Nam Kim Steel: Q1 Revenue Increases, Plans New Plant
April 26, 2024
On April 26, 2024, Nam Kim Steel Corporation (stock code NKG) held its Annual General Meeting of Shareholders for 2024. The company approved a plan for total revenue of 21,000 billion VND, an increase of nearly 13%, and pre-tax profit of 420 billion VND, a rise of 137% compared to 2023. The total planned production volume is 1 million tons, an increase of 16%.
Market Outlook for 2024
Nam Kim Steel anticipates that the steel industry will continue to recover in 2024, but growth will remain modest, especially with the US Federal Reserve (Fed) maintaining high interest rates. Domestic demand remains uncertain, while the real estate market requires time to absorb government support policies. The company projects that the path to recovery in 2024 will be met with challenges.
Nam Kim Steel is actively researching color-coated and alloy products, focusing on product lines that can serve home appliance manufacturing, mechanical parts, and precision engineering, catering to both existing plants and the future Nam Kim Phu My Sheet Plant.
Q1 2024 Earnings Reach 200 Billion VND
Management reported at the meeting that revenue in Q1 2024 reached 5,300 billion VND, with pre-tax profit of 200 billion VND. These figures represent an improvement over the 4,380 billion VND revenue and pre-tax loss of over 49 billion VND in Q1 2023.
Dividend Distribution Plan
The company will not declare dividends for 2023 and 2024. The remaining profits after allocating funds will be used to support production and business operations.
Share Issuance Plans
Nam Kim Steel plans to issue 2.5 million shares under its Employee Stock Ownership Plan (ESOP), representing 0.95% of total outstanding shares, at a price of 10,000 VND per share. The company will also issue bonus shares at a ratio of 20%, equivalent to issuing approximately 52.7 million shares.
Additionally, Nam Kim Steel plans to offer over 131.6 million shares to existing shareholders at a ratio of 50%. This means shareholders owning 2 shares will be entitled to purchase 1 new share at 12,000 VND per share. The projected proceeds of 1,579.7 billion VND will be used to invest in the Nam Kim Phu My Sheet Plant Company, Ltd. to develop the Nam Kim Phu My Sheet Steel Factory project.
Through these various methods, the company will issue a maximum of 187 million shares, increasing its capital to 4,500 billion VND.
TT Capital Chairman Nominated as Board Member
Nguyen Trung Tin (born 1979) was elected as a member of the Board of Directors, while Dang Van Hoa (born 1990) joined the Supervisory Board.
Nguyen Trung Tin is currently the Chairman of the Board of Directors of TT Capital Investment Corporation and the General Director of Phuc Loc Khang Investment Corporation. He previously spent 10 years with Haxaco Green Car Service Corporation. Tin was also Vice Chairman and Deputy General Director of An Gia Real Estate Development and Investment Corporation (2012-2021).
Shareholder Meeting Discussion
1. What is the percentage of raw material imports from China?
Chairman Ho Minh Quang: The percentage of raw materials imported from China and India is approximately 20-25%, meaning that the company’s supply is not entirely dependent on these countries.
2. What is the forecast for future pricing? How long will the new plant take to reach full capacity?
Pricing will depend on the input costs of raw materials. The company exports a substantial amount to the EU and North America and will continue to maintain these markets. Therefore, exchange rate fluctuations have a limited impact on the company and may even benefit Nam Kim Steel if the VND weakens against the USD. Long-term, the company will develop strategies to manage the risk of USD/VND exchange rate changes.
The Nam Kim Phu My Sheet Steel Factory project has received necessary permits. It will have a total investment capital of 4,500 billion VND (30% equity investment and 70% debt financing). The project will include a 350,000-ton/year galvanizing line, two 300,000-ton/year and 150,000-ton/year aluminum-zinc alloy coating lines.
The total investment in the first phase is 4,500 billion VND. The company has contributed 500 billion VND to the project, which is expected to start construction in Q2. Production is planned to begin in Q4 2025 – Q1 2026, gradually reaching full capacity by 2027.
The new products are strategically important and of higher quality than current market offerings. Once the new plant is operational, the company’s total production capacity will increase to 1.6 million tons per year.
3. What is Nam Kim Steel’s potential and position after the new plant becomes operational?
Chairman Ho Minh Quang: Nam Kim Steel is the industry leader in the coating sector. The new plant is not intended to expand market share but to provide better quality for consumers, creating increased value.
General Director Vo Hoang Vu: The new plant investment allows Nam Kim Steel to focus on developing the industry value chain. We continue to see opportunities in both domestic and export markets.
The company will select technologies, calculate the product mix, and develop output products to serve industries such as mechanical components, consumer electronics, and even some automotive accessories.
Currently, coating companies focus on construction industry products. Nam Kim Steel, however, is targeting a new segment that I believe only one or two foreign companies in Vietnam are currently pursuing.
4. What are the estimated results for Q1?
Chairman Ho Minh Quang: Revenue in Q1 2024 reached 5,300 billion VND, with pre-tax profit of 200 billion VND. These figures represent an improvement over the 4,380 billion VND revenue and pre-tax loss of over 49 billion VND in Q1 2023.
Regarding sales volume, Vo Hoang Vu reported that the company sold 250,000 tons in the quarter. Sales are expected to increase by 10% in Q2 (approximately 275,000 tons). In 2024, Nam Kim Steel plans to sell 1 million tons of steel products.
5. How does the company view the potential dilutive effect of the capital increase on EPS and ROE?
Vo Hoang Vu: The capital increase is intended to support investment needs, leading to corresponding profit. According to regulations, if the issuance does not achieve a 70% success rate, it must be canceled. Therefore, the Board of Directors has presented shareholders with the option to find alternative allocation methods if the issuance is not fully subscribed.
6. Will Nam Kim Steel participate in public works projects, such as roads, highways, or Long Thanh Airport?
Vo Hoang Vu: The company’s primary focus is on specialized coated steel products, so its involvement in road and highway projects is limited. Regarding the Long Thanh Airport project, we are one of the shortlisted bidders and expect to participate with a significant share.
