The consecutive decrease in profit makes it questionable whether domestic private Hoa Sen Group can develop the $10.6-billion Ca Na steel project in the central province of Ninh Thuan.

According to CafeBiz, steel maker Hoa Sen Group has published a bleak financial statement for the first quarter of 2018 (the second quarter of the 2017-2018 financial year ending in September this year). 

Accordingly, the firm reported VND7.66 trillion ($336.5 million) in revenue, up 23 per cent on-year. However, its net profit was only VND115 billion ($5.05 million), one-fifth of last year’s figure. The firm’s after-tax profit was only VND87 billion ($3.82 million).

The major reason for this plunge is due to the increase of expenditures, including interest payments for debts. Notably, the corporation’s short-term debt increased by VND3.6 trillion ($158.1 million) to VND16.24 trillion ($713.5 million), leading to a 70 per cent increase in interest expenses. Besides, sales and management expenses increased by 35 and 90 per cent on-year.

Along with the plunge in business results, Hoa Sen Group saw a decrease in its market share. Accordingly, its galvanised steel market share was 33.1 per cent in 2016, 7.8 per cent less than in 2012.

Furthermore, the bleak business results had a negative effect on the corporation’s share value on the stock exchange. As of 3:30 PM of the May 3 transaction session, the firm’s shares were at VND14,550, 49 per cent less than at the beginning of this year.

In the 2016-2017 financial year, Hoa Sen Group sold an estimated 1.66 million tonnes of steel with a revenue of VND26.1 trillion ($1.14 billion), signifying increases of 26 and 46 per cent, respectively.

However, the consolidated after-tax profit was VND1.33 trillion ($58.3 million), 12 per cent lower than the figure of the previous financial year.

The reason behind this was the soaring interest on the company’s massive debts. Notably, as of the end of the second quarter of last year, Hoa Sen Group bore a debt of VND12.4 trillion ($543.6 million), VND10 trillion ($438.4 million) of which was short-term debts, while its equity was only VND5 trillion ($219.2 million).

From early October 2016 to late July 2017, the group reported mobilising VND19.9 trillion ($872.4 million) in loans.

Besides, the group reported that interest payments rose to VND334 billion ($14.6 million), tripling on-year.

The consecutive decreases in profit raised concerns about the feasibility of Hoa Sen Group’s $10.6-billion Ca Na steel complex, which the group took over from the revoked Ca Na steel manufacturing complex initially invested by a Malaysian and Vietnamese joint venture.

Previously, Hoa Sen chairman Le Phuoc Vu announced that the group was ready to develop the steel project in the central province of Ninh Thuan.

Established in August 2001, Hoa Sen Group is one of the leaders in steel sheet production and trading in Vietnam and Southeast Asia. It accounted for more than 30 per cent of the domestic steel sheet market and more than 20 per cent of the steel pipe market.

The group’s products have been exported to more than 70 countries and territories around the world. Export turnover accounts for nearly 40 per cent of the group’s total revenue. Beside its home market, Hoa Sen Group also expanded to potential markets such as the Middle East, Southern Asia, Australia, America, Europe, and Africa.

VIR