Small steel companies struggle in Q3 due to COVID-19

Hanoi (VNS/VNA) - As the domestic market has been heavily affected by the COVID-19 pandemic, many small steel enterprises experienced a sharp decline in profit in the third quarter of 2021.

In its third quarter financial statement, Pomina Steel Corporation (POM) said that its net profit dropped 78 percent on-year to 3.5 billion VND (153,267 USD). However the company’s consolidated net revenue still rose 38.9 percent to 3.1 trillion VND. 

Meanwhile, due to the complexity of the COVID-19 outbreak in southern localities such as HCM City, Binh Duong and Ba Ria - Vung Tau, construction consumption also stopped, resulting in lower prices. Moreover, extra costs due to the “three-on-site” model triggered a decline of 14.7 percent in gross profit to 119.7 billion VND. Its gross profit margin inched down to 3.8 percent from 6.3 percent. 

The company's revenue growth was boosted by exports with revenue of 1.9 trillion VND, 4.5 times higher than the same period last year. 

The strong rise in exports offset the decline in domestic consumption that was down 55 percent. 

For the first nine months of the year, Pomina recorded net revenue of 9.6 trillion VND, up nearly 32 percent over last year, while posting a profit after tax of 205.9 billion VND. In the same period last year it lost 127.8 billion VND. 

This year, the company set a target of 12 trillion VND in revenue and 600 billion VND in profit after tax. Thus, after nine months, it respectively completed 80.35 percent of the revenue target and 34.3 percent of the profit target.

Other steel enterprises operating in the south also recorded a sharp drop in business results in the third quarter as both consumption and production were seriously hit by the pandemic. 

Of which, Thu Duc Steel JSC (TDS) in its financial statement reported a net loss of 643.7 million VND, while in the same period last year it posted a net profit of nearly 2.2 billion VND. 

The fall was due to losses of 31.8 percent year-on-year in net revenue, while production costs increased sharply. Because of the pandemic, it could only arrange the “three-on-site” for one production shift. Therefore the production cost was very high, while output was low. 

The company's production cost climbed sharply because of rising debts, transportation costs, and raw material costs.

Vietnam- Italy Steel JSC (VIS) also suffered a net loss of 92.3 billion VND in the third quarter of 2021, despite an 18.4 percent increase in net revenue. In the same period of 2020 it recorded a profit of 26.7 billion VND.

The reason was the sharp rise in cost of goods sold, up 30.9 percent over last year, eroding the company’s profit. In addition, financial revenue decreased by 42.2 percent while interest expenses jumped by 21.6 percent. 

As of September 30, the company still witnessed a net loss of 18.6 billion VND although net revenue rose 56.1 percent year-on-year.

It explained that the implementation of the COVID-19 prevention measures in many localities had delayed construction activities, freezing the output of steel products. Both its billet and steel mills had to stop operating at times, but the company still paid fixed costs. 

Also adding to the pressure, the prices of raw materials increased while the company could not sharply raise the price of semi-finished products, and inventories rose sharply, causing the company to pay extra costs for holding goods.

Similarly, the financial statements of Vicasa (VCA) showed that its profit after tax slid 48 percent in the third quarter of 2021, while revenue only decreased by 4 percent.

On the contrary, leading steel producers still performed well during the period thanks to strong export demand and higher global steel prices. 

Hoa Sen Group (HSG) posted an increase of 89 percent in revenue and double in profit. While Hoa Phat Group (HPG)’s profit was 2.73 times higher than the same period last year./.