Hòa Phát’s 3-Year Chart Shows Recovery as Predicted by Chairman Tran Dinh Long

During the annual shareholder meeting on March 30, 2023, Mr. Tran Dinh Long - Chairman of the Board of Directors of Hoa Phat Group, stated that the toughest period for the steel industry has passed, but the pace of recovery will heavily depend on market demand. It will take some time to determine the "bottom" of the challenges and re-evaluate the forecasts made by the Chairman of Hoa Phat.

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According to the recent financial report released by Hoa Phat Corporation, the consolidated annual revenue and after-tax profit for the year 2023 reached VND 120,356 billion and VND 6,800 billion, respectively, representing a decrease of 16% and 19% compared to 2022.

Prior to the Annual General Meeting of Shareholders in 2023, which took place on March 30, 2023, Mr. Tran Dinh Long – Chairman of the Board of Directors of Hoa Phat Group, stated, “The most difficult period for the steel industry has passed, but the recovery speed heavily depends on market demand.”

Examining Hoa Phat’s performance before and after Mr. Long’s statement, it can be observed that the group has surpassed the lowest point of the challenging period in the fourth quarter of 2022 and entered a recovery cycle, with profits in 2023 increasing significantly each quarter. Particularly, the fourth quarter’s performance was more than double the third quarter’s performance, making it the best quarter of the year.

3-year chart showing the revenue, GV, gross profit, gross profit margin, and net profit margin of Hoa Phat from 2021 to 2023

In detail, in the fourth quarter of 2023, Hoa Phat’s consolidated revenue reached VND 34,925 billion, an increase of VND 8,713 billion or 33% compared to the same period last year, and an increase of 21% compared to the previous quarter. The consolidated after-tax profit reached VND 2,969 billion, an increase of VND 4,968 billion or 48% compared to the same period and an increase of VND 968 billion or 48% compared to the third quarter of 2023.

The steel segment continues to be the backbone of the group, contributing 94% and 92% to the total revenue and after-tax profit. Agriculture ranks second in terms of revenue with a 5% share, while the real estate segment contributes the second-highest profit to Hoa Phat with a 5% share of the consolidated net profit.

Hoa Phat’s 2023 consumption volume recovers quarterly

Throughout the year 2023, Hoa Phat produced 6.7 million tons of crude steel, a 10% decrease compared to 2022. The sales volume of HRC steel, construction steel, high-quality steel, and steel billet reached 6.72 million tons, a 7% decrease.

Specifically, construction steel and high-quality steel reached 3.78 million tons, an 11% decrease compared to the same period last year. The sales volume of hot-rolled coil (HRC) reached nearly 2.8 million tons, a 6% increase compared to 2022.

Although the total consumption for the year was lower than in 2022, Hoa Phat’s steel business has gradually improved throughout the year, with sales volumes showing growth each quarter and reaching the highest level in the last quarter of 2023, both in the domestic and export markets.

In terms of exports, Hoa Phat has diversified its export markets by expanding to 39 countries and territories worldwide. The total export volume has increased significantly since the second quarter of last year and continued to grow in the fourth quarter.

Hoa Phat stated that export revenue accounts for 30% of the group’s total consolidated revenue.

Regarding domestic construction steel, optimistic signals have emerged thanks to the removal of difficulties and the promotion of infrastructure investment, especially in the transportation sector. While the overall market consumption in the fourth quarter of 2023 increased by 19% compared to the previous quarter, Hoa Phat’s construction steel production increased by over 32%, raising Hoa Phat’s domestic market share from 33% in the first quarter to 38% in the fourth quarter. The market share of steel pipes also increased from 27% to 29%.

Hoa Phat’s gross profit margin improves due to increased selling prices and cost control

Despite the negative impact of China’s steel underperformance compared to expectations, with a 14.9% decrease in raw steel consumption in the fourth quarter compared to the same period last year, the steel market in Vietnam has shown recovery signs as prices for steel products have steadily increased since October, partially offsetting the prolonged price decline since the first quarter of last year.

In the fourth quarter, while Hoa Phat’s sales revenue increased by VND 6,133 billion, the cost of goods sold only increased by VND 5,406 billion, resulting in an increase in gross profit margin.

In terms of market conditions, Hoa Phat stated that overall, raw material prices did not fluctuate significantly throughout the past year. Fuel price shocks after the geopolitical crisis in 2022 gradually subsided.

Regarding operating capacity, the full operation of blast furnaces in the fourth quarter helped reduce depreciation costs in the unit cost of products compared to the previous period.

In addition, in the fourth quarter, Hoa Phat’s Dung Quat Complex achieved 100% self-sufficiency in electricity, significantly reducing energy costs in the production cost of steel products.

SOURCEcafef
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