Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex

Leading Vietnamese steelmaker Hoa Phat had invested more than VND52.5 trillion ($2.08 billion) in its Dung Quat Iron and Steel Integrated Complex (Dung Quat 2) in the central province of Quang Ngai as of Q3/2024.

The investment represents about one-fourth of the group’s total assets.

The figure marked an increase of around VND10 trillion ($395.4 million) since Q2/2024 and 132% from the start of the year, according to the group’s Q3 financial statement.

The Dung Quat 2 project, which has a total investment of VND85 trillion ($3.4 billion), received investment approval in June 2021. It is designed to have an annual capacity of 5.6 million tons, including 4.6 million tons of hot-rolled coil (HRC) and 1 million tons of specialized steel.

Hoa Phat expects to take about three years for the project to reach its maximum production capacity, which will raise its total crude steel output to over 14 million tons annually.

At the group’s recent 2024 AGM, chairman Tran Dinh Long said they aim to complete the first phase of the Dung Quat 2 project (Dung Quat 2.1), which includes a blast furnace with a production capacity of 2.5 million tons, by the end of 2025.

They expect to complete the entire project by September 2026, three months ahead of schedule.

Once operational, the complex will add 5.6 million tons of HRC to Hoa Phat’s production capacity, taking it to 8.6 million tons. With current prices around $600 per ton, Hoa Phat’s revenue is expected to increase by VND70 trillion ($2.77 billion), Long said.

In pursuit of this key project, Hoa Phat has ramped up its borrowings. As of September 30, the group's total debt stood at VND99.6 trillion ($3.94 billion), up 17% from the beginning of the year. A significant portion of this debt comprised short- and long-term loans of VND78.7 trillion.

The overall rise in debt stemmed from long-term borrowings of VND24.52 trillion ($969.4 million), which surged more than VND14 trillion compared to early 2024, marking the highest amount of long-term debt the group had recorded. Notably, the Q3 financial report indicated a sharp decline in cash reserves.

At the end of Q3, Hoa Phat's cash and cash equivalents stood at VND8.5 trillion ($336 million), down 30.6% from the start of the year, while term deposits fell over 26% to nearly VND16.4 trillion ($648.35 million).

The group has reported revenues exceeding VND34 trillion ($1.34 billion) in Q3, a 19% surge year-on-year. Production of construction and high-quality steel reached nearly 1.1 million tons, down 14% from the previous quarter.

Despite the drop, the group maintained a leading 38% share of the domestic construction steel market.

Meanwhile, production of hot-rolled coil remained steady at 738,000 tons, matching the previous quarter. After deducting expenses and taxes, the group's net profits of VND3.02 trillion ($119.4 million) was down nearly 9% quarter-on-quarter, but up 51% year-on-year.

In the first nine months of the year, Hoa Phat recorded over VND105 trillion ($4 billion) in revenue, up 23% year-on-year and fulfilling 75% of the year's target.

Its profit rose a remarkable 140% year-on-year to VND9.21 trillion ($364.1 million) in the nine-month period, achieving 92% of the year's goal.

Hoa Phat’s HPG ticker, listed on the Ho Chi Minh Stock Exchange, closed Friday at VND26,550 ($1.05) apiece.