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Local furniture maker for Tesco, Lidl to hoard dollars
Truong Thanh Furniture Joint-Stock Group (TTF), a Vietnamese furniture maker that supplies Tesco, Lidl and Carrefour SA, plans to hold onto US dollars as the dong weakens to help reverse a drop in 2009 profit.
The dong has slid 1.9 percent against the dollar this year as concern about inflation reemerging prompted companies to hoard dollars. Vietnam’s currency touched a record low of 17,862 per dollar on July 23, according to prices compiled by Bloomberg.
“We’re trying not to sell the dollar now since it has risen a lot against the dong so far this year,” said Tran Xuan Nam, deputy chief executive officer of Truong Thanh, Vietnam’s biggest listed furniture maker, in an interview on the sidelines of a conference in Ho Chi Minh City Friday.
A shortage of dollars may make it more difficult for importers to bring in raw materials to help support the economy and prop up growth. A weakening dong may also undermine foreign investors’ confidence in Vietnamese assets.
Nam expects the dong to weaken to 19,000 by year-end. Vietnam’s currency was at 17,818 as of 5:30 p.m. Friday in Hanoi.
Profits at Truong Thanh, based in the southern province of Binh Duong, fell to about VND9 billion (US$505,000) in the first half, down 59 percent from VND21.7 billion a year earlier.
Gains from dollar hedging may help full-year profit increase to about the same as last year, Nam said.
Lending subsidies
“If we need dong to pay local suppliers, we’ll try other ways to get it, but not by selling dollars since it may gain more, and will help us reverse a decline in profits,” Nam said. The furniture maker may increase borrowing from Vietnamese banks under a government program to subsidize lending, he said.
The government has kept its benchmark interest rate at 7 percent since February and set aside VND17 trillion ($993.30 million) to help banks extend loans at preferential rates after gross domestic product expanded 6.2 percent last year, the slowest since 1999.
Inflation is poised to start quickening, after slowing this month to a five-year low of 3.3 percent, because of increased bank lending and rising commodity prices, according to HSBC Holdings Plc. Gains in consumer prices reached 28.3 percent last year, the fastest inflation in Asia.
Nam spoke after the market closed Friday. Truong Thanh fell 3 percent to close at a six-day low of VND19,500 on the Ho Chi Minh City Stock Exchange.
thanhnien, bloomberg
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