Profit of many steel companies is inversely proportional to revenue

This is also evidenced by the positive growth of steel companies. However, profits fell sharply, even companies have reported losses.

 

Survey of business results in Q3 / 2018 of 14 listed steel companies on the stock market showed total revenue reached 48,018 billion (up 11% over the same period in 2017). However, after tax profit fell to 24.5% to VND2,534 billion. The main reason for this situation is that enterprises do not maintain the gross profit margin.

 

For example, in the case of Hoa Sen Group, the gross profit margin of this enterprise in the third quarter of 2018 is only 8.44%, much lower than the figure of 16.3% achieved in the same period of 2017. This As a result, the gross profit of the third quarter of the year was 36% lower than that of the third quarter of 2017, only reaching VND 723 billion, despite revenue growth of 23.4% to VND8,565 billion. Meanwhile, the interest expense burden continued to increase (from VND 152 billion to VND 234 billion) which led to a loss of 102 billion dong in Q3 / 2018, a sharp decline compared to the profit of more than 200 billion dong in the same period. last year.

 

In another case, Nam Kim Steel Joint Stock Company, revenue in the third quarter of 2018 reached VND 3,470 billion, up 7.5% over the same period of 2017, while cost of goods increased by 16%, resulting in gross profit from Sales and services only equal one third of the same period in 2017, reaching 116 billion.

 

 

 

The high cost of capital, after deducting the expenses, Pomina Steel had only after tax profit of more than VND 27 billion in the third quarter of this year, a decrease of 89% compared to the profit achieved in the third quarter. Last. In the first nine months of 2018, Pomina's net profit was nearly 401 billion dong, down 22 percent from the same period last year.

 

The same story takes place in many steel companies such as Viet Y Steel Corporation, Thai Nguyen Iron and Steel Joint Stock Company.

 

In the third quarter of 2018, Hoa Phat Group alone maintained its gross profit margin and recorded a 13% increase in net profit to VND2,408 billion. In the first nine months, Hoa Phat reached 41.988 trillion dong in revenue and 6,833 billion dong in after tax profit, up 24 percent and 22 percent year-on-year.

 

According to a financial expert, fundamentally, steel and plated steel products are of comparable quality among companies, so competition usually follows the low cost strategy. Accordingly, the companies with the largest market share and the lowest cost, the broad distribution channel will gain competitive advantage over competitors with high costs.

 

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