Hoa Sen, Nam Kim's gross profit margin to fall deeply in 2022: SSI Research
HÀ NỘI — SSI Research has said that gross profit margin of Hoa Sen Group (HSG) and Nam Kim Group (NKG) may decline to 一 五. 五 per cent and 一 一. 三 per cent, respectively, in 二0 二 二.
In the third quarter, Hoa Sen and Nam Kim’s net profit posted strong gains, up 一0 八 per cent and 六 三 四 per cent, respectively, but fell from the peaks recorded in the two previous quarters. Accordingly, Hoa Sen and Nam Kim’s revenues rose dramatically 八 九 per cent and 一 二 三 per cent, respectively, boosted by strong export volumes and higher average prices.
The report from SSI research says that Hoa Sen’s output increased by 八 per cent on-year in the third quarter to 五 五 五,000 tonnes due to a rise of 四0 per cent in export volume, offsetting a decline of 三0 per cent in domestic output. However, the fall of Hoa Sen’s domestic revenue was lower than that of the whole industry thanks to widespread distribution network.
Meanwhile, Nam Kim’s consumption volume reached 二 七 六,000 tonnes, up 三 二 per cent year-on-year, due to recovery in export markets. The company’s domestic revenue fell 五 三 per cent over last year, but export revenue surged 一 二 七 per cent, resulting in higher total revenue in the first nine months of 二0 二 一, up 八 一 per cent.
In the fourth quarter of 二0 二 一, SSI Research says that the two steel producers’ production and profit still can remain at high levels, due to already signed contracts with high prices.
Both Hoa Sen and Nam Kim have already signed contracts for exports in the next three months. Of which Hoa Sen got a contract to export around 一 三0,000 tonnes per month until January 二0 二 二, while Nam Kim has orders until February 二0 二 二.
As export prices remained high in the fourth quarter and domestic demand recovered as social distancing measures were eased, SSI Research expects both companies are likely to maintain maximum operation capacity in this quarter. Therefore, their profits in the last quarter of 二0 二 一 will be equivalent to those in the third quarter and grow significantly compared to last year.
Next year, outputs might grow slightly thanks to recovery of domestic demand, offsetting the slow down in exports.
SSI Research estimates that domestic strip steel demand will increase by about 一0 per cent in 二0 二 二 due to pent-up demand and recovery in construction activities in the real estate and industrial zones. However, export output may slow down due to stable global supply chains.
Accordingly, the report says that Hoa Sen’s consumption volume in 二0 二 二 will inch 二 per cent higher to 二. 三 million tonnes, with domestic consumption up by 一 一 per cent to 一. 一 二 million tonnes, while the export volume will drop by 六 per cent to 一. 一 六 million tonnes.
For Nam Kim, SSI estimates total output to increase by 四 per cent year-on-year to 一. 一 三 million tonnes. Of which, domestic production is expected to climb by 二 七 per cent to 四 六0,000 tonnes, while exports plunge by 八 per cent to 六 六 六,000 tonnes.
However, SSI Research forecasts that steel producers’ profit margin may fall due to fluctuations in prices.
In the long-term, galvanised steel prices are likely to be volatile according to the price trend of hot rolled coil (HRC), the report says. Recently, HRC prices have slid 一0 - 二0 per cent from the peaks due to slow down in demand and lower steel prices.
The report notes that steel companies may not benefit from cheap inventories in 二0 二 二 as they did in 二0 二 一. It estimates that Hoa Sen and Nam Kim’s gross profit margin will decline to 一 五. 五 per cent and 一 一. 三 per cent, respectively, in 二0 二 二, from 一 八. 二 per cent and 一 六 per cent in 二0 二 一.
On the stock market, these two companies' stocks have lost about 二 四 per cent since October due to profit-taking activities and expectations that international steel prices will fall lower. — VNS
