Coated steel major Hoa Sen Group reshuffles business model

Hoa Sen Group, Vietnam’s top producer of coated steel products and plastic pipes, will reshape itself as a distributor of construction materials, rather than a heavy industry manufacturer.

At an annual shareholder meeting on Monday, Chairman Le Phuoc Vu said he wants to convert Hoa Sen into a distributor of construction materials and interior decoration items.

Hoa Sen, listed on the Ho Chi Minh Stock Exchange (HoSE: HSG), will establish Hoa Sen Furniture and Construction Materials Distribution JSC, or Hoa Sen Home, to take over Hoa Sen's entire distribution, retail and supermarket business.

The group will also convert a one-member company Ltd, its subsidiary, into Hoa Sen Plastic JSC.

Hoa Sen wants to conduct IPOs of these two units and list them on the HoSE in the next two years.

Vu said Hoa Sen Home has the potential to generate VND50 trillion (more than $2 billion), equal to the group’s present revenue, and it is his “last endeavor” before leaving the group. Last year, Vu said he would stop managing Hoa Sen in 2026, the year that marks its 25th anniversary.

Hoa Sen has topped $1 billion in export revenue, and the group is Vietnam's number 1 producer of coated steel products, number 2 producer of steel and number 3 maker of plastic pipes, according to Vu.

“To develop further, investing huge sums of money in new steel complexes is necessary. However, we tried and gave up as it was not suitable. Thus, the group is shifting to distribution, leveraging its distribution system, customer base, management contingent and brand.”

Previously, Vu noted that Hoa Sen will no longer prioritise manufacturing. “We could sell off all assets unrelated to our distribution system, such as hotel projects and industrial parks, to focus resources on Hoa Sen Home.”

In the fiscal year 2020-2021, Hoa Sen’s net revenue reached VND48,727 billion ($2.13 billion), 77% higher year-on-year and 48% higher than its objective.

Profit after tax hit nearly $189 million, 188% higher than the group's plan and 274% higher than the previous year.

In the period of 2021-2022, it estimates a revenue of $2.03 billion and profit of $65.6-109.3 million. Given the fluctuating price of input materials, these targets might be 42-65% lower than the 2021 results, the company reported.

Hoa Sen owns 11 factories and more than 500 distribution and retail branches nationwide. Its products are exported to over 70 countries and territories worldwide.