Big guy profits trillions

Billionaire Tran Dinh Long's Hoa Phat Group Joint Stock Company (HPG) has just announced its business results for the third quarter of 2023 with after-tax profit of VND 2,000 billion, up 38% compared to the second quarter and surpassing the loss of VND 1,786 billion in the same period last year.

Accumulated in the first 9 months of the year, Hoa Phat achieved 3,830 billion VND in profit after tax, completing 48% of the year plan.

However, sales activities are still facing difficulties when economic demand is low, credit growth is not high, the real estate market has not yet become active again, and public investment needs more time for money to flow strongly into infrastructure.

HPG's output in the first 9 months mostly decreased compared to the same period last year. In the third quarter of 2023, HPG recorded a 16% decrease in revenue compared to the same period last year to VND 28,766 billion. Accumulated revenue in the first 9 months reached VND 85,430 billion, down 27%.

Despite low revenue, Hoa Phat's profit is considered impressive when steel enterprises in general are facing difficulties. Hoa Phat is known as the leading enterprise in the market share of construction steel and steel pipes in Vietnam, with 33.3% and 27.3% respectively.

Hoa Sen Group Corporation (HSG) has just announced its after-tax profit for the fourth quarter of the 2022-2023 fiscal year (from July 1 to September 30, 2023). Its consolidated after-tax profit reached VND438 billion, recovering from a loss of VND887 billion in the same period. The company's revenue in the quarter reached VND8,107 billion.

Accumulated for the entire fiscal year 2022-2023 (from July 1, 2022 to September 30, 2023), Hoa Sen's consolidated revenue reached VND 31,651 billion, consolidated profit after tax reached VND 28 billion.

In contrast to the leading corporations, most steel enterprises recorded many difficulties. The general picture is still one of losses, high debt, high financial costs, and low selling prices.

Up to now, a series of steel industry enterprises have reported losses, including the giant Thai Nguyen Iron and Steel (TIS), Vietnam Steel Corporation - VNSteel JSC (TVN), Cao Bang Iron and Steel (CBI), Nha Be Steel - VNSteel (TNB), Kim Vi Stainless Steel Import-Export Production JSC (KVC)...

Vietnam Steel Corporation - VNSteel (TVN) reported a loss of VND172 billion in the third quarter of 2023, the second consecutive quarter of loss for the company. However, the loss was lower than the loss of VND567 billion in the same period last year. Accumulated in the first 9 months of 2023, the pre-tax loss amounted to more than VND431 billion.

VNSteel currently has more than 6,500 billion VND in the form of unfinished basic construction costs at the Thai Nguyen Iron and Steel Company Production Rehabilitation and Expansion Project Phase 2.

In the third quarter of 2023, the "one-time giant" Thai Nguyen Iron and Steel Corporation - Tisco (TIS) suffered a pre-tax loss of 57 billion VND, with a cumulative loss of 193 billion VND in the first 9 months.

Steel industry still faces many difficulties but will break through next year

Although it is forecasted to recover dramatically in 2024, up to now, most steel enterprises are still facing many difficulties. The group facing the most difficulties is small and medium enterprises. High input costs, high financial costs, fluctuating exchange rates, while selling prices are low... are pressures on enterprises in the industry.

Low consumer demand also affects steel and materials businesses.

In the third quarter of 2023, SMC Investment and Trading Joint Stock Company (SMC) reported a loss of more than VND 178 billion. Previously, this enterprise had anticipated the difficulties and set a goal of "no loss" in the last 6 months of 2023. In the first half of the year, this enterprise lost about VND 400 billion.

The slowdown of the real estate market along with unprecedented difficulties of real estate businesses has significantly affected steel and steel trading businesses.

SMC has to make provisions for many revenues related to real estate companies such as: Delta - Valley Binh Thuan, Dalat Valley Real Estate, Dalat Valley Real Estate, AQUA City...

In September, a slight recovery in world steel prices and more positive domestic steel demand helped many steel stocks increase rapidly. Billionaire Tran Dinh Long's HPG and Le Phuoc Vu's HSG shares surged. However, consumption demand is still quite low compared to 2022 and in early 2023, the revenue of enterprises has not improved. However, low coke prices have helped some leading enterprises in the industry record high profits.

Some forecasts suggest that the construction steel market could see a booming recovery in 2024.

Dragon Viet Securities (VDSC) believes that the steel market will continue to face difficulties in the second half of 2023 and may recover strongly in 2024. In the second half of 2023, steel companies' revenue and gross profit margins will improve thanks to factors such as domestic market demand, sharp declines in raw material prices, and businesses have reduced the average number of days of inventory to minimize risks due to fluctuations in raw material prices.

The real estate market has shown more positive signs, with credit flowing into this sector increasing sharply, legal issues of many projects are being resolved... based on the Government's efforts to revive a pillar industry in the economy.

Steel consumption in September also showed signs of improvement. According to the Vietnam Steel Association (VSA), September was the first month to record growth in finished steel sales compared to the same period last year, up nearly 5% to nearly 2.2 million tons. Hot-rolled coil consumption increased the most, nearly 34%. Finished steel exports also increased sharply, doubling compared to the same period to nearly 658,000 tons.

In addition, public investment activities have also been accelerated in the past few months (reaching 49% of the plan in 9 months), which will likely boost demand for construction materials, including steel. Projects such as the North-South Expressway and new airports will boost the consumption of construction steel.

However, in a previous report, Bao Viet Securities (BVSC) said that steel consumption demand will recover significantly by the end of 2023 and in 2024, thereby helping to improve the profit margins of businesses in the industry. However, this recovery will not be too large and will not return to the average profit margin.

In fact, the global economy remains weak. Many major economies are still lurking in recession. Steel prices in general and hot-rolled coil (HRC) prices remain at levels well below the peaks recorded in 2022 and early 2023. This is a major drag on domestic steel companies.

The former 'big brother' of the steel industry suffered losses, while the trillion-dollar project remained unfinished . In the first nine months of the year, the former 'big brother' of the steel industry, Tisco, suffered a pre-tax loss of 193 billion VND; meanwhile, another 6,400 billion VND was still 'buried' in the Thai Nguyen Iron and Steel Company's production expansion project - Phase II.