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Corporate profits have passed their peak

14:14 | 03/06/2019

VCN - The business results in the first quarter of 2019 of many listed companies had a sharp decrease compared to the same period last year, showing that their "health" is going down.

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High raw material prices made Hoa Phat's profit decrease by 19% in the first quarter.

Backward plan

A noticeable point in 2019 business plans is the caution in setting targets of listed companies, especially big ones. Typically, at PAN Group Joint Stock Company, after achieving 92% growth in revenue and 13% growth in profit in 2018 compared to 2017, PAN unexpectedly set a profit target for 2019 that decreased slightly to 562 billion VND while the revenue target still increased by 34%, up to 10,513 billionVND. Similarly, Refrigeration Electrical Engineering Joint Stock Company (REE) set the revenue plan for 2019 to reach 5,577 billion VND, up by 10% compared to 2017 but the profit was set to decrease by 18%, reaching only 1,465 billion VND. Hoa Phat Group Joint Stock Company also set a profit target of 2019 that decreased 22%, reaching only 6,700 billion VND while the revenue targetwas still set to increase 24%, reaching 70,000 billion VND.

At Petrovietnam Camau Fertilizer Joint Stock Company, the profit plan was also set to drop by 63%, reaching 240 billion VND although the expected revenue was still expected to be up by 10%.2019 is the first year the company applies new gas prices when its factory is still in the depreciation period, in addition, risk factors of the trade war, declining gas supplies and climate change may affect its consumption. The profit plan of Sao Ta Foods Joint Stock Company also was set to decrease by 7%, reaching only 180 billionVND. Mr. Ho Quoc Luc, Chairman of FMC said that in 2019, the company would increase the self-cultivated land fund to take the initiative ofclean materials. The company is pursuing a project to rent about 90 hectares next to an old farming area. Therefore, the demand for capital is very high to compensate for the labor achievement. Moreover, competitiveness on selling prices is also a factor for FMC to consider when making their plans. The difference between the price of shrimp from India and Vietnam is very large, at one time the price of Indian shrimp was 40,000 VND/kg lower than the price of Vietnamese shrimp.

South Basic Chemicals Joint Stock Company (CSV) set a negative plan on all targets. Specifically, the consolidated revenue plan was set to decrease by 7%to 1,466 billion VND, the profit before tax was also set to decrease by 8% to 293 billion VND. According to the leadership of CSV, the price of input materials such as sulfur, industrial salt etc. is still high, the materials still mainly depend on imported sources. In addition, the increase in interest rates in 2019 and electricity prices made CSV cautious in setting their targets this year.

Many "big companies" reduce their interest rates

Corresponding to the caution in plans of enterprises, business results in the first quarter of 2019 also showed a significant slowdown. Typically, at Sao Mai Group Corporation, although its revenue increased by 5.4 times compared to the same period last year, the after-tax profit fell 37%, reaching only 313 billion VND. The reason is that the production cost of goods sold increased by 5.7 times, the revenue from financial activities decreased by 70% while the financial expenses increased sharply from nearly 14 billion VND to nearly 76 billion VND, the selling expenses and enterprise management costs also increased strongly.

According to statistics of SSI Securities Company of more than 950 enterprises who announced financial statements for the first quarter of 2019, the total after-tax profit in the first quarter reached nearly 65.2 billion VND, up only 3.4% over the same period last year, significantly lower than the increase of 21.6% in the first quarter of 2018. Notably, the profit of 30 enterprises in the VN30 category decreased by 1.32%, after increasing over 20% in the first quarter of the last 3 years.

Up to 12 enterprises in VN30 suffered a decrease in profit compared to the same period last year. The most notable case is Ho Chi Minh City Infrastructure Investment Joint Stock Company that lost 5.5 billion VND in the first quarter. According to the explanation of the company leadership, although the company has completed some key stages in the first quarter of 2019, it is still not qualified to recognize the revenue and profit according to the accounting standards. Therefore, the consolidated profit estimated to be accumulated in the first 6 months of 2019 (excluding trade advantages) will reach about 500 billion VND, completing 53.65% of the plan. Similarly, at Hoa Phat Group, although its revenue grew by more than 15%, the profit after tax decreased by nearly 19% compared to the 1st quarter of 2018, reaching 15,180 billion VND and 1,810 billion VND respectively. They explained thatan increase in raw material prices was the cause of the decline in profit in the period. Similarly, REE's revenue in the first quarter was just over 1,079 billion VND, an insignificant increase compared to the same period in 2018. Meanwhile, the cost of capital increased by 6%, the financial cost also increased sharply. Therefore, the after-tax profit decreased by 11%, reaching only 370 billion VND.

Other businesses also saw declining profits such as Gemadept down 90%, Vinhomes down 33%, Phu My Fertilizer down 77%, VPBank down 29%, and Eximbank down 37%.

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According to experts, the costs to enterprises such as interest rates and electricity prices will tend to increase in 2019.Competition pressure also increases in many industries. For export enterprises, the demand of markets is increasing, so they require an increase in investment and production to improve their product quality. In addition, many large enterprises have now reached the growth limit in their core sector, so they must seek investment opportunities in new areas. Moving into new areas needs more time to verify business performance, thereby affecting profits in the short term due to increasing investment costs for new projects; enterprises may even suffer losses in the early stages.

By Nguyen Hien/ Ha Thanh