Vietnam steelmakers report losses in Q3

A number of steel producing companies in Vietnam reported losses in the July-September quarter, a situation already anticipated by securities companies.

Industry giants like Hoa Phat, Hoa Sen and Nam Kim have yet to release their financial reports, but data collected by The Investor shows that many steel companies reported losses in the third quarter this year or a significant decrease in profits compared to the same period last year.

KIS Securities Corporation believed that the steel sector would be affected by weak market demand due to the rainy season. Falling steel prices would impact their profitability even though input costs remained stable.

Thai Nguyen Iron and Steel Corporation, traded on the unlisted public company market UPCOM as TIS, has posted a loss of VND58.2 billion ($2.37 million) in Q3, marking its fifth consecutive loss-making quarter. Its Q3 revenue fell 7% year-on-year to VND2.41 trillion ($98.5 million).

A rise in the cost of goods sold caused the company's Q3 gross profit to decrease 24% to VND34 billion.

The firm also recorded a net loss of VND25 billion ($1.02 million) in the same period last year.

In the first three quarters this year, TIS has incurred a loss of 194.3 billion ($7.93 million), the biggest loss in the steel industry so far.

TIS has assessed that the global context remains complex, with prolonged geopolitical conflicts affecting supply chain and making prices of raw materials for production unpredictable. Therefore, TIS also has asked shareholders to authorize the board of directors to adjust the business targets to align with the actual situation.

Similar to TIS, VICASA - VNSTEEL Joint Stock Company (listed on the Ho Chi Minh Stock Exchange as VCA) reported a loss of VND2.7 billion ($110,200) in Q3/2023, compared to a loss of VND21.9 billion ($894,000) in Q3/2022.

This is VCA’s first quarterly loss after three consecutive profitable quarters. In nine months through September, the company recorded a profit of VND3.5 billion ($142,800), completing approximately 37% of its full-year target.

Other steelmakers that also reported losses in Q3 are Thuduc Steel Corporation - Vnsteel Joint Stock Company (UPCOM: TDS) with VND491 million ($20,040), and Nhabe Steel - Vnsteel Joint Stock Company (UPCOM: TNB) with VND2.73 billion ($111,400).

On the other hand, Thong Nhat Flat Steel Joint Stock Company (UPCOM: TNS) made an impressive turnaround in Q3 with a net profit of VND3.1 billion ($126,530), versus a loss of VND6.2 billion ($253,000) in the same period last year.

Thanks to efforts in finding customers as well as reasonably priced inputs, the company's output increased by 169% and sales rose by 152% year-on-year, resulting in a substantial increase in revenue and profit. For the first nine months of the year, the company reported a net profit of VND120 million ($4,900), down 86%.

Another steel company that reported a net profit in Q3 was VNECO.SSM Steel Structure Manufacturing Joint Stock Company (listed on the Hanoi Stock Exchange as SSM). SSM reported a net profit of VND1 billion ($40,800) in Q3, a significant improvement from a loss of VND4.9 billion ($200,000) in Q3/2022.

According to the Petrovietnam Securities Corporation, the steel industry may not be able to return to a growth trajectory. Demand for construction steel will remain lackluster given the struggling real estate market. This means steel consumption will rely heavily on the implementation of major public investment projects nationwide. However, the slow disbursement of public investment funds will pose a significant risk to the steel industry towards the end of 2023.

In addition, PSI suggested that steel prices are currently lacking supportive drivers. Weak demand has been the primary reason for the continuous decline in steel prices over the past two quarters, and this trend is expected to persist in the final quarter of the year.

Dao Minh Chau, deputy director of stock analysis at SSI Research, said that short-term economic conditions continue to pose challenges, affecting business performance. Consequently, there will be a limited number of sectors with positive profit growth for the rest of 2023, including steel, securities, oil and gas, and technology.

Along with retail, fertilizers, and aquaculture, the steel industry's profitability is expected to enjoy strong growth in 2024, according to Chau.