The financial statements second quarter of 2019 are in the final stage. Investors are not too surprised to constantly appear in the financial reports of steel enterprises with revenue, and both profits declined compared to the same period. There are even businesses with losses like Vietnam-Italy Steel (VIS) or Italian Dana (DNY).
For businesses that have published their financial statements, at the end of the first 6 months, a number of businesses such as Viet Y Italy, Tisco (TIS), Tien Tien Steel (TLH), Viet Duc steel pipe VGPIPE (VGS), Dana Italy has both revenue and profit decline. And SMC, a well-known steel business, although its revenue soared to over 8.7%, its profits decreased by nearly half compared to the same period last year.
Specifically, SMC’s first 6 months revenue was VND 8,669 billion, up 8.7% compared to the first half of last year, while COGS increased to 10.5%, leading to a 22% drop in gross profit. . Gross profit margin is only 3.8%.
Speaking of SMC, investors associate the “marriage” between SMC and Nam Kim Steel (NKG). The “marriage” occurred in the middle of the steel industry is facing many difficulties, making investors think of many “scenarios”, in which, the “easy listening” scenario is the fact that businesses are linking together. to create more strength, cooperate more closely to create new strength in competition.
In the beginning, the two steel sheet enterprises cooperated in the NKG to issue 30 million shares individually and SMC was one of the buying partners. However, things only developed quickly when a senior SMC employee was elected as CEO of Nam Kim Steel, at the same time, this CEO bought a large amount of shares and became a major shareholder of NKG. Then SMC increased its ownership, and became a major shareholder of NKG. Meanwhile, President Ho Minh Quang’s own company has sold off and is no longer a major shareholder.
Nam Kim has not announced Q2 business results yet, but Q1 / 2019 saw a loss of nearly 102 billion dong. The reason is that due to the higher cost of the team, Nam Kim made a gross loss of over 1 billion dong from production and business activities, not to mention the type of operating expenses incurred.
Not only Nam Kim, but Pomina Steel (POM) has not announced Q2 business results, while Q1 lost nearly 84 billion dong. These losses resulted in a strong decrease in the company compared to the VND 209 billion of profit achieved in the first quarter of 2018. The cause of Pomina’s loss is also due to the large cost of goods sold, gross profit fell sharply over the same period.
In the market, both NKG and POM stocks are falling deeply, to the bottom of many recent years.
The high cost of steel enterprises’ enterprises is not difficult to understand. The information said that in China, iron ore prices are constantly setting new peaks, the iron ore market recorded the second quarter of 2019 as the strongest price increase since the end of 2016.
Meanwhile, in contrast, the competitive pressure and the pressure on enterprises’ prices made the selling price of steel not increase as strongly as the price of raw materials. In this context, businesses that have autonomy in the source of raw embryos will have a competitive advantage over businesses that only import raw embryos. The US’s imposition of anti-dumping and countervailing duties on corrugated iron products imported from Vietnam, using raw materials imported from Korea and Taiwan is also a pressure making steel exporters. We must find a new direction and take the initiative in sourcing raw materials from Vietnam or other countries besides Korea, China and Taiwan.
Hoa Phat Group said that in the first 6 months of 2019, steel supply to the domestic market and exports increased sharply. In particular, Hoa Phat construction steel has exported more than 123 thousand tons, up 35% over the same period in 2018.
At the recent investor meeting, Hoa Phat said its Q2 revenue reached VND 15,300 billion and profit after tax reached VND 2,050 billion, still down 7% compared to the same period last year. Therefore, Hoa Phat’s first 6 months revenue is estimated at 30,263 billion dong, up by 11% YoY but EAT is still down by 12.77% to about 3,860 billion dong. Hoa Phat also added that in the 2nd quarter, there was no contribution from Dung Quat steel complex. However, Hoa Phat also said that in the last 6 months of the year, there will be many difficulties and the real estate market is slowing down.
Viet Duc Steel Pipe (VGS) reported a turnover of VND 3,446 billion in the first half, a slight decrease of 1.3% compared to the same period, but after-tax profit reached only VND 28 billion, down 11.7%.
Tien Len Steel (TLH) reached 2,557 billion dong of revenue, down 16.4% compared to the first half of last year, but the latter’s profit dropped by more than 72%, which was also caused by higher cost of goods and costs. Particularly, in Q2 / 2019, Tien Len Steel raised its profit after hire by more than VND 8 billion, equal to 1/5 of the same period.
Tisco (TIS) reached VND 5,486 billion in revenue, down 5.4% compared to the first 6 months of 2018 but the after-tax profit decreased by 10.5% to VND 38 billion.
Referring to the “marriage” of SMC with Nam Kim, investors did not forget to associate Vietnam-Italy Steel, and Thai Nguyen Steel (Tisco). Vietnam Italy Steel after the journey “roundabout” through a series of individual shareholders, before returning to Thai Hung, the idea was stable. Unexpectedly, only for a short time, Vietnam-Italy Steel has once again “changed owners” into Japanese steel enterprise Kyoei.
Earlier, when starting to Thai Hung, Vietnam Italy Steel had a period of exciting business, prospering with sales and profits in the quarter outperformed the previous period. However, after that, it dropped sharply and just experienced 5 consecutive quarters of losses from Q2 / 2018 with accumulated losses up to June 30, 2019 to VND 392 billion. In the first half of 2019, the loss was nearly VND 68 billion, approximately the same period in 2018.
Unfavorable transfer as Vietnam Italy Steel, Thai Hung also jumped into the acquisition at Thai Nguyen Steel. Along with that, SCIC divested by reducing 1,000 billion dong of charter capital. The idea of the name Kyoei Steel reappeared in the game when Thai Hung after the time of ownership announced the sale of divestments.
However, the scenario at Viet Y Steel was not repeated, simply because Thai Hung could not hold a controlling stake in Tisco like in Visco. In Tisco, there are still state shareholders of VnSteel (TVN). Therefore the parting between Thai Hung and Tisco became difficult. Besides, recently, 5 former leaders of VnSteel and Tisco were arrested related to the project of expanding production and business phase 2 – Thai Nguyen Iron and Steel Company also caused many difficulties for related businesses.
Currently, TVN has not released Q2 / 2019 business results yet.
Another business that also has a story worth mentioning is Italian Dana Steel (DNY) – the business continues to stop production from the decision of the People’s Committee of Da Nang City. The company is only recording revenue from liquidation or return of some supplies and equipment with short shelf life. Also record losses from operating expenses and cost of goods sold. The total accumulated losses of the first 6 months of 2019 reached over 171 billion VND.
The story related to Italian Dana Steel did not stop there, when the company filed a lawsuit against the People’s Committee of Da Nang City for incidents related to the plant’s closure and production shutdown. The petition was filed in early 2019, but in June the company paid the court fee only after suspending the negotiation. In a 24-page petition, Dana-Italy Company stated that the damage suffered by this unit from the decisions of the People’s Committee of Da Nang City was nearly VND 400 billion.
The common point of steel enterprises in Q2 is that steel billet price increases, leading to high cost of goods sold and reduced profit. The only way out is that businesses try to be self-reliant on material resources, or combine strength like the way SMC and Nam Kim Steel are doing.
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