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Low material costs give sharp lift to corporate profits
Share prices of some listed companies have increased sharply on the back of their hefty second-quarter earnings that resulted from low material costs.
Da Nang Rubber Joint Stock Co. (DRC) announced last month its first-half revenue rose by a moderate 16 percent year-on-year to VND884 billion, but its profit surged 370 percent to VND174 billion.
Even the rubber producer’s board of directors didn’t expect such a significant increase as their profit target this year is a mere VND58 billion.
“The declines in oil and rubber prices helped increase our profit margins,” Bloomberg cited financial department deputy head Tran Thi Ly Le as saying.
The company domestically bought a huge amount of natural rubber at low prices at the end of last year and early this year, as oil prices had slumped with the global financial crisis.
The rubber manufacturer gained good profits later following rallies in oil prices lifting the rubber price.
The company also reported “significant increases” in the domestic sale of tires for heavy trucks, Le said. First-half income was almost five times higher than the same period last year, according to the company’s reports.
Da Nang Rubber expects net income of VND130 billion in the second half, raising its full-year target to VND305 billion, almost six times higher than the previous projection, according to Le.
Steel maker Hoa Sen Group (HSG) similarly purchased a large amount of steel at sharply reduced prices early this year when the steel industry was hit hard by the global recession.
The group lost VND116 billion in the last three months of 2008. But construction demand has increased recently since the economy showed signs of recovering, boosting Hoa Sen’s sales and profits strongly.
Its income in the second quarter rose nearly sevenfold from the first quarter to VND108 billion on higher sales, according to Bloomberg. The group did not give comparative figures for last year.
June’s sales climbed to 18,200 tons of steel products, up more than 26 percent from May.
Consequently, the two companies listing on the Ho Chi Minh Stock Exchange became investors’ top picks. Heavy buying boosted the two stocks, with DRC rising 16.5 percent and HSG advancing 17 percent this month.
However, some brokers warned investors should be cautious as inside shareholders of the two companies sold off their holdings in the last two months.
A member of Hoa Sen Group’s supervisory board this month registered to sell half of her holdings of 8,000 shares before September 11.
Earlier last month, brother of the group’s deputy general director sold his entire holding of 20,000 shares.
Senior officials and inside shareholders from Da Nang Rubber also made a similar move, with a director board member, a supervisory board member and wife of deputy general director dumping their stakes.
thanhnien, nguoi lao dong
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