US-China tension hampers prospects of HSG

15:07 | 06/01/2020
The heavy US tariffs on local steel products may be encouragement for local giant Hoa Sen Group's (HSG) conservative 11 per cent profit growth target.
us china tension hampers prospects of hsg
HSG sets only 11 per cent growth rate in profit

HSG has just published the documents used for the 2019-2020 fiscal year’s shareholder meeting. Accordingly, the company targets a consumption output of 1.5 million tonnes with the revenue of VND28 trillion ($1.2 billion) and the profit of VND400 billion ($17.4 million), up 11 per cent on-year.

The expectation comes from a 12.15 per cent growth in accumulated profit to VND3.4 trillion ($1.48 billion) as of early 2020. HSG will keep adjusting the company structure, including subsidiaries, factories, branches, and stores.

In the 2018-2019 fiscal year, the steel firm also set the goal of VND34 trillion ($14.78 billion) in revenue and VND500 billion ($21.74 million) in profit. However, it only got the turnover of VND28.035 trillion ($12.2 billion) and the profit of VND361 billion ($15.7 million), equivalent to 89 and 72 per cent of the plan.

During the period hundreds of branches have been dissolved to restructure the goods distributor system. HSG’s business strategy is to maintain only one branch in every city or province and turn the remaining branches into stores.

As of the end of 2019, the group had 536 distributors, up 45 against 2018. The numbers include 55 branches across the provinces, 10 storage houses, and 471 stores.

Despite the conservative business plan, the document also showed a positive outlook in easing the debt burden. Over the past year, HSG cut 17 per cent in financial costs, 14 per cent in sales costs, and 30 per cent in management costs.

By late September 2019, the group recorded VND6.7 trillion ($291.3 million) in bank loans and financial debts, down nearly VND4.2 trillion ($182.6 million) compared to the beginning of the fiscal year.

Currently, the group still occupied the largest market share with 30.6 per cent as of the end of 2019, despite a fallback since 2018’s 34.3 per cent. The group's share in the steel pipe market also fell to 15 per cent from 17.3 per cent.

Under the strains of the US-China trade war, the United States Department of Commerce in late 2019 levied a tariff of 456 per cent on a series of local steel goods the material of which originates from South Korea and Taiwan and then undergo simple processing in Vietnam before being exported to the US, according to Reuters.

By Van Anh

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