Breakthrough momentum of steel enterprises

VCN - According to the Vietnam Steel Association (VSA), the third quarter of 2020 recorded a breakthrough in the production and consumption of steel products after the first half of the year slowed down due to the impact of the pandemic. This has helped consolidate the business growth prospects of these businesses in the last three months of the year.
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Steel enterprises are expected to achieve positive business results in 2020.

Interest increased sharply

According to VSA, in the third quarter, steel production reached 6.9 million tons, up 11.3%; sales reached 6.17 million tons, up 8.8% over the same period last year. Especially, exports increased by nearly 30%, reaching 1.34 million tons, while the first half of the year decreased by 24.6%. Thus, production, consumption and export of steel products have recorded an increase in four consecutive months since June.

However, due to low output and consumption in the first months of the year, for the whole nine months in 2020, production of steel products of all kinds will reach 18.5 million tons, down 1.7%, sales reach 16.5 million tons, down 4.3% and exports reach 3.2 million tons, down 8.6% over the same period in 2019.

Thanks to favorable conditions in recent months, domestic steel companies have made "sudden" profits, setting sales records. In the fourth quarter of the fiscal year 2019-2020 (from July 1 to September 30), Hoa Sen Group Joint Stock Company (HSG) achieved sales of over 525,000 tons. Thanks to that, HSG achieved revenue of VND8,349 billion, up 31%; after-tax profit is VND400 billion, 476% higher than the same period last year. This enterprise estimated that the consolidated business results of the fiscal year 2019-2020 achieved an increase of more than 8% in consumption output, an increase of VND1,100 billion in profit after tax, an increase of 275% over the same period and 2.8 times the plan.

Notably, the steel export volume of Hoa Sen Group has steadily increased each month. Specifically, the export output in July reached more than 82,000 tons, in August reached more than 92,000 tons, in September reached more than 100,000 tons, for the whole third quarter it is estimated to increase 154% over the same period last year.

Similarly, Hoa Phat Group also announced Q3 revenue of VND24,900 billion, up 62.7% and profit after tax of VND3,785 billion, 2.1 times higher than the same period last year. In the first nine months, HoaPhat's revenue reached VND65,000 billion, increasing 40%; profit after tax of VND8,845 billion, an increase of 56% over the same period of 2019. Regarding the export market, over the past nine months, Hoa Phat construction steel exported more than 370,000 tons, up 95% over the same period last year.

SMC Trading Investment Joint Stock Company also announced Q3 profit after tax of VND100 billion, 2.8 times higher than the same period last year. This is the highest quarterly interest rate since the first quarter of 2017. Revenue in the quarter decreased by 2.5% but COGS dropped by more than 5.6%, helping gross profit increase 136% to VND218 billion. The representative of this enterprise said that profit increased strongly thanks to the increase in production, outsourcing, and increased productivity and consumption. Raw material prices increased steadily and at high levels, favorable for seeking more profits.

The expectation of exit losses

Mr. Trinh Khoi Nguyen, Vice Chairman of VSA, predicted that the construction steel market in the last months of the year will flourish due to increased market demand after the Covid-19 pandemic.

Moreover, although raw material prices rebounded, domestic construction steel prices will not adjust much as businesses are competing fiercely to keep market share. In addition, the Steel Industry Report of BSC Securities Company also gives a positive outlook for the industry in the last months of the year thanks to strong demand from the domestic market. The steel billet export market and galvanized steel sheet continues to benefit from strong demand in China, but the level will gradually decrease towards year-end.

HSG also has great expectations for growth in the remaining months of the year. Explaining the growth recovery momentum, the representative of HSG said that, in the context of general difficulties, businesses focused on exploiting the system advantage of nearly 600 stores in the domestic market and export channels to 85 markets around the world, so production and sales grew well. In addition, HSG has been approved by the General Department of Vietnam Customs to extend its priority business program in the field of customs for another three years from August 2020. This helps to shorten the clearance time for goods and save costs on administrative procedures, contributing to increased profits.

In addition, steel enterprises also expect business results will be more positive in the fourth quarter thanks to the vibrant real estate market and policies to promote disbursement of public investment capital. However, according to experts, the difficulty of input material prices, the domestic market mainly focuses on construction steel, the export market affected by the Covid-19 pandemic can also affect the production and business situation of enterprises.

Besides the enterprises that expect big profits, many steel enterprises are just trying to reduce losses. For example, Viet Y Steel Joint Stock Company (Visco) has announced its financial statements with the third quarter of 2020 being the second profitable quarter after seven consecutive quarters of losses. In 2020, Viet Italy Steel cautiously sets a business plan with expected loss of about VND 65.57 billion. Thus, at the end of the first nine months of the year, not only didn't lose money, but Vietnam Italy Steel also recorded a profit after tax of more than VND10 billion. This profit helped the company reduce accumulated losses until September 30, 2020 to over VND534 billion.

By Huong Diu/Dieu Huong

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