The positivity of leading enterprises such as Hoa Phat brings a lot of optimism to the steel industry after the downturn cycle. Photo by TL.
Leaders of various steel manufacturing companies stated that “the crisis has passed for steel enterprises” during recent shareholder meetings. The annual report for Hoa Phat states, following losses, the steel sector “has experienced the most difficult period and is on the road to recovery.”
The business also accepted the production and business plan for this year, which calls for VND150,000 billion in revenue and VND8,000 billion in after-tax profit.
The most challenging and competitive phase of the steel business has passed, according to Mr. Tran Dinh Long, Chairman of the Board of Directors at Hoa Phat.
“Hoa Phat will now strongly shift to producing high-quality steel, leaving the market for basic steel, such as construction steel, to other companies since the company will invest heavily in producing fabricated steel, for shipbuilding, automobiles, fasteners, and post force. Increase exports of such high-quality steel products and investment, he urged.
Leaders like Hoa Phat give the steel manufacturing business hope following the downturn. After a long downturn, the steel industry’s business improved in the first quarter of 2023. In the preceding quarter, steel companies on the stock exchange lost VND4,700 billion.
Despite good pronouncements from market leaders like Hoa Phat and Hoa Sen, numerous concerns remain. Profits rise, but demand remains low. The Chinese real estate sector has not recovered, and construction demand is poor, hurting steel prices in 2023. Assessments include EU and US demand. Interest rates lowered prices. Vietnam’s steel demand fell.
Steel prices plummeted from April to now due to limited demand. If this pattern continues, steel companies will face reserve pressure again, though not as high as in the middle of last year. HOSE lowered margin on Hoa Sen Group’s HSG shares because the parent company’s shareholders’ profit after tax on the consolidated financial statements examined for the financial year 2022-2023 is negative.
The Vietnam Steel Association (VSA) blames weak global demand and negative attitude for the recent drop in domestic construction steel prices. end result. Manufacturers lowered prices to increase inventory as domestic steel demand plummeted. Construction steel prices may continue to fall.
Therefore, some firms have barely returned to profit in the first quarter of 2023 due to the reversal of provisions due to the recovery of steel prices, but they still face poor demand and declining steel prices. VSA data shows that finished steel output fell 20.9% to 6.692 million tons and sales fell 25.4% to 6.068 million tons in the first quarter of 2023. Steel shipments dropped 8.9% to 1.659 million tons. Thus, domestic consumption and export of steel businesses have not recovered.
In a recent analysis, VNDirect predicted that the prolonged dismal demand of the domestic civil construction sector will considerably affect the demand for construction materials, resulting in a negative growth rate for total domestic steel demand in 2023.
In 2023, many steel companies expect public investment to boost construction demand for iron and steel. The steel industry group only records Hoa Phat trading and has a substantial market share in building steel, while the remaining enterprises mostly operate in galvanized steel sheets.
Hoa Phat’s public investment push expectations will be less calculated. In the latest study, VCBS Securities Company stated that only 10-15% of public investment consumes steel, and the disbursement pace is slow. Consumption growth will remain negative this year.
After the energy of Vietnam (EVN) raised the average retail price of energy, the steel industry’s outlook for 2023 is uncertain. Since steel production is a heavy business that needs a lot of electricity, rising electricity prices would strain steel companies.
Mirae Asset Vietnam Securities Company estimates that a 3% increase in electricity rates might affect the industry’s overall profit before tax if businesses cannot transition to consumers. steel 15%.
On this basis, VNDirect analysts expect Hoa Phat’s net profit to remain low in the first half of 2023 before positive growth returns from the third quarter due to (1) sales volume of steel rebounding from the lows of the second half of 2022; (2) improved gross profit margin as input material prices fall and inventories are forecast lower; and (3) improved net loss of financial expenses when the exchange rate loss decreases sharply. Thus, 2023-2024 net profit will rise 22.2-41.9% to VND10,366-14,711 billion.
