July 10, 2020 19:44

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Some steel enterprises face difficulties

10:57 | 25/05/2020

VCN- The Covid-19 pandemic has affected most economic sectors, especially those with import and export activities. Therefore, steel companies have to make efforts to change the market structure to overcome difficulties.

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Steel enterprises are also greatly affected in the context of a difficult economy. Photo: Internet

Market declines, prices fall

According to the Vietnam Steel Association, in the context of a gloomy global market due to the effects of the Covid-19 pandemic, domestic steel production and sales in the first three months of 2020 had a negative growth of 6% and 12.4% respectively, over the same period in 2019, reaching 5.7 million tons and 5 million tons, respectively. Steel exports reached over one million tons, down 21.3% compared to the first quarter of 2019.

Moreover, in March 2020, prices of raw materials for steel production decreased such as iron ore by $4-6/ton; scrap steel price is down about $12-15/ ton; HRC coil price drops sharply at $50-55/ton compared to the price at the beginning of March 2020.

According to the Vietnam Steel Association, compared with HRC transaction price in early 2020, this price has decreased by $90-92/ton. This will be very difficult for both domestic HRC producers, as well as flat rolling enterprises to use HRC as raw materials.

Therefore, at the beginning of 2020, steel enterprises have forecasted that the difficult and challenging trend for the steel industry will continue to increase, not only because of the Covid-19 pandemic that stopped production but also because of protectionist trends in the international market, as well as the gloom of the real estate and construction markets. Many businesses in this industry said that their business for the whole year of 2020 would not meet the plan.

Typically, at Viet Y Steel Joint Stock Company (VIS), in the first quarter of 2020, this enterprise has a net revenue of nearly VND756 billion, down 26.5% over the same period last year. While COGS is approximately equal to revenue, VIS hardly recognizes gross profit from selling activities and providing services. Revenue decreased, but financial costs increased that caused VIS to lose VND41.7 billion, up sharply from the loss of VND33.6 billion recorded in the first quarter of last year. This is also the 8th consecutive quarter that VIS has suffered a loss. The accumulated losses to March 31, 2020 amounted to VND586 billion.

Many businesses have increased profits

Explaining this, HoaSen group’s leaders said that the Covid-19 pandemic broke out around the world, so the consumption of the market decreased due to the influence of customers' psychology. However, the Company has actively implemented the policy of not pursuing price competition but focused on improving product quality and customer service quality, thus improving gross profit margin. At the same time, HoaSen group has implemented a series of management measures to reduce inventories, reduce bank loans, improve production and business efficiency to reduce costs. Increasing gross profit and reducing costs made HSG's consolidated after-tax profit soar.In the difficult context, there are still businesses in this industry finding a "bright spot" to do business, waiting for the opportunity to recover from the pandemic. HoaSen Group (HSG) reported the consolidated business results for the second quarter of the fiscal year 2019-2020 recorded an estimated profit after tax of VND200 billion, up 277% over the same period last year, although this enterprise sales volume is estimated at 338,674 tons and revenue is estimated at VND5,780 billion, down 8.6% and 16.3% respectively over the same period last year.

Similarly, Nam Kim Steel also recorded a net revenue in the first quarter of 2020 of nearly VND2,452 billion, down 16.7% compared to the same period last year. But due to the sharp decrease of cost price by nearly 24%, the company reported a gross profit of over VND212 billion, while the same period last year saw a loss of over VND1 billion. Hoa Phat also recorded the first quarter of 2020 revenue of VND19,450 billion and profit after tax of VND2,305 billion, corresponding to an increase of 28% and 27% over the same period of 2019, respectively, thanks to the two key industries of steel and agriculture. In addition, the products of Hoa Phat refrigeration such as air conditioners, freezers and refrigerators, all increased sharply, contributing to a 57% increase in output compared to the same period in 2019.

The businesses got the above results not only thanks to the business plan but also the solutions to adapt and maintain production and business activities. Typically, Thai Hung Trading Joint Stock Company actively changed market structure to minimize risks. Accordingly, Thai Hung has "attacked" more strongly in the civil market instead of large construction projects as before.

With Hoa Phat, this enterprise has applied the software and support tools in regulating production and sales, both increasing sales ability and improving prevention measures.

By Huong Diu/Quynh Lan