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Sugar companies make profit or take loss?
Sugar companies repeatedly complain about their difficulties every year. However, they always finish fiscal years with great successes.
“You keep complaining…”
In early 2010, sugar companies called for the support from the State, because their 140,000 tons of sugar was left unsold. However, at the meeting which gathered the representatives of the Ministries of Industry and Trade, Agriculture and Rural Development (MARD), and the representatives of sugar companies and retail chains, MARD’s Deputy Minister Diep Kinh Tan said frankly: “You keep complaining, but I know each of sugar companies made a profit of 50 billion dong on average in 2009.”
By 2009, Vietnam had had 38 sugar companies, while the average output of every sugar refinery is 25,000 tons. Therefore, the sum of 50 billion dong in profit was not a small figure. In 2010, sugar companies also made fat profits.
In early 2011, the sugar sale went slowly, leading to the inventory volume of 525,000 tons by April 2011. Sugar refineries then blamed this on the decision by the Ministry of Industry and Trade (MOIT) to grant the quota to import 250,000 tons of sugar.
Amid the complaints by sugar companies, MOIT then had to request the companies, which were granted quotas, to delay the imports until the end of July, 2011. However, once again, sugar companies turned out to make fat profits in the year.
Of the six sugar companies listing their shares on the bourses, Bourbon Tay Ninh was the company which has the lowest ratio of profit on chartered capital in 2011. However, the figure was still high if compared with other business fields – at 40 percent. The Bien Hoa Sugar Company’s figure was 49.08 percent. Kontum, Ninh Hoa and Lam Son Companies all had sky high figures of 87.11, 99.28 and 171.51 percent, respectively.
The figures show that sugar is one of the industries with the highest rate of return in Vietnam. This explains why sugar companies have been expanding their business in recent years. Two years ago, the domestic output just could meet 70 percent of the demand. Meanwhile, in 2012, the output is expected to exceed the demand.
The paradox
The same complaint has been voiced by sugar companies. Local newspapers, quoting the report by the Vietnam Sugar and Sugar cane Association, reported that the inventory volume has reached 300,000 tons, and that sugar companies have to sell products at a loss, while they need capital to pay for sugar cane.
The association has asked for the permission to export 250,000 tons of sugar this year, and for the credit policy with preferential interest rates to help companies collect sugar cane from farmers.
However, analysts have pointed out that sugar companies do not have to sell products at a loss.
The sugar refinery season depends on the sugar cane harvesting crop. In general, a refinery only operates 7-8 months a year, from October to May. Therefore, the big stocks at the end of the production period, in April or May, should be seen as a normal thing. Companies need to store products to sell in the non-production months.
Therefore, the analysts say, it would be unreasonable if the State offers a credit policy with preferential interest rates to enterprises. The State does not have to fulfill the duty of storing products for enterprises.
The sugar import quota scheme, which has been applied for a long time, has led to a problem that the domestic prices are always higher than the world prices. In 2011, the domestic price once climbed to 20,000 dong per kilo, while the world’s price was 15,000 dong per kilo at maximum.
vietnamnet
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