Revenues plummet amid global health emergency

Domestic and foreign-invested enterprises are struggling to earn profits Photo: Danh Lam

Vietnam National Petroleum Group (Petrolimex) released its first-quarter earnings highlighting significant losses of VND1.9 trillion ($81 million). This is the biggest first-quarter figure since the loss of VND1.15 trillion ($49.3 million) in the fourth quarter of 2014, which was caused by the plunge in global oil prices.

Petrolimex attributed the quarterly loss to the recently sharp decline in global oil price, which directly affects cost of goods sold and causes higher provision expenses. The country’s biggest fuel distributor has also witnessed a 10 per cent decline in sales volume due to the COVID-19 crisis. At the same time, the shrinking profits of its member companies in the transportation, gas, and petrochemical sectors continue to drag earnings down.

Meanwhile, Binh Son Refining and Petrochemical (BSR), the operator of Dung Quat Oil Refinery in the central province of Quang Ngai, announced large first-quarter losses of VND2.3 trillion ($98.1 million), equal to 80 per cent of last year’s earnings. The plunge follows the oil price collapse and the local low demand for petroleum products due to pandemic-related travel restrictions.

Likewise, PetroVietnam Oil Corporation (PV Oil), the second-largest petroleum dealer in the country, also posted a loss of VND537 billion (around $23.3 million) in the first quarter, which is even higher than last year’s profit.

Efforts to contain the outbreak have also pushed a number of foreign-invested enterprises (FIEs) into further harm.

However, it is not the first time FIEs reported losses over the course of operating in the country. Fresh data from the Vietnam White Book 2020 released recently by the General Statistics Office reveals that while 51.5 per cent of FIEs posted a positive outlook and 1.9 per cent broke even, 46.6 per cent experienced losses in 2018.

Social distancing restrictions have forced many major trade partners of Vietnam to slash orders from Vietnamese suppliers. Consequently, FIEs are among the most vulnerable. For instance, Tan Thuan Export Processing Zone in Ho Chi Minh City has 168 local and foreign enterprises with 56,000 Vietnamese employees and 585 foreign employees. So far, 33 enterprises have been hit by COVID-19, leaving almost 6,000 workers temporarily and 1,000 permanently unemployed.

Furthermore, some high-profile names that have received capital injection from foreign shareholders are also encountering choppy waters. Thien Long Group, one of the Vietnamese suppliers of stationary, recorded net loss of ($860,000) for the first time after 10 years of going public due to school closures this year.

Previously Newell Brands, Thien Long Group’s US-based shareholder, was under pressure since the company is being investigated by the US Securities and Exchange Commission regarding its sales and accounting practices.

Meanwhile Sabeco, Vietnam’s leading brewer, witnessed nearly a halving of post-tax profits in the first quarter to less than $31 million – its lowest on-year level since 2013. The heavy-handed Decree No. 100/2019/ND-CP enacted last December on administrative sanctions for road traffic and rail transport violations, coupled with the COVID-19 pandemic, have added more salt to the wound.

The contagion has also wreaked havoc on Habeco, another local brewer. The brewer reported a loss of VND96 billion ($4.1 million) in the first quarter. Habeco, which produces Hanoi Beer and Truc Bach Beer, said the loss is almost the same as its first quarter pre-tax profit last year.