According to steelonline.vn, since mid-May constructive steel prices in the country have adjusted 15-times, decreasing by around $282.6 per tonne from the peak amount, equivalent to 25-30 per cent. The decrease in local steel prices is the same as the decline in the world's prices, due to a lot of inventory.
This is affecting the profit margin of steel businesses, including Hoa Phat Group. Business results in the second quarter of HPG revealed a lot of difficulties.
Despite the consolidated net revenues of $1.63 billion, which went up 6.5 per cent on-year, consolidated gross profit dropped by 43 per cent in value, and its margin decreased by 17.5 per cent as compared to 32.7 per cent last year, which is the lowest figure since the second quarter of 2019. This pulled after-tax profits down by 58.7 per cent to $174.9 million.
As of end-June, the value of Hoa Phat's inventory went up to $2.5 billion, up 36.6 per cent of the beginning of the year. This is the second-largest amount on HPG's asset structure.
Due to a lot of inventory and the drop in prices during the last months, the business results of HPG in the third quarter are forecast not to be bright.
Based on the low price of steel, Hoa Phat will have to use reserve funds and discount inventory, if the prices stay as low as now until the end of the quarter.
Additionally, the adjustment of monetary policies and the increase of the interest rate of the Fed to curb inflation have enabled the US dollar value to rise. Thus, HPG had to suffer further losses from the exchange rate difference and the revaluation of foreign currency debt items.
