Workers process shrimp for export on a production line. (Photo: VNA) Hanoi (VNS/VNA) - The seafood industry grew rapidly inthe third quarter of last year, but there are signs of a slowdown in the fourthquarter and it is expected to continue this year, particularly in largemarkets.
According to experts, even though rising inflation has a negative impact onimport markets and high material costs result in declining profit, seafoodbusinesses are still supported by some positive factors.
KB Vietnam Securities Company (KBSV) said that the seafood industry has alreadyhit its peak. The securities firm expected that seafood exports are notoptimistic as higher inflation caused stagnation in purchasing demand.
Moreover, some enterprises’ profits hit peaks in 2022, which is a sign that theindustry is entering the declining cycle.
KBSV also sees the prices of raw shrimp and pangasius remaining high despiterecent declines. Although material prices are expected to fall in 2023, highfeeding costs and the faster decrease in selling prices will directly affectenterprises’ gross profits.
But there are still some positive factors that can support the seafood industryin 2023, including the reopening of Vietnam’s largest seafood export market,China, after lifting the "zero-COVID" policy, as it can boost demandat restaurants and hotels, KBSV said.
While export volumes to China are expected to increase, rising inventories atthe factories' warehouses, high output, and a bearish trend in raw fish pricesmake it difficult for Vietnam’s pangasius exports to post a breakthrough.
Vietnamese pangasius also has to compete fiercely with China’s tilapia.Therefore, KBSV believes that the reopening of China just lessens the strain ongrowth rather than causing a boom in this sector.
In contrary, the lower freight charges help businesses reduce the burdenof logistics costs and offset profit margins when they have to discountselling prices, while seafood exporters to the US market such as Vinh Hoan andSao Ta Foods (HoSE: FMC), may benefit if the USD advances.
Meanwhile, an expert from SSI Securities Corporation (SSI) said that in 2023,inflation will continue to be a challenge amid slow inventory turnover.
The securities firm forecasts the inventory will be fully cleared sometime inthe third quarter of 2023, with orders beginning to be signed by that time.
It also warns that China is a price-sensitive market, and the average sellingprice to this market is always about 40% lower than the average selling priceto the US market.
Therefore, SSI believes that revenue from the Chinese market will partiallyoffset the decline in revenue from the US and EU markets, but not enough tohelp companies recover profits in the first half of 2023. This may be due tothe high level of comparative profitability in 2022.
SSI also forecasts that the profits of pangasius companies willdecrease in 2023.
The securities firm expects that the average selling price will decrease by20-30% year-on-year in 2023 and that the cost of aquafeed will also godown.
With a slow increase in orders, there will be no shortage of supply for bothraw shrimp and fish; thereby, it is expected that the price of raw shrimp andfish will fall slightly due to weak demand until the end of the first half of2023.
SSI believes that the gross margin of seafood businesses will decrease in 2023.
With interest rates expected to remain high for the whole year, risingfinancial costs will continue to affect net profit margins, especially forcompanies with high leverage, such as I.D.I International Development &Investment Corporation (HoSE: IDI). Overall, SSI forecasts companies to postnegative earnings growth in 2023.
In fact, in 2022, the seafood industry had a very positive growth.Therefore, the decline in profit this year is due to a high comparative base.
Due to a negative business outlook and the downtrend in the stock market, theseafood industry's share prices fell 13% last year. The industry's sharesquickly fell when quarterly profit growth slowed. Shares of key companies fellduring the period, such as FMC was down 36%, and IDI was down 27%.
Seafood stock valuations could fall to the industry's historically low level of4x through the third quarter of 2023 as earnings are expected to edge down fromthe high base level for 2022, said SSI./.
