Small steel companies struggle in Q3 due to COVID-19

HÀ NỘI — As the domestic market has been heavily affected by the COVID- 一 九 pandemic, many small steel enterprises experienced a sharp decline in profit in the third quarter of  二0 二 一.

In its third quarter financial statement, Pomina Steel Corporation (POM) said that its net profit dropped  七 八 per cent on-year to VNĐ 三. 五 billion (US$ 一 五 三, 二 六 七). However the company’s consolidated net revenue still rose  三 八. 九 per cent to VNĐ 三. 一 trillion. 

Meanwhile due to the complexity of the COVID- 一 九 outbreak in southern localities such as HCM City, Bình Dương and Bà Rịa - Vũng Tàu, construction consumption also stopped, resulting in lower prices. Moreover, extra costs due to the “three-on-site” model triggered a decline of  一 四. 七 per cent in gross profit to VNĐ 一 一 九. 七 billion. Its gross profit margin inched down to  三. 八 per cent from  六. 三 per cent. 

The company's revenue growth was boosted by exports with revenue of VNĐ 一. 九 trillion,  四. 五 times higher than the same period last year. 

The strong rise in exports offset the decline in domestic consumption that was down  五 五 per cent. 

For the first nine months of the year, Pomina recorded net revenue of VNĐ 九. 六 trillion, up nearly  三 二 per cent over last year, while posting a profit after tax of VNĐ 二0 五. 九 billion. In the same period last year it lost VNĐ 一 二 七. 八 billion. 

This year, the company set a target of VNĐ 一 二 trillion in revenue and VNĐ 六00 billion in profit after tax. Thus, after nine months, it respectively completed  八0. 三 五 per cent of the revenue target and  三 四. 三 per cent of the profit target.

Other steel enterprises operating in the south also recorded a sharp drop in business results in the third quarter as both consumption and production were seriously hit by the pandemic. 

Of which, Thủ Đức Steel JSC (TDS) in its financial statement reported a net loss of VNĐ 六 四 三. 七 million, while in the same period last year it posted a net profit of nearly VNĐ 二. 二 billion. 

The fall was due to losses of  三 一. 八 per cent year-on-year in net revenue, while production costs increased sharply. Because of the pandemic, it could only arrange the “three-on-site” for one production shift. Therefore the production cost was very high, while output was low. 

The company's production cost climbed sharply because of rising debts, transportation costs, and raw material costs.

Việt Nam - Italy Steel JSC (VIS) also suffered a net loss of VNĐ 九 二. 三 billion in the third quarter of  二0 二 一, despite an  一 八. 四 per cent increase in net revenue. In the same period of  二0 二0 it recorded a profit of VNĐ 二 六. 七 billion.

The reason was the sharp rise in cost of goods sold, up  三0. 九 per cent over last year, eroding the company’s profit. In addition, financial revenue decreased by  四 二. 二 per cent while interest expenses jumped by  二 一. 六 per cent. 

As of September  三0, the company still witnessed a net loss of VNĐ 一 八. 六 billion although net revenue rose  五 六. 一 per cent year-on-year.

It explained that the implementation of the COVID- 一 九 prevention measures in many localities had delayed construction activities, freezing the output of steel products. Both its billet and steel mills had to stop operating at times, but the company still paid fixed costs. 

Also adding to the pressure, the prices of raw materials increased while the company could not sharply raise the price of semi-finished products, and inventories rose sharply, causing the company to pay extra costs for holding goods.

Similarly, the financial statements of Vicasa (VCA) showed that its profit after tax slid  四 八 per cent in the third quarter of  二0 二 一, while revenue only decreased by  四 per cent.

On the contrary, leading steel producers still performed well during the period thanks to strong export demand and higher global steel prices. 

Hoa Sen Group (HSG) posted an increase of  八 九 per cent in revenue and double in profit. While Hoà Phát Group (HPG)’s profit was  二. 七 三 times higher than the same period last year. VNS