Most listed Vietnamese steel businesses reported year-on-year declines in net revenue and net profit last year, but their profits are expected to grow well in 2024.
According to the Vietnam Steel Association (VSA), domestic crude steel production in 2023 reached nearly 19.2 million tons, down 4% compared to 2022. Crude steel consumption was nearly 18.8 million tons, up slightly 1% year-on-year, while nearly 1.8 million tons of crude steel were exported, 1.4 times more than in 2022.
Finished steel production hit 27.76 million tons, dropping 5% year-on-year, and finished steel sales reached nearly 26.3 million tons, down 3.5%, of which exports were more than 8 million tons, an increase of 29%.
The figures showed that Vietnam's steel market in 2023 was quiet, with businesses narrowing production due to falling global steel demand, economic recession and high inflation in major steel markets such as the EU and the U.S.
In that context, most steel producers recorded declines in net revenue or net profit in 2023 compared to the previous year. For example, giant Hoa Phat, listed on the Ho Chi Minh Stock Exchange (HoSE) as HPG, saw a 15.88% drop in net revenue, Nam Kim Steel Corporation (HoSE: NKG) 19.39%, and Thai Nguyen Iron and Steel Joint Stock Corporation (UPCoM: TIS) 18.54%. Only TLH reported a year-on-year revenue increase of 17.63% to VND6.2 trillion ($254.36 million).
Similarly, the 2023 net profits of businesses in the group also decreased, such as TIS with a loss of VND179 billion ($7.35 million), nearly 20 times higher than 2022; Pomina (HoSE: POM) with VND961 billion ($39.4 million), and SMC Trading Investment Joint Stock Company (HoSE: SMC) VND919.3 billion.
NKG was a bright spot with a net profit of VND114.7 billion ($4.7 million) from a VND124.7 billion loss in 2022. Nha Be Steel Joint Stock Company (UPCoM: TNB) also attracted attention with VND2.9 billion ($119,000) in profit compared to a loss of VND8.4 billion the previous year. Vnsteel - Vicasa Joint Stock Company (HoSE: VCA) also switched from a loss of VND5.9 billion in 2022 to a profit of more than VND7.1 billion in 2023.
In Q4/2023, the steel group marked a comeback when many companies reporting profits compared to heavy losses in 2022.
Typically, HPG recorded Q4 revenue increasing by 33.14% year-on-year to VND34.93 trillion ($1.43 billion). Its after-tax profit hit VND2.97 trillion ($121.87 million) from a loss of nearly VND2 trillion in the same period in 2022. Compared to the previous quarter, HPG's profit surged 48%.
For Hoa Sen Group (HoSE: HSG), its consolidated revenue in Q1of the 2023-2024 fiscal year (October 1, 2023 to December 31, 2023) reached VND9.7 trillion ($398 million), a year-on-year rise of 15%. The firm’s gross profit margin recovered strongly from 2% in Q1 of the 2022-2023 fiscal year to 11% in the same quarter of the 2023-2024 fiscal year.
As a result, its gross profit in Q1 of the 2023-2024 fiscal year reached VND960 billion ($39.4 million), five times higher than the same period the previous fiscal year. HSG reported a profit of VND22.4 billion ($919,160) compared to a loss of VND414.3 billion in Q4/2022.
Similarly, NKG posted Q4/2023 net revenue of VND4.46 trillion ($183 million), up over 3.7% year-on-year. With its gross profit margin in Q4/2023 reaching 6.12% (-4.9% in Q4/2022), NKG’s gross profit recorded a strong recovery, reaching VND273.2 billion ($11.2 million) compared to a gross loss of nearly VND210 billion in the same period in 2022.
NKG’s financial and business governance costs were VND88.5 billion ($3.63 million) and VND22.8 billion, down 12.1% and 49%, respectively. Meanwhile, its sales expenses were more than VND175.3 billion ($7.2 million), a year-on-year rise of 15%. Therefore, in Q4/2023, the company had a net profit of VND22.4 billion, sharply increasing from a loss of VND414.3 billion in Q4/2022.
On the contrary, POM, SMC and TLH continued to report losses.
Bright outlook in 2024
Broker ACB Securities (ACBS) expected steel consumption in 2024 to recover thanks to continued strong public investment. Disbursement of state budget investment capital in 2023 reached VND625.3 trillion ($25.66 billion), expanding VND21.2 trillion over the previous year and fulfilling 85.3% of the yearly plan.
With the economic situation yet positive, ACBS forecasts that the state will continue to promote public investment disbursement to spur economic growth.
Some large projects such as Long Thanh airport in the southern province of Dong Nai (with investment capital of $16 billion), which has a higher steel demand than other public investment projects, will be a growth driver for the steel industry.
In addition, the real estate market, the main consumer of steel products, is predicted to recover, it said, adding real estate supply is expected to improve in the following years, helping steel demand recover.
Another broker BIDV Securities (BSC) estimated that with positive changes in policies and low interest rates, the real estate market will recover from the second half of 2024, while domestic steel production will increase by 10-15% compared to 2023.
The gross profit margin of steel enterprises in 2024 is expected to recover to the average level of a cycle thanks to the recovery in output and an upward trend in steel prices.
“Now is a good time to buy stocks in steel businesses with good assets and large market shares, as the worst time for steel firms has passed and their profits are at the bottom and will gradually improve in the near future,” BSC noted.