Concrete industry’s cement feet

The shutdown of Ha Tu Cement, based in northern Quang Ninh province on May 15, illustrates the severity of the situation.

 “Other cement firms might follow the footsteps of Ha Tu Cement if there were no positive improvements in the cement market,” warned Nguyen Van Thien, chairman of Vietnam Cement Association.  Meanwhile, foreign cement firms are said to be seeking partnership deals in the struggling sector.

In the first quarter of 2013, Vicem But Son Cement Joint Stock Company (BTS), a member of state cement conglomerate Vicem, incurred losses amounting to VND45.5 billion ($2.1 million) compared to over VND2 billion ($96,000) profits during the same quarter one year ago.

Its sales revenue in the period slid to VND625 billion ($29.7 million) from over VND639 billion ($30.4 million) in 2012’s first quarter.

Lower prices and a drop in both cement and clinker consumption were to blame on the company’s lower revenue figures in parallel to 13 per cent hike in the capital cost due to surging input expenses.

Besides, higher commission costs (up VND15.2 billion or $724,000) and cement processing expenses for other units (up VND1.8 billion or $86,000) in the first quarter had cast a dent on the company’s profits, according to a company source.

By the end of March 2013, BTS’ short-term debt approximated VND2.239 trillion ($106 million), nearly triple short-term assets. Due to poor business performance with negative after-tax profits last year and the first quarter this year BTS stock was put under alert by the Hanoi Stock Exchange.

Another Vicem member, Vicem Hoang Mai Cement (HOM) also counted losses of around VND10 billion ($47,600) in the first quarter this year.

This year, the company set to achieve VND90 billion ($4.3 million) in after-tax profits only though it posted VND113 million ($5.4 million) after-tax profit last year.

According to HOM’s general director Nguyen Truong Giang, the company losses in the first quarter were attributed to sliding cement consumption (down 17.2 per cent) and escalating input costs (particularly fuel and electricity costs). 

Vinacomin-Viet Bac Mining Industry Holding Corporation (VVMI) director Bui Tran Dong said in 2012 VVMI struggled for fulfillment of production and business targets.

“The situation even got worse in the first four months this year,” said Dong.

The cement sector’s current production capacity is around 70 million tonnes whereas cement consumption in 2013 (including export) is forecast to at most tantamount to 2012’s level of 55 million tonnes.

Market oversupply and low consumption has put scores of cement firms in a fix as stated above. 

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