Compact: All Druk Holding and Investments (DHI) owned companies have achieved at least 90 percent of their six months’ targets as compared to that of last year during the same period.
This was one of the findings of the mid-term review for DHI owned companies conducted from August 10 to 18. Review for Druk Air that DHI owns will be held soon.
Beginning every year, DHI and its subsidiary companies sign compacts where annual financial and non-financial targets are set.
“The DHI is fully satisfied with the performance of the companies,” DHI director Damber S Kharka said.
However, even with the companies’ performance enhanced, DHI officials said that Druk Air, the Natural Resources Development Corporation Ltd. (NRDCL) and the Dungsam Cement Corporation Ltd. (DCCL) are bound to record substantial losses at the end of the year.
NRDCL has already recorded a substantial amount of loss this year. He attributed the loss to the company’s mandate of providing construction materials to the public.
The DHI director said that NRDCL’s profitability depends on the construction sector, growth of which has slowed down. “We cannot increase prices to increase NRDCL’s profit,” he said.
Druk Air, which incurred a loss of Nu 129M last year, is not expected to record any profit, DHI officials said. Damber S Kharka attributed Druk Air’s loss to competition from Bhutan Airlines.
“Last year’s loss of Druk Air was bound to happen, and we don’t expect any surprise this year too,” he said.
On DCCL, he said the company was able to reduce loss in the first half of the year. The company, however, reported improvements in capital utilisation and minimising loss.
However, DHI believes that the company’s loss at the end of the year will be substantial and is hopeful that the DCCL will be able to make profit by 2017.
Meanwhile, he said most companies recorded profit in the first half of the year.
Compared to the same period last year, the Druk Green Power Corporation’s (DGPC) profit increased by 40 percent and is attributed to the much better hydrology.
According to the economic affairs ministry, the DGPC generated Nu 621M in April 2015 alone for generating 386.74 GWh (Gigawatt hour) of electricity.
Similarly, the Construction Development Corporation Ltd. (CDCL) also saw an increase in profitability by 86 percent. According to DHI, this is the first time the company has recorded this level of profitability.
The CDCL was transferred to the DHI at the beginning of this year.
While revenue for Bhutan Telecom (BT increased by five percent, profit after tax (PAT) reduced by 25 percent. This was on account of majority of cost being allocated in the first half of the year.
As for the Bank of Bhutan, the revenue increased by 17 percent and PAT improved by 140 percent. However, this is far below the annual target, according to DHI officials.
Officials said the figures for the financial institutions normally improve in the second half of the year.
Performance indicators vary depending on the nature of their business. For example, the performance of manufacturing companies like the DCCL will be based on capacity utilisation and their ability to minimise cost of production.
For service provider companies like Bhutan Telecom (BT), performance is reviewed based on the company’s ability to provide faster Internet service and reduction of service costs for customers.
“If unforeseen incidents like earthquakes derails the activities, then targets can be adjusted,” the DHI director said.
Employees of the companies that achieve 95 percent of their targets will be rewarded with 15 percent performance based variable allowance (PBVA) on the basic annual pay.
Director Damber S Kharka, however, said that the mid-term results alone would not be enough to determine a company’s performance as a major portion of revenue starts flowing in the second half.
Some targets are not measurable in concrete numbers and are given a timeline. If some companies are lagging behind, the review discusses on what needs to be corrected.
On the impact of the corporate salary revision on the companies’ profit, the DHI director said that it would be known only at the end of the year. “But it would be unfair to say that the increase in salaries should be matched by performance enhancement,” he said.