(HSV VIETNAM GROUP) – With the low base level of the same period in 2023 and the recovery of consumption demand, the steel industry continues to have an impressive recovery in the second quarter of 2024, reflected in the business results of leading enterprises in the industry. However, the dark point is that there are still loss-making companies.
Hoa Phat Group (code HPG) had the highest profit quarter in the past 8 quarters, thanks to increased revenue and consumption output. Specifically, the business brought in VND 39,556 billion in revenue in the second quarter of 2024, an increase of 34% over the same period last year. This is a revenue level that is only lower than the fourth quarter of 2021 and the first quarter of 2022. Gross profit margin also improved, from 10.8% in the second quarter of 2023 to 13.2%.
While construction steel and HRC prices both decreased this quarter, the group's revenue growth came from increased construction steel consumption. Specifically, Hoa Phat's construction steel consumption output in the second quarter of 2024 reached 1.27 million tons, an increase of 33% compared to the previous quarter (956,000 tons).
Increased revenue is the main driver helping HPG's profit after tax reach VND 3,320 billion, an increase of 129% compared to the second quarter of 2023. This is also Hoa Phat's highest profitable quarter since the third quarter of 2022.
Achieving the most impressive growth is Hoa Sen Group (code HSG). In the third quarter of the 2023-2024 fiscal year (from April 1, 2024 to June 30, 2024), the company brought in revenue of VND 10,840 billion, an increase of more than 25% over the same period last year. Gross profit reached 1,337 billion VND - an increase of 50%, corresponding to a gross profit margin of 12.3% (compared to the same period reaching 10.3%). Minus expenses, Hoa Sen Group achieved 273 billion VND in profit after tax, nearly 20 times higher than the same period last year.
Nam Kim Steel (code NKG) brought in revenue of VND 5,661 billion in the three months of the second quarter, up 3% over the same period last year. Gross profit reached 512 billion VND, equivalent to a gross profit margin of 9% - equivalent to the same period.
Thanks to financial revenue skyrocketing 124% (reaching 114 billion VND) while total costs were reduced, NKG's profit after tax was 220 billion VND, an increase of 76% over the same period last year. This is also the company's highest profit in the past 2 years, since the second quarter of 2022.
Vietnam Steel Corporation - Joint Stock Company (VNSteel, code TVN) recorded revenue of 10,077 billion VND, an increase of 50% over the same period last year; Profit after tax was 130 billion VND, compared to the same period, the loss was 49 billion VND. Gross profit margin improved from 1.3% to 3.2%.
TVN's conversion of losses into profits, in addition to increased revenue and improved gross profit margin, is also thanks to the profit of more than 50 billion VND from joint ventures and affiliates, while in the same period this item had a heavy loss of 374 billion VND.
At the top, businesses show more differentiation. On the positive side, Thong Nhat Steel Sheet (code TNS) has an after-tax profit of more than 13 billion VND in the second quarter of 2024, while in the same period the loss was nearly 1.3 billion VND. This is also the company's highest profit since the fourth quarter of 2017. Viet Duc Steel (code VGS) also had an after-tax profit of more than 12 billion VND, up 20% over the same period.
Me Lin Steel (code MEL) recorded a 75% increase in profit (reaching 1.9 billion VND); Central Metal Joint Stock Company (code KMT) increased by 1.7% (reaching 875.3 million VND); Nha Be Steel (code TNB) profit 311.3 million VND (same period loss 2.5 billion VND)…
In contrast, Thai Nguyen Iron and Steel (Tisco, code TIS) had an after-tax loss of 95 million VND, an improvement over the same period last year's loss of 117 billion VND. In the second quarter, the company's net revenue reached 3,071 billion VND, an increase of 61% over the same period, gross profit margin of 3.1% also improved over the same period, operating below cost price. However, because costs are still high, the company reported a loss.
Tien Len Steel (code TLH) recorded net revenue of 1,634 billion VND, up nearly 33% over the same period last year. However, the sharp increase in cost of capital caused the company to have a gross loss of more than 66 billion VND, while the same period last year's profit was 38 billion VND. Excluding expenses, Tien Len Steel's after-tax loss was more than 153 billion VND, compared with a profit of more than 5 billion VND in the same period last year.
SMC Trading Investment Joint Stock Company (code SMC) also operates below cost price when net revenue reached 2,240 billion VND, while cost of sales reached 2,307 billion VND. Although there is more than 170 billion VND from selling the headquarters and no longer making as much provision for bad debt as before, minus costs, the company still has an after-tax loss of 114 billion VND, compared to a profit of 21 billion VND in the second quarter of 2023.
In general, most of the above steel industry enterprises recorded strong revenue growth compared to the same period last year, showing the recovery of consumption demand. However, whether there is a profit or a loss depends on how the business manages input materials as well as costs.
Many analysis units agree that the construction materials industry in general and the steel industry in particular have basically overcome the difficult period and are waiting for motivation to transform.
In the steel industry outlook report published in mid-July, KB Securities Vietnam (KBSV) said that domestic consumption output will recover stronger when the residential real estate sector becomes more active from the second half of 2024 onwards, with the number of newly licensed projects increasing.
KBSV expects that the entire steel industry's consumption output in 2024 - 2025 will increase by 15% and 8% over the same period. In addition, domestic manufacturing enterprises have room to compete with imported steel thanks to the difference in selling price of domestic construction steel compared to imported steel, which has decreased significantly compared to 2023 and is still on a downward trend. At the same time, the decline in input costs in the first half of 2024 will create space for manufacturers to adjust selling prices to ensure consumption output.
In the outlook report for the second half of 2024 released in early July, MB Securities (MBS) forecast that steel companies' profits could grow by 40% in 2024 thanks to the following factors:
Increased housing supply and infrastructure contributed to both prices and volumes, making it possible for revenues to increase by 25% thanks to output and selling prices growing by 9% and 8% respectively.
Gross profit margin recovered to 13% (compared to about 8% in 2023) thanks to output prices increasing by 8% over the same period and raw materials (ore, coal) decreasing by about 4% due to stable supply.
The provision ratio will cool down due to rising output prices; Financial costs decreased by 30% in the context of exchange rate pressure and cooling interest costs.
Ha Diem HSV