HPG and Pomina overtake crumbling VNsteel

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VNsteel’s annual report for last year said the company undertook numerous works and defined an impressive strategy toward becoming one of the leading steel manufacturers in Vietnam with the lowest costs by taking advantage of its access to raw materials.

The reality is far more grim.

VNsteel sustained heavy losses in 2013 after losing several subsidiaries and associated companies. Its revenue fell below that of the previous year with seven subsidiaries earning VND71.98 billion ($3.42 million) and five subsidiaries taking in VND361.83 billion ($17.23 million).

These companies suffered heavy losses due to low business efficiency, while provisioning was also high; last year the company’s subsidiaries set aside provisions of VND400 billion ($19 million).

Additionally, some of the subsidiaries have an imbalance between long-term sources and long-term assets, leading to settlement risks in the short-term. Such companies included Thai Nguyen Iron and Steel JSC, Vnsteel Thang Long Coated Sheets Joint Stock Company, and Bac Thai Metal.

Answering questions about whether MoIT would hold Le Phu Hung responsible for VNsteel’s losses, Do Thang Hai, deputy minister of Industry and Trade, said the ministry is awaiting the exact figure on losses and an audit on the firm before making a decision.

Unlike VNsteel’s utter failure, two other private companies in Vietnam’s steel industry have showed remarkable gains in recent years.

Specifically, Hoa Phat Group (HPG) reported revenues of VND19.2 billion ($914) in 2013 with after tax profits reaching VND2 trillion ($95.7 million), a spectacular 12 per cent and 95 per cent rise, respectively, in 2012.

Moreover, the steel business and related fields were the biggest contributor to HPG’s revenues and post-tax profits, with 79 and 83 per cent, respectively.

In 2013, Pomina Steel Corporation and its subsidiaries suffered the losses but with the positive change, this corporation has interest of VND22 billion ($1 million). The company also aimed to achieve the net profit of VND200 billion ($9.5 million).

According to steel industry experts, Pomina faced difficulties in 2013 as demand has fallen sharply over the last two years. It is currently the largest steel manufacturer in Vietnam, with a capacity of 1.5 million tonnes, as well as 1.1 million tonnes of ingot construction steel.

In terms of market share, Pomina has the largest market share with 15.9 per cent in 2013 higher than HPG. Moreover, Pomina only focused on steel manufacturing industries, so it’s a big chance to rebound for Pomina.

In terms of market share, Pomina had the largest in 2013, with 15.9 per cent, well above HPG.

Pham Chi Cuong, with decades of experience in the steel industry and a former chairman of the Vietnam Steel Association (VSA), explained VNsteel’s huge losses to a VIR reporter. He said the firm’s poor management was to blame.

In fact, while the steel industry attracted many big projects on investment, VNsteel was disappeared. The project about renovation and expansion of Thai Nguyen Iron and Steel JSC catching many attentions was still left open whether it has been deployed for two years.

In fact, while the steel industry has attracted many big investment projects, VNsteel has shown very little activity.

Therefore, VNsteel’s new general director Nghiem Xuan Da, who was formerly the chief accountant of the firm, has a long road ahead of him. However, many insiders are confident in his abilities.