The 2024 Annual General Meeting of Shareholders of HT1 on the morning of April 24, 2024 – Photo: Thanh Tú
|
The cement industry is facing its most challenging time
At the Annual General Meeting of Shareholders 2024 held this morning, April 24, Mr. Dinh Quang Dung – Chairman of the Board of Directors of Vicem Ha Tien Cement JSC (HOSE: HT1) said that 2023 was the year in which the Vietnamese cement industry faced unprecedented difficulties in history. The real estate and construction markets in the country have not shown any signs of recovery, construction works/projects are being delayed and postponed, the disbursement rate of public investment capital is slow; scarcity and price increases of building materials affect construction progress in many areas, especially in the Central and Southwest regions, leading to a sharp decline in domestic cement demand.
Cement and clinker exports face difficulties and prices have fallen sharply due to reduced import demand from China, Bangladesh, and competition with excess supply in the Middle East and Southeast Asia, as well as the Philippine government’s policy of protecting domestic production.
Domestic cement supply far exceeds demand, in 2023 cement supply was around 117.8 million tons, while domestic consumption demand was only 55.6 million tons. Total consumption of cement and clinker decreased by 11.9% year-on-year, of which domestic cement consumption decreased by 16.9%, leading to extremely fierce competition in the domestic cement market. The decline in consumption led to high inventory levels, causing some factories and production lines to reduce capacity or cease production.
Commenting on 2024, Mr. Dung said that there are still potential risks from the global economic environment and will continue to have negative impacts on the growth recovery prospects of the Vietnamese economy. Global trade growth continues its downward trend, influenced by geopolitical tensions and unpredictable factors. The recovery of the global economy is still uncertain.
The real estate market is expected to recover but has not yet been able to regain its momentum, and domestic cement demand is unlikely to grow strongly due to the slow disbursement of public investment capital in localities and the difficulties and delays in legal procedures, finance, land, and site clearance… which need time to resolve and handle. Domestic electricity prices are forecasted to continue to increase.
“This is a difficult time for the Vietnamese cement industry and Vicem Ha Tien. To overcome these difficulties, we need to have drastic, proactive, and flexible solutions; we need the solidarity, efforts of the company’s collective, and the empathy, companionship, and cooperation of shareholders, customers, and partners”, said Mr. Dung.
Conservative business plan
At the meeting, HT1 submitted to shareholders the business plan for 2024 with a total revenue of 7,032 billion VND, a slight decrease of 0.3% compared to 2023; after-tax profit of over 23 billion VND, an increase of 29%. In which, the production, consumption, and processing of cement reached over 5.6 million tons, an increase of 5.4% compared to 2023.
Speaking about the weak business situation in the past year, Mr. Luu Dinh Cuong – Member of the Board of Directors and General Director said that the cement industry has never been as difficult as it is now in the past 120 years, and most cement enterprises are suffering losses.
However, recognizing the weakness of the civil construction market in the past year, Vicem Ha Tien has focused on boosting production in the industrial segment. In 2023, the company won the bid to supply 42,000 tons of cement for the New Rural Development project in Binh Phuoc province; Long Thanh airport project, Terminal 3 of Tan Son Nhat airport, Ring Road 2 project, and Ring Road 3 of Ho Chi Minh City, as well as Eastern Expressway component projects.
In addition, the company has also launched a number of new products suitable for the current market situation in this difficult period, independent of the Vicem Ha Tien brand, to compete directly with cheap cement.
Regarding the 2024 plan, Mr. Cuong said that the real estate market is still expected to face challenges. However, with the support policies of the government and ministries and sectors with better penetration, the real estate market will develop in a positive direction, but the recovery will not be uniform, and the industrial segment and the low-cost and social housing segment are expected to grow.
The cement market is forecasted to continue to be unbalanced due to supply still exceeding demand; exports will also continue to face many challenges, putting great pressure on the domestic market, and competition among cement enterprises will increase. It is forecasted that the domestic cement industry could be the same as in 2023; expected to increase slightly by 0.5 – 0.6%; cement demand in the market that Vicem Ha Tien is participating in is forecasted to decrease by 0.4%.
Closing 2023, Vicem Ha Tien recorded a net revenue of over 7,049 billion VND, a decrease of 21%; while after-tax profit was nearly 18 billion VND, a decrease of 93% compared to the same period last year, the lowest level in the past decade of the enterprise (from 2014).
| Net income from 2013 – 2023 of HT1 |
It is impossible to predict when the cement market will recover
DISCUSSION
How much cement has HT1 supplied to Long Thanh airport?
General Director Luu Dinh Cuong: Currently, HT1 has basically participated in the main bidding packages of Long Thanh airport in the last months of 2023, including many main contractors and HT1 is supplying cement. The estimated volume that HT1 has supplied to date is about 60 thousand tons out of an estimated 850-900 thousand tons for Long Thanh airport, HT1 will supply about 50%, equivalent to about 400-500 thousand tons for the project.
Long Thanh airport will be under construction for a relatively long time, this is only the first phase. The major bidding packages in the South, each package must be bid and constructed, if the main package is won, the following packages will be easier. Currently, the selling price of cement is very competitive, just a little higher than the cost, but it still has to be supplied for the sake of the brand.
When is the cement industry expected to start a new recovery cycle?
General Director Luu Dinh Cuong: It is impossible to predict when the market will recover, it depends largely on the macroeconomic situation, the global economy…
Currently, the North has a lot of cheap clinker, does the company have a strategy to buy it?
General Director Luu Dinh Cuong: In practice, HT1 has no plans to buy cheap clinker from outside, at the present time, it still prioritizes using it at the company’s factory. However, depending on how high or low energy prices go, if there is a shortage, it will have to be purchased from outside.
The situation and trend of using cheap cement in the South? Is the company planning to increase this product in 2024? What is the expected output?
General Director Luu Dinh Cuong: Currently, HT1 is competing directly with cheap cement, but the products launched will be controlled depending on the market, currently maintaining 50 thousand tons/month, in 2024 this consumption will be around 600
