Druk Holding and Investments (DHI) and its subsidiaries have contributed more than 30 percent of the total domestic revenue of the country in the last fiscal year through taxes and dividend.

During the annual press conference yesterday, chief executive officer of DHI, Dasho Karma Yezer Raydi said that this year is a special year as it marked a decade of DHI’s journey.

DHI’s net worth, he said has increased from Nu 22B in 2008 to Nu 89B today.

Contribution to the government coffer has increased to Nu 6.36B (dividend of Nu 4B and tax contribution of Nu 2.3B) from Nu 2.1B in 2008.

However, the profitability of DHI and its group has decreased from about Nu 6.5B in 2016 to Nu 6B last year. This is attributed to lower power generation from its cash cow, the Druk Green Power Corporation (DGPC) owing to poor hydrology.

In addition, he said the Bhutan Power Corporation’s construction contracts pertaining to transmission lines also experienced a slight drop.

However, the performance of Natural Resource Development Corporation Ltd. (NRDCL) has improved and the State Mining Corporation is the top performing company when it comes to return on equity. Drukair Corporation also saw its best performance in the last 35 years of operation.

In the manufacturing sector, the performance was not as impressive as the major industry Dungsam Cement Corporation Limited (DCCL) has yet again suffered a loss of Nu 537M after tax.

Despite the decline in profit, the DHI and group saw an increase in dividend and taxes.

Considering the DHI as a standalone company, it made a profit of Nu 5.4B against Nu 5.1B in 2016. DHI does not create any revenue by itself, so its revenue is the dividend it received from DHI linked, controlled and owned companies.

Companies’ performance

The DGPC saw its profit decline from Nu 5.5B in 2016 to Nu 5.1B last year because of poor hydrology. The company’s director of finance, Ugyen Namgay said power utilisation is 98 percent and water utilisation is 99 percent, one of the best in the world. He said there is not much the company can do but to depend on hydrology.

The Bhutan Power Corporation added 7,979 new customers and as of last year, 99.87 percent of the households in Bhutan are provided with electricity. The remaining 300 households, the chief executive officer of BPC, Gem Tshering said is in Lunana where erecting transmission lines still remains a challenge. The company, however made a profit Nu1.3B compared with Nu 1.57B in 2016.

Even with the deployment of 4G connections in all the dzongkhags, Bhutan Telecom registered a profit after tax of Nu 838M.

For the airline company, Drukair, 2017 was the most fruitful year as it registered a record high performance with increase in profit by 250 percent. The company made a profit after tax of Nu 348M compared with Nu 99.8M in 2016.

CEO Tandin Wangchuk attributed this to the strategic utilisation of aircraft where revenue is maximised and expenditure is minimised. “The procurement, budgeting and financing norms have been overhauled,” he said adding that this resulted in decreased airfare beginning this year.

The Construction Development Corporation limited (CDCL) has reduced its loss from Nu 40M to Nu 7.6M this year. CEO Phuntsho Gyeltshen said the company’s focus has been on the niche arcade in construction, where private sector does not have the capacity, for instance, tunneling and bridge construction.

The DCCL is another company that is yet to come out of the red. Deputy CEO Karma Geley said that DCCL’s loss could have been substantially reduced had the GST and demonetisation issue not struck its export market. Each month the company earns more than Nu 300M, but for the month of July and August, the company could not export anything since the GST was implemented. The company still faces issues at the customs station despite a commendable job by the agent in India.

The State Mining Corporation (SMC) has made history by registering a profit of Nu 67M in its second year of operation against a loss of Nu 4.3M in 2016. However, CEO Kezang Jamtsho said that clarity on the mineral development policy is needed to determine the future of the company. As such, he said that there is a deadlock between department of geology and mines and the SMC on the strategic minerals.

The Bank of Bhutan, despite an implication of Nu 398M from the reduced interest rates, which benefitted 17,400 account holders, made a profit of Nu 707M. CEO Pema Nadik said the bank has been able to manage non-performing loans below five percent for the first time in the bank’s history. “Although the credit market grew by 15 percent, the bank’s credit grew by 27 percent but it has also paid higher interest on deposits.”

The ripple effect

Indian contractors executing works for hydropower projects owe the DCCL Nu 500M at any given point of time. This credit overdue has been a challenge for the DCCL to keep its cash flow afloat.

DCCL’s Deputy CEO, Karma Geley said that DCCL supplies 1,000 metric tones of cement to the hydropower projects every day. As of June 14, the DCCL has Nu 304.5M receivable amount for the projects and another Nu 252M has already expired the credit period.

“We have already discussed with the government and requested the economic affairs minister who is the chairperson of the project authorities,” he said. In addition the company has also appointed two of its employees to follow up on the dues.

Consequently, the DCCL owes the SMC about Nu 39M for the supply of raw materials like coal. SMC’s Chief Executive Officer, Kezang Jamtsho said that this exposes SMC to financial risk. “We had to take loans to pay our vendors and suppliers,” he said. “If Dungsam gets paid, SMC gets paid,” he said adding that the government must resolve this issue soon.

In addition, the SMC has also been asked to supply stone aggregate for the Kholongchhu hydropower project. The SMC has incurred huge capital cost to set up stone crushing units at the project site. “But Kholongchhu has been suspended indefinitely,” he said. 

Again when DCCL’s health and performance is mired in issues that are beyond their control, Dungsam Polymer Limited (DPL), a public listed company and its shareholders are suffering. Sixth year into operation and DPL is suffering its sixth consecutive loss as its 80 percent of the sales is dependent on DCCL.

Tshering Dorji