First two steel makers report Q3 loss

By Trang Nguyen
Sun, October 16, 2022 | 1:59 pm GMT+7

Vicasa JSC and Thu Duc Steel JSC, subsidiaries of Vietnam Steel Corporation, are the first two steel companies to report a loss in the third quarter of the year.

VNSTEEL-Thu Duc Steel JSC reported a loss of $907,400 in Q3/2022. Photo courtesy of the company.

VNSTEEL-Thu Duc Steel JSC reported a loss of $907,400 in Q3/2022. Photo courtesy of the company.

VNSTEEL-Vicasa recorded a net revenue of VND477.7 billion ($19.79 million) in Q3, down 17.5% year-on-year. Its loss after tax was VND21.9 billion ($907,400), while the same period profit was nearly VND2 billion.

The company blamed the Russia-Ukraine conflict, China's "zero-Covid policy" and global inflation for the woes of the domestic steel and construction industries. Besides, the State Bank of Vietnam's credit tightening for the real estate sector has reduced domestic demand for steel.

In the first nine months of 2022, Vicasa's net revenue reached VND1,838 billion ($76.15 million), down 4% year-on-year, and its losses, VND12.5 billion ($518,000).

By the end of Q3, Vicasa's total assets reached VND530.8 billion ($21.99 million), down 8.3% compared to the beginning of the year, of which inventory was VND377.2 billion, accounting for 71%.

Meanwhile, VNSTEEL-Thu Duc recorded a net revenue of VND406 billion ($16.82 million) in Q3, a slight increase compared to the same period in 2021. The company reported a loss exceeding VND21 billion ($870,000) in Q3.

In the first nine months of 2022, the company recorded a net revenue of VND1,500 billion ($62.15 million), down 8.3% and a loss of VND15.8 billion ($654,600), while it had a profit of VND58 billion in the same period last year.

By the end of Q3, the company's total assets reached VND491.8 billion ($20.38 million), of which inventory reached more than VND420 billion, a slight decrease compared to the beginning of the year, accounting for 85% of total assets.

Recently, Pomina Steel Corporation, which accounts for nearly 4.3% of the domestic steel market share, announced the company had stopped operating its blast furnaces (BF) and terminated labor contracts with some employees.

Pomina's leaders said that the business had suffered heavy losses due to the negative impacts of the Russia-Ukraine conflict, which pushed up the price of oil and commodities, while the price of steel products and billets fell sharply.

According to S&P Global Commodity Insights, in the context of the Russia-Ukraine conflict and escalating inflation, the steel market outlook is more uncertain as construction activity continues to stagnate due to Covid-19 and the auto industry slows down.

In the first nine months of 2022, Vietnam exported about 6.46 million tons of steel, down 34.4% year-on-year. Export value reached $6.5 billion, down 22.6%.

According to a report for the last six months of the year, top broker VnDirect Securities said it expects accelerated infrastructure development, increased public investments and the warming of the real estate market would help the country's construction steel consumption increase by 5-10% year-on-year.

The selling price of construction steel would gradually decrease to the average level in the long-term, about VND16.1 million ($667) per ton, and down to VND14.5 million per ton in the following year. Reduced prices of construction steel would help ease the burden on many construction enterprises as steel usually accounts for about 20-30% of a project's total costs.

Meanwhile, Viet Dragon Securities commented that construction steel demand would soon recover as public investment disbursement accelerates from the end of 2022 after the medium-term public investment plan 2021-2025 completes the approval process.

Leading broker SSI Securities recently lowered the estimation for steel giant Hoa Phat Group's after-tax profit in the third quarter to VND2,100 billion ($86.97 million), a sharp decrease of 80% compared to the peak of the same period last year. Hoa Phat accounted for 35.78% of Vietnam's steel market share.

Tran Dinh Long, chairman of Hoa Phat, told shareholders at the company's annual general meeting in May: "You will see how awful the business results are given the unfavorable conditions of the steel industry."

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