Cement firms have their thinking caps on to sustain current market oversupply.
In 2013’s first quarter, Vicem Hoang Thach Cement, based in Hai Duong province, sold nearly 700,000 tonnes of cement and around one million tonnes of clinker, a 38 per cent jump against the same period last year.
Despite these positive sales, the company fears consumption could come to a standstill in the following months unless comprehensive measures were taken.
In 2012, the company had dropped its consumption, revenue and profit targets. Accordingly, it raked in revenue of VND4.005 trillion ($190 million) against proposed VND5,002 trillion ($238 million) and profits of VND250 billion ($12 million) against a planned VND427 billion ($20.3 million).
To abate unsold stock, from 2012 the company closely controlled input material sources to be certain it is close to production demands, according to company’s deputy general director Nguyen Thi Tao.
Its concern came as cement sector production now reaches 68 million tonnes per year whereas consumption this year (including export) is forecast at around 54 million tonnes only, similar to that in 2012.
Amid hardships in consumption, most cement firms set out modest revenue and profit targets.
Vicem Hoang Thach set revenue at VND4.374 trillion ($208 million), a bit more than 2012’s actual level and profit at VND222 billion ($10.6 million) this year.
In this context, Quan Trieu Cement based in Thai Nguyen province, contemplated running at 90 per cent of designed capacity only, generating 700,000 tonnes of cement with an estimated revenue of VND570 billion ($27 million). However, its sales in the first quarter were 135,000 tonnes only, leaving the task of achieving 2013 consumption target extremely hard.
“Our company will make strides to increase sales in some pivotal areas like Hanoi, Bac Giang and Thai Nguyen to reach the set goal,” said the company’s director Tran Dang Quy.
In other case Vicem Hoang Mai, based in north-central Nghe An province, set its profit target in 2013 at around VND90 billion ($4.3 million) against VND113 billion ($5.3 million) last year. The company had incurred losses of approximately VND10 billion ($476,000) in the first quarter of 2013.
Vicem Hoang Mai has implemented wide-ranging cost-saving measures such as lowering power and calorie usage in clinker production to avoid hiking prices, an important factor to help it reach 2013 business targets, said company director Nguyen Truong Giang.
According to Ministry of Construction figures, by the end of March 2013 cement and clinker inventory had exceeded 3.1 million tonnes, of this unsold clinker was 2.3 million tonnes and that of cement was 850,000 tonnes. Cement consumption was 11 million tonnes in the first quarter, 95 per cent compared to in 2012.