Hanoi (VNS/VNA) - The VietnamRubber Group JSC (VRG) plans to invest in tyre and tube production via mergersand acquisitions (M&As) over affiliate companies of the Vietnam ChemicalGroup (Vinachem).

In a recent meeting with the Committee forManagement of State Capital at Enterprises (CMSC), GVR said that they werefocusing on restructuring the business, increasing investment in the rubberindustry, adding that the M&As would help close the value chain of rubbertyre and tube products.

Currently, GVR is focusing on five mainactivities of planting and processing rubber latex, processing rubberwood,processing rubber industrial products, running industrial parks on rubbercultivation land and high-tech agriculture.

In the natural rubber segment, GVR ismanaging more than 400,000ha of rubber with an average yield of 1.56 tonnes perha in 2019. However, this business has been on a downward trend in recent yearsdue to low selling prices.

The impact of the COVID-19 pandemic furtherhurts the demand for rubber, resulting in lower output.

Therefore, expanding tyre and tube productioncan help the group earn more. In fact, the group started to penetrate thissegment in 2017, when it started to partner with The Southern Rubber IndustryJoint Stock Company (Casumina or CSM) to produce VRG-branded rubber tyres.

Vinachem is a multidisciplinary conglomerateinvolved in chemical production. As for the tyre segment, Vinachem is a majorplayer in the industry with four-member units producing rubber tyres, namely DaNang Rubber (DRC), Sao Vang Rubber (SRC), Southern Rubber Industry (CSM) andInoue Rubber Vietnam Co Ltd.

In 2019, there were 9.4 million units ofbicycle tyres sold, 6.48 million units of motorcycle tyres sold and 3.43million units of car tyres sold.

DRC has a slightly higher production scalecompared to other units with the output of tires and tubes of all kindsaccounting for about one-third of the whole group.

In the first half of this year, DRC recordednet revenue down 17 percent to 1.59 trillion VND (68.7 million USD). Pre-taxprofit reached 107 billion VND, down 3 percent compared to the same period in2019 and fulfilled 38 percent of the yearly plan.

According to the company, rubber tyre exportshad improved after being hit hard in the second quarter by COVID-19. Exportsales in July and August were both estimated at over 6 million USD, higher thanthe average of 4.4 million USD per month in the second quarter.

A full-steel radial tyre factory with acapacity of 600,000 tyres per year has come into operation, doubling thecapacity of rubber tyre products of DRC.

Regarding CSM and SRC, after difficultperiods in 2017-2018, business results improved in 2019 and early 2020.

CSM's pre-tax profit reached nearly 40billion VND in the first half of this year, 4 times higher than the same periodlast year and fulfilling 27 percent of the yearly plan.

In H1, CSM recorded output of 18.14million units for motorcycle tubes, 3.73 million units for bicycle tubes, 3.29million units for motorcycle tyres, 2.46 million for bicycle tyres, and nearly2 million units for all kinds of car tyres.  

SRC reported pre-tax profit of more than 33billion VND in the first half this year, up 88 percent over the same period in2019 and exceeding 58 percent of the yearly plan.

The company reported output of more than 15.9million units for all kinds of tyres and tubes, of which motorcycle tubesaccounted for 6.77 million units, bicycle tubes 4.27 million units, bicycletyres 3.24 million units, motorcycle tyres 1.1 million units and car tyres286,364 units.

In early 2018, the Prime Minister issued adecision to restructure Vinachem during the 2017-2020 period. Accordingly, thisgroup would have to divest capital in all three tyre companies to below 51 percent.

At DRC, Vinachem once filed an auction of17.2 million shares with a starting price of 25,170 VND per share in May 2019.However, the auction was cancelled because no investors registered to purchasethe shares. Vinachem is still holding nearly 60 million DRC shares, equivalentto 50.51 percent of charter capital.

In contrast, at SRC, Vinachem also held anauction of 4.2 million shares with the starting price of 46,452 VND per shareand attracted four investors to buy all shares. After the divestment,Vinachem still holds 36 percent of charter capital.

Vinachem still holds 51 percent of capital ofCSM and 24 percent of capital in Inoue Rubber Vietnam Co Ltd./.