Cement giant Vicem sees record-low $65 mln profit in 2022

Vietnam National Cement Corporation (Vicem), the country's biggest cement producer, reported a pre-tax profit of VND1,532 billion ($65.33 million) in 2022, down 30.5% year-on-year and a record low.

The profit tally is equivalent to 89.8% of Vicem's plan, according to a report released at the corporation's 2022 review meeting on Saturday.

The state-run company's total revenue was estimated at VND39,453 billion ($1.68 billion), reaching 95.5% of its target and up 16.6% year-on-year.

Payment to the state budget reached VND1,863 billion ($79.44 million), or 98.4% of its plan and down 14.2% compared to 2021.

According to Vicem, subsidiary Ha Long Cement JSC suffered heavy losses largely due to a sharp reduction of demand, and this is the main factor causing the giant not to complete its 2022 profit plan.

Vicem's total sales hit 27.46 million tons in 2022, or 93.2% of the 2022 plan and down 6.7% year-on-year. Of this, domestic cement sales reached 21.34 million tons, hitting 95.6% of its plan and up 5.6% year-on-year. Sales of clinker, including export, reached 2.88 million tons, or 79% of its target and down 45.6%.

The company said that difficulties stemming from the Russia-Ukraine conflict and the fact that the market is very complicated and unpredictable have had a very negative impact on the production and business efficiency of the cement industry and Vicem.

The supply of coal for cement production is lacking in terms of quantity, quality and types, while the price suddenly increased. High coal prices have made the cost of coal in the total cost of Vicem's cement production in 2022 increase by about VND4,000 billion ($170.6 million) compared to 2021.

Vicem raised its selling price of cement to offset the cost hike. However, in the context of unfavorable market conditions like lower demand, competition pressure was increasingly fierce, while export prices of cement and clinker did not increase.

Member units must add discounts and promotions to maintain output and market shares. Therefore, the increase in the price collected is not enough to offset the impact of the increase in input costs, the group noted in the report.

In addition, the unusual fluctuation of demand in 2022, especially in the fourth quarter which is the main annual cement consumption season, had a great impact on business results.

Regarding prospects in 2023, a report by top broker VNDirect Securities said that the cement industry will still be weighed down by the gloom of the real estate market.

VNDirect analysts believe that there may appear early indicators for the improvement of the industry by the end of 2023. First, prices of input materials (coke, thermal coal, scrap steel) would decrease. Second, China's economic reopening and accelerating infrastructure development would boost global demand for steel and cement.