Rubber firms face hard time ahead

Dong Phu Rubber JSC has yet to make public its 2022 third-quarter business results. According to the company’s latest figures, in the first eight months, the company counted $21.26 million in revenue and $4.86 million in accrued profits, up 7.6 per cent in revenue and 23.7 per cent in profit on year.

This means undergoing two-thirds of the year, Dong Phu Rubber has just fulfilled 54 per cent of its full-year revenue plan and 34.4 per cent of its full-year profit plan, as in 2022 the company aims to reach $39.47 million in revenue and $14.13 million in accrued profit.

The price of latex is anticipated to remain low

At Phuoc Hoa Rubber JSC, the company’s third-quarter financial statement shows that its post-tax profit in the first nine months soared 115 per cent on-year to touch $11.34 million, in which the figure for the third quarter just amounted to $535,650, showing a sharp decline of more than 80 per cent on-year as well as compared to the first two quarters.

The lower latex price has seen profits from sale and service provision in the third quarter down nearly $104,340 on-year, meanwhile profit from the financial business was down $1.93 million as in the same period last year.

Besides selling costs, business management costs have all gone up in 2022.

After three quarters, Phuoc Hoa Rubber has just completed more than 38 per cent of the full-year revenue plan and 36 per cent of the full-year profit plan.

Le Thanh Hung-, general director of Vietnam Rubber Industry Group, said that the group’s business was fairly good in the early months of 2022 but facing mounting hardships recently due to lower latex prices and slow consumption against rising input costs. These factors have all affected the group’s income source.

In the first nine months, it earned around $800 million in revenue and $191.6 million in profit, up 2 per cent in revenue and 4 per cent in profit on year.

With such results, the group has finalized 62 per cent of its full-year revenue target and 82.5 per cent of its full-year profit target.

Tien Phong Securities remarked that the demand for natural rubber is invariably commensurate with economic shifts globally. Accordingly, demand will soar following a strong rebound of the major economies, and vice versa.

Global rubber output rose remarkably from 2012 following a boom of rubber plantation expansion across Asia, particularly in Thailand, Vietnam, Cambodia, and Laos.

This led to oversupply for a long period of time which only broke in 2021 when the supply-demand reached a balance due to difficulties in latex exploitation and transportation amid the pandemic.

This year, when most nations have re-opened their doors post-pandemic, the oversupply of natural latex has come back.

A report by the Association of Natural Rubber Producing Countries shows that in August and September, total natural rubber volume approximated 2.7 million tonnes, up 71,000 tonnes on-year. Meanwhile, the total demand was 2.5 million tonnes.

Trading Economics data shows that the rubber latex price peaked on February 23, then slid down and bottomed out at 130 US cents per kg on September 6.

In October, the latex price saw a slight increase compared to September but is anticipated to stay in a low range going forward due to the possibility of a global economic recession. The latex price now hovers around 134 cents per kg and shows no clear signs of rebounding.

According to Tien Phong Securities, rubber firms are encountering a big threat. First, lasting and heavy rainfall has taken place during harvest season, affecting the latex output. Second is the risk associated with the Chinese market’s dwindling demand due to power shortages, as China has just undergone record hot weather and drought.

Rubber groups aim to cut China reliance As China cuts down on its purchase of rubber from Vietnam, the latter has witnessed a sharp decline in its rubber market share in China.

Worthwhile opportunity to foster new technologies in the plastics and rubber industry in Vietnam The Ninth International Plastics and Rubber Technologies and Materials Exhibition for Vietnam – Plastics & Rubber Vietnam 2022 – will officially take place between July 6 and 8 and feature hundreds of exhibitors and various inspiring activities for attendees.