Illustrative image (Photo: VICEM) They claimed demand has sharply declined in domestic and export markets whileinput costs have steadily risen. As a result, cement makers have been postingsignificant financial losses since the beginning of the year.
Vicem Ha Tien Cement Joint Stock Company reported a consolidated net loss of 85.6billion VND (3.6 million USD) for the period, compared to a net profit of 24.8billion VND in the same period last year.
The company said demand fell by 18.73% during the first quarter of the yearwhile input costs rose as much as 15.2 billion VND, on top of a higherfinancial cost of 18.4 billion VND due to interest rate hikes.
According to Vicem Ha Tien's management, the company was trailing behind inboth its quarterly and yearly targets and it is looking increasingly difficultto reach a revenue target of 9 trillion this year.
Similarly, Bim Son Cement Joint Stock Company reported a loss of 48.6billion VND for the period. The company stated a fall in sales revenue, coupledwith increases in financial costs and operational expenses were the maincontributors.
The company has set a target to produce up to 2.8 million tonnes of clinker and4.54 million tonnes of cement products, as well as a revenue target of 4.6trillion VND. With the first quarter being a net loss, the company said it hasplans to turn things around with the acquisition of a mining licence for the YenDuyen limestone quarry and leasing of the Tam Dien clay quarry.
According to KIS Vietnam Securities Corporation, Vietnam’s cement productionstood at 111 million tonnes per year, nearly double the domestic market demand.To make matters worse, additional cement plants are expected to becomeoperational in the near future.
In addition, the industry's major production centres, which were forced tolocate near the source materials, have created an imbalance in supply anddemand among different regions, hindering their ability to set competitiveprice and maintain stability in the domestic market.
The securities firm said domestic cement makers will likely struggle with thesame challenges for the rest of the year due to a slowing down of Vietnam’sproperty market while demand from international markets is unlikely toexperience a boost.
A report by SSI Securities Corporation said domestic demand for cement productsfell by 15% during the first months of the year while export declined by 26%with the largest buyer of Vietnamese cement – China – falling by as much as 95%.
An increase in electricity prices will likely hurt the industry's profitfurther as electricity typically accounts for 9-15% of the cost of goods sold.A 3% hike in electricity prices can result in a profit decrease as large as 13%for the industry.
Additional rounds of tariff adjustments from export markets, such as thePhilippines, are expected during the second quarter of 2023. Meanwhile,shipping costs have been projected to increase during the remaining months ofthe year./.
VNA
