Steel producers make provisions for devaluation in inventory as prices cool down

After increasing inventories at the beginning of 2021 to take advantage of price differences to maximise profits, the strategy has now hit steel producers hard as global steel prices plunged at the end of the year.

The first two steel companies have announced their financial statements for the fourth quarter of 2021, showing less-than-positive results.

SMC Trading Investment JSC (SMC) said that in the last quarter of 2021, the company recorded a net revenue increase of 37.3 per cent on-year to VND6.1 trillion (US$271.5 million), but profit after tax fell 78.7 per cent to VND34.07 billion. Notably, the gross profit margin decreased from 7.6 per cent to only 2.1 per cent.

In 2021, the company’s net revenue edged up 35.4 per cent to VND21.3 trillion, with profit after tax up by 184.9 per cent to VND903.06 billion.

In the first six months of 2021, when steel prices rose sharply, SMC reported a gross profit margin of 10.2 per cent, much higher than in the fourth quarter of 2021.

Meanwhile, in its fourth-quarter results of 2021, Thai Nguyen Iron and Steel JSC (TIS) showed that its net revenue rose 34.1 per cent year-on-year to VND3.2 trillion with profits after tax at VND9.63 billion, after posting a loss of VND6.74 in the same period of 2020.