Inside a factory of VNSTEEL–Thu Duc Steel JSC (TDS). (Photo: thepthuduc.com.vn) In the second quarter of this year, VNSTEEL–Thu Duc Steel JSC (TDS) recordednet revenue of 358 billion VND (15.3 million USD). It suffered a net loss ofnearly 2 billion VND, down more than 45% over the same period last year.
According to the company, the output price decreased continuouslyfrom the beginning of the second quarter until now, along with a decrease insteel consumption.
This caused the company to stop production, and the high price of steelinventory from previous months made the situation worse. This was in contrastto the second quarter of 2021 when there were supply chain disruptions andstrong demand created conditions for high steel prices.
Slow consumption also affected cash flow in Q2, along with credit tighteningand high-interest rates over the same period of last year also made financialcosts, especially loan interest, increase sharply. During the quarter,financial expenses jumped from 85 million VND to 2.7 billion VND. The positivepoint was the reduction in selling and administrative expenses.
The company is expected to continue facing difficulties in the future as steelprices are still declining.
At the end of the second quarter of 2022, TDS recorded 498 billion VND ofinventory, of which the provision for devaluation was about 7.5 billion VND.The company's short-term debt also increased from 219 billion VND to 307billion VND.
SMC Trading Investment JSC (SMC) recorded net revenue of 6.62 trillion VND inQ2, up 11% over the same period. However, net profit dropped sharply by 90%, to47 billion VND.
As a company specialising in steel trading, the falling steel price has dealt ahuge blow to SMC's business. In the second quarter of this year, the profitmargin of the company was only 3.1%, while in the same period last year thefigure was 11.6%.
Financial expenses in the period increased nearly nine times, to 110 billionVND, half of which was interest expense. Selling expenses also increasedsharply to 56 billion VND.
In the first 6 months of this year, SMC recorded revenue of 13.25 trillion VND,up 20% over the same period last year. Meanwhile, net profit decreased by 82%to 127 billion VND.
At the end of the second quarter of 2022, the company still had VNĐ3.37trillion of inventory, a sharp increase from 2.54 trillion VND at the beginningof the year. In which, SMC's provision for devaluation of inventories was morethan 170 billion VND.
Profit decline also occurred at other enterprises such as Me Linh Steel JointStock Company (MEL), Cao Bang Cast Iron And Steel Joint Stock Company (CBI) andThai Nguyen Iron and Steel Joint Stock Company (TIS) as they saw their netprofits down by 90% over the same period last year.
According to a report from SSI Research, steel consumption has slowed down inrecent months, with domestic finished steel consumption in April-May 2022dropping about 32% year on year.
Steel prices also plummeted rapidly, in which construction steel prices haveexperienced nine consecutive declines in the past month, to 16 million VND pertonne. The price of the hot rolled coil (HRC) in Vietnam also plummeted to 650USD per tonne.
The inventories of the above steel enterprises were still quite high at the endof the second quarter of 2022. TIS is holding more than 2 trillion VND ofinventory, a sharp increase of 43% over the same period last year, while MELand CBI decreased slightly to 463 billion VND and 396 billion VND,respectively./.
VNA
