and Deputy CEO Pham Duy Hung were arrested and detained.
• DGC held an extraordinary shareholder meeting on May 8 to remove three board members and elect replacements, including Nguyen Quoc Trung, who was later prosecuted.
• Q2 2026 net profit fell 50.5% YoY to VND 441 billion, with revenue down 16.5% to VND 2,415 billion.
• Gross profit dropped 53.5% to VND 456 billion due to higher input costs for sulfur, electricity, coke, and ammonia.
• The temporary suspension of Mine 25 for investigation forced DGC to use imported and purchased ore, raising costs for yellow phosphorus.
• As of end-June, DGC held VND 10,921 billion in cash and deposits, representing 57% of total assets of VND 19,271 billion.

What Happened

On July 22, DGC received notification from the Ministry of Public Security’s investigation agency that three senior executives had been prosecuted and placed under travel bans. CEO Luu Bach Dat and Deputy CEO Phung Trong Tu face charges of causing environmental pollution, while board member Nguyen Quoc Trung is charged with violating regulations on resource exploration and extraction. This expands the earlier probe that began on March 17, when a criminal case was opened against DGC and related units for environmental, resource, and accounting violations. Previously, Chairman Dao Huu Huyen, Vice Chairman Dao Huu Duy Anh, and Deputy CEO Pham Duy Hung were arrested and detained. At an extraordinary shareholder meeting on May 8, DGC removed three board members and elected replacements, including Nguyen Quoc Trung, who was now prosecuted just over two months later.

Separately, DGC reported weak Q2 2026 results. Revenue fell 16.5% year-on-year to VND 2,415 billion, while cost of goods sold rose slightly, causing gross profit to plunge 53.5% to VND 456 billion. Net profit after tax dropped 50.5% to VND 441 billion. The company attributed the decline to lower revenue and higher input costs for raw materials such as sulfur, electricity, coke, and ammonia. Additionally, the temporary suspension of Mine 25 for investigation forced DGC to rely entirely on imported and purchased ore, raising the cost of yellow phosphorus. For the first half of 2026, revenue fell 20% to VND 4,540 billion and net profit dropped 49% to VND 871 billion.

Market Context

DGC shares closed at VND 37,950 on July 23, reflecting ongoing uncertainty from the legal proceedings and deteriorating financial performance. The stock has been under pressure since the initial arrests in March. DGC is listed on HOSE and is a major player in Vietnam’s chemicals sector, particularly in phosphate and yellow phosphorus production. The broader market has been volatile, but DGC’s legal and operational challenges are company-specific. The company’s large cash hoard (VND 10.9 trillion) provides a buffer, but core earnings are declining sharply.

Strategic Significance

The expanded prosecution signals that the legal risks for DGC are far from over, potentially affecting management stability and operational continuity. The temporary closure of Mine 25, a key source of low-cost ore, has structurally raised input costs for yellow phosphorus, a core product. While DGC’s substantial cash reserves offer financial resilience, the erosion of profitability and ongoing investigations could lead to further asset impairments, dividend cuts, or even forced divestments. The company’s ability to navigate these challenges will depend on the outcome of the legal cases and its success in securing alternative ore sources.

What to Watch

• Next court hearings or updates on the criminal case, including potential fines or asset seizures.
• Q3 2026 earnings release, expected in October, to see if profit decline accelerates or stabilizes.
• Any announcement regarding the resumption of Mine 25 operations or alternative ore supply agreements.
• Changes in board composition or management following the latest prosecutions.
• Foreign ownership trends, as legal risks may deter international investors.