Vietnamese steel giant Hoa Phat Group will focus its resources on its core business in the short term to compete with imports amid intensified industry competition, said its chairman.
“Competition in the steel market is getting fiercer, so Hoa Phat will do its utmost to improve competitiveness in the coming five to 10 years,” Tran Dinh Long said at the annual general meeting on Thursday.
Long, the country’s third-richest billionaire, noted that the group’s multi-business strategy remains unchanged, but now is the time to focus on its core industry - steel. As such, the firm will also refrain from expanding its non-core businesses.
The steel industry in Vietnam and elsewhere in the world has experienced a slump as prices nosedived. Steel sales in the domestic market started to slow in late 2022 due to tepid real estate transactions. This caused Hoa Phat’s 2023 business performance to fall, with a profit of VND6.8 trillion ($272.6 million) on revenue of VND120.36 trillion, down 19% and 16% year-on-year, respectively.
The local steel industry is forecast to continue struggling this year as the housing market is yet to break out, while overcapacity persists worldwide, particularly in China, the world’s largest steelmaker.
In the first quarter of this year, domestic hot-rolled coil (HRC) output reached two million plus tons, produced by Hoa Phat and Taiwanese-invested Formosa Group, far below the three million tons of imported products, including 2.3 million tons from China. Cheap Chinese steel is hurting local players, Long said.
For this year, Hoa Phat has targeted a net profit of VND10 trillion ($401 million) on revenue of VND140 trillion, up 47% and 18% against 2023.
Elaborating on the targets, Hoa Phat’s CEO Nguyen Viet Thang said that the company is unlikely to see dramatic improvements this year although its worst moment was in the 2022-2023 period, citing the unpromising real estate market and the continued monetary tightening by major central banks amid high inflation.
The Vietnamese steelmaker plans to increase its charter capital by 10% to VND63.96 trillion (VND2.56 billion) through a share dividend payment this year.
If business performance turns more positive, the firm may return to paying a cash dividend next year, Long said.
Business expansion
CEO Thang shared that the company is set to produce more HRC by the year-end, with a full designed capacity of 2.7 million tons per year at the Dung Quat 2 mill, next to the Dung Quat 1 mill in the eponymous economic zone in the central province of Quang Ngai.
With the Dung Quat 2 mill in place, the company will see revenue up to VND200 trillion ($8 billion) per year, thus raising its steel weight to 95% of its total revenue, up from 85-90% in recent years, Thang added.
He expressed confidence that the company’s products can compete with China and maintain their market share, which stands at around 35% of construction steel sales countrywide.
Notably, Long revealed that Hoa Phat was researching the production of silicon corrugated iron, which is used to make electric motors. If successful, Hoa Phat will be the first in Vietnam to churn out this product.
In addition, once the Dung Quat 2 mill comes online, the company will make rails for high-speed trains with cutting-edge technologies acquired from developed countries.
Hoa Phat will bid to supply rails for the North-South high-speed railway project, which is in the making and may cost over $72 billion, Long said.
To realize its goal of becoming one of the world’s 50 biggest steelmakers, Hoa Phat plans to pour $5 billion into a steel project in the central province of Phu Yen.
The firm will continue with a bauxite project in the Central Highlands province of Dak Nong, but is willing to drop it for any arising investor interest as it focuses on the steel business, Long said.