Vietnam steel major SMC faces risk of compulsory delisting

Steel manufacturer SMC Trading Investment JSC, with 37 years of development, faces the risk of compulsory delisting due to three consecutive years of losses with nearly VND1.3 trillion ($51.4 million) in bad debt, 1.7 times higher than its charter capital.

SMC, listed on the Ho Chi Minh Stock Exchange as SMC, reported its revenue continued to drop sharply to VND2.18 trillion ($86.2 million) in Q4/024, only one-third of the same period last year, according to the firm’s freshly released financial statement.

With production costs higher revenue, the company incurred a gross loss of VND9 billion ($355,731) in the quarter.

Financial income decreased from VND50.7 billion ($2 million) to VND7.9 billion. Financial expenses fell from VND159 billion to VND65.7 billion, selling expenses plunged from VND 57 billion to VND21 billion, and administrative expenses halved to VND146 billion.

The company reported a post-tax loss of VND291.5 billion ($11.52 million) for the parent company shareholder.

The Q4 result led to a full-year loss of VND270 billion ($10.67 million). Although the loss was lower than the VND885 billion ($35 million) in 2023, this marked the third consecutive year of losses for SMC. If there are no changes in the audit results, SMC's stock will be compulsorily delisted from the HoSE.

The firm explained that in 2024, it seriously implemented many solutions to improve its business performance, strengthened asset sales and financial investment divestment, closely followed macroeconomic and steel industry trends to develop suitable strategies, and actively handled overdue debts.

However, both domestic and international steel markets remained full of challenges. Steel prices and consumption demand sharply decreased, and the domestic real estate sector was yet to stabilize, directly affecting the company’s production and business activities, it noted.

Bad debt of $51.4 million

SMC is a major steel enterprise in the southern region with 37 years of development. The company operates across three main sectors: steel distribution, processing, and manufacturing. In the previous years, its revenue was comparable to large-marketshare companies like Nam Kim Steel (NKG) and Dong A Steel (GDA), even reaching a billion-dollar milestone in some years.

Between 2019-2021, SMC accelerated investments in processing plants, aiming to capitalize on the trend of moving investments out of China and to join the global supply chain. However, the Covid-19 pandemic and the downturn of the steel industry in 2022-2023, coupled with slow-moving debts, significantly affected its business operations.

At the end of 2024, the company's bad debt remained high at VND1.29 trillion ($51 million), accounting for nearly 29% of total assets and 1.7 times the owner's equity. The company has provisioned VND663 billion for bad debt.

Last year, the company actively liquidated financial investments and assets to generate operating cash flow, including its stakes in Pomina Steel (POM) and Nam Kim Steel (NKG), an office building in Ho Chi Minh City’s Binh Thanh district, and land use rights and assets at SMC Da Nang.

The company also agreed to convert debts into shares or real estate for offsetting. For example, SMC accepted converting debts with Hoa Binh Construction Group (HBC) into shares. However, because the HBC price dropped in 2024, SMC had to make provisions of VND49.5 billion ($1.96 billion) for this investment.

These activities helped reduce the company’s liabilities by VND1.38 trillion to VND4 trillion ($158.1 million), with VND627 billion of that reduction in loan debt. At the end of the year, it had VND503 billion ($19.9 million) in fixed-term deposits over three months, a slight increase from the beginning of the year. However, cash equivalents saw a significant decrease from VND570 billion to VND145 billion.

SMC stated that it will continue implementing business strategies, recover overdue debts, and consider restructuring the company to improve business performance. It also targets 620,000 tons of steel and a post-tax profit of VND30 billion ($1.18 million) this year.

SMC closed Monday at VND6,050 ($0.24) per share, down nearly 4%.