Business Situation Of Major Steel Enterprises
2020 was a flourishing year for Vietnam steel industry despite the global market still in a bleak situation. Big steel enterprises such as Hoa Phat, Hoa Sen and Nam Kim simultaneously reported large profits. Hoa Phat also joined the top 50 biggest steel enterprises in the world.
In 2021, Vietnam Steel Industry was forecasted to keep the uptrend motivated. According to the Vietnam Steel Association, global demand for steel increased by 4.1 % due to the economic recovery post-pandemic in the developed countries. Domestic production and consumption in early 2021 increased 8% and 10% respectively. February is the only month the demand declined due to Tet Holiday. The biggest factor which drives the supply and demand is public investment from the government.
There are five biggest steel enterprises together shares Vietnam Steel market which is Hoa Phat (HPG), Hoa Sen (HSG), Minh Ngoc Steel, Viet Duc Steel and Ton Nam Kim (NKG). Since the steel price spiked up, steel enterprises that actively controlled the steel billet supply and had abundant inventory would be the most profitable.
Source: VIRAC, VSA
Hoa Phat (HPG) achieved large profit in the First Quarter
Hoa Phat has been the biggest steel enterprise although it operates in multi-industry. This is one of the most profitable enterprises since they have actively afforded the material supply.
Up to now, Hoa Phat is the only one who succeeded in closed interlock blast furnace technology from iron ore to complete product, which is called produce from the source. Hoa Phat Iron and Steel Complex in Kinh Mon, Hai Duong is built on a 132-hectare area, including a closed complex aimed to optimize the supply-demand chain in every stage of the metallurgical cycle. This complex is evaluated as the most synchronized, developed and largest scale in Vietnam.
Consumption and market share of HPG increased due to the advantages of selling price and logistics cost. Since the Dung Quat factory went into operation, the market share in 2020 of HPG in the Southern Market has increased 7% and in the Central Region increased by 14%. HPG’s market share is predicted to continue to extend.
In terms of Revenue Structure, the steel production and trading segment brought in more than 28,800 billion VND, accounted for more than 92%, and increased 23% compared with the same period last year. Agriculture brought in nearly 2,250 billion VND and real estate only accounted for a very small part which is 125 billion VND. Remarkably, the steel segment alone brought in 6,666 billion VND out of a 7,000 billion VND profit of a whole quarter for the company.
Nam Kim Steel (NKG) recorded 53% of profit target
Nam Kim Steel recently announced financial report for the first quarter of 2021 with a revenue of 4,861 billion VND which doubled the figure of 2,459 billion VND in the same period in 2020. In the first quarter, the company produced 244,301 tons and sold 240,037 tons. The export volume reached a record high of 151.992 tons with the main targeted markets being the European countries and America. Deducing the capital cost, NKG gained a total of 610 billion VND profit, 3 times higher than the same period last year. Gross profits margin equivalent to 12.5%, increased significantly from 8.6% in the first quarter in 2020.
Moreover, by reducing interest expense and management cost, NKG gained nearly 319 billion net profits, 7.7 times higher than the same period. This is the record profit quarterly of the company. In 2021, NKG set a new target revenue of 16,000 billion VND, the profit after tax is 600 billion VND, an increase of 38% and 200% in turn compared with the last year. Compared with the new target, in the first quarter of 2021, NKG has already achieved 30% of the revenue target and 53% of the profit target.
After Tax profit of Hoa Sen Enterprise and Tien Len Steel increased significantly
Similar to Hoa Phat, Hoa Sen is a multi-business enterprise. The major steel product of the company is tole. Moreover, the period from January 1 to March 30, 2021 is the second quarter of Hoa Sen’s financial year (starting from October 1 to September 30 next year). Last quarter’s net revenue was 10,846 billion VND, an increase of nearly 88% than the same period last year. Profit after tax also 5 times higher, up to 1,035 billion VND. Total profit after tax in the first 2 quarters of the fiscal year 2020-2021 up to 1,607 billion VND.
In the financial report of the first quarter of 2021, Tien Len Steel reached a gross revenue of 979 billion VND. The company has minimized the costs, plus, the joint and the associate company also brought in more than 10 billion VND (there are only 1 billion dongs last period) lead to profit after tax reach 120 billion VND, 30 times more than the first quarter of 2020 (4 billion VND). This is the third quarter in a row, the company profit increased compared with the previous quarter. In 2021, Tien Len Steel set a target of 5,000 billion revenue, 250 billion dongs profit after tax. Steel production and consumption reach 400,000 tons. TLT stock is also one of the hot stocks in the market with millions of shares matched every session. TLH also doubled from the beginning of 2021 until now, currently trading around 15,350 VND per stock.