Is Vietnam's steel major SMC emerging from shadows?

Steel manufacturer SMC Trading Investment JSC (HoSE: SMC) has dodged delisting, but its path to recovery remains rocky as the steel industry grapples with mounting challenges.

SMC has found itself in one of the most challenging positions among steelmakers, grappling with a dual blow.

Specifically, the industry downturn, fueled by economic headwinds and rising protectionism from major economies, has taken a toll on operations. Moreover, internal pressures have mounted, with hefty debt obligations straining the company’s cash flow.

SMC shares tumbled sharply from over VND20,000 ($0.77) apiece in July 2024 to just VND6,000 ($0.23) in March 2025, a steeper slide than many of its industry peers, such as Nam Kim (NKG), Ton Dong A (GDA), Vietnam Steel Corporation (TVN), and Hoa Phat Group (HPG).

However, since early April, SMC shares have staged a sharp rebound, climbing to VND11,100 ($0.43) apiece on April 9, up 95%, outperforming both the steel sector and the benchmark VN-Index. The stock closed at the same level on Thursday.

Beyond the broader market rally, driven by positive developments in U.S. tariff negotiations with several countries, including Vietnam, SMC has also drawn strength from signs of improving financial health.

After multiple delays and warnings from the Ho Chi Minh Stock Exchange (HoSE), SMC finally released its 2024 audited financial statements in early May.

Reportedly, the company swung from a net loss of VND270 billion ($10.39 million) to a net profit of VND29 billion ($1.12 million). This turnaround is crucial as two consecutive years of losses in 2022 and 2023 had put SMC at risk of mandatory delisting.

The result was driven by the reversal of bad debt provisions. In late 2024, the company’s non-performing loans stood at VND1.33 trillion ($51.2 million), accounting for 27% of total assets.

Recoverable receivables rose from VND740 billion ($28.49 million) at the start of the year to VND971 billion ($37.38 million) by year-end, mostly linked to receivables from Novaland (NVL), Vietnam's leading property developer.

According to SMC, on December 20, 2024, Novaland, its parent company NovaGroup, and its affiliates signed a debt confirmation and repayment commitment.

By the time the 2024 audited financial statements were finalized, SMC and Novaland had entered into several asset purchase agreements and related documents to secure payment obligations linked to SMC’s receivables. This prompted the steelmaker to reassess recoverability and adjust provisions for related outstanding debts.

Recovery outlook remains challenged

In SMC’s 2024 annual report, chairwoman Nguyen Ngoc Loan noted that over the 36-year journey, 2024 stood out as the most difficult and challenging year for the company.

However, the worst appears to be behind, with encouraging signs that point toward stability and recovery in 2025, she said.

Despite dodging delisting, SMC continues to face substantial headwinds. As of end-2024, total liabilities stood at VND3.97 trillion ($152.83 million), nearly 4.9 times its equity. This included VND1.42 trillion ($54.66 million) in payables to suppliers and VND2.39 trillion ($92 million) in loans.

To sustain operations and support future growth, SMC is seeking fresh capital through a proposed private placement of 73 million shares at VND10,000 ($0.38) each to professional investors in 2025-2026. If successful, its charter capital is expected to nearly double to VND1.47 trillion ($56.59 million).

SMC aims to raise VND730 billion ($28.1 million) to repay loans, settle payables to suppliers, and strengthen working capital. The privately placed shares will be subject to a one-year lock-up period from the completion date of the offering.

Meanwhile, the steel industry is forecast to continue facing headwinds in 2025, with volatility in supply-demand dynamics and persistent trade barriers. Notably, U.S. tariff policies are expected to weigh on the pace of global economic recovery, adding uncertainty.

On the domestic front, however, increased public investment and efforts to stimulate consumer demand offer some upside for growth.

Based on the 2025 macroeconomic outlook and steel industry landscape, SMC has set this year’s targets at VND9.5 trillion ($365.71 million) in revenue, up 6.6% from 2024, and VND30 billion ($1.15 million) in after-tax profit, 2.5 times higher year-on-year.

Its leadership said the plan reflects careful consideration of market conditions, operational challenges, and the company’s available resources, with goals focused on business recovery, improving financial efficiency, and driving long-term sustainable growth.

In Q1/2025, SMC recorded revenue of VND1.85 trillion ($71.28 million), down 18% year-on-year. After expenses, core operations posted a loss of VND16 billion ($616,201), but thanks to other income of VND16.6 billion ($639,309), the company managed a slight net profit of VND126 million ($4,852), sharply down from VND179 billion ($6.89 million) in the same period last year.

In its explanation, SMC cited a challenging steel industry environment in Q1, marked by falling steel prices and weak demand. Intense competition from domestic players and imported steel directly impacted the company’s production volume and revenue.