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Steel producer (HPG) posts 7% lower Q2 profit on increased material prices
Steel producer Hoa Phat has reported that its post-tax profit dropped 7 per cent year on year to VND2.05 trillion (US$88.15 million) in the second quarter of the year.
Second quarter revenue was 6 per cent higher year on year at VND15.3 trillion ($659.5 million), the company said at a meeting with investors on Thursday.
In the first six months of the year, Hoa Phat recorded VND30.4 trillion ($1.3 billion) in combined revenue and VND3.86 trillion ($166.4 million) in post-tax profit. Compared to the first half of 2018, the six-month figures were up 10 per cent in revenue but down 12.7 per cent in post-tax profit.
According to the company’s chairman Tran Dinh Long, the performance in the first six months of the year was “acceptable” because the firm and the whole steel sector faced a sharp increase in the price of iron ore, the major input for steel production.
In January-June period, the price of iron ore gained 82 per cent to almost $120 per tonne. With the key material accounting for a third of Hoa Phat’s total production cost, the soaring prices seriously affected the firm’s profits.
The firm’s sales did not increase as quickly as material costs, so the per-product profit margin declined, leading to the slight decline in post-tax profit.
The slowdown of the real estate and construction markets also pulled the company’s profits down in the first six months of the year, Long said.
In the company’s six-month earnings report, there was no contribution from the Dung Quat steel production complex.
Construction on the first stage of the complex had been completed as of June 30. The company will start testing the production chain this month and it will deliver the first batch of hot-rolled steel products next March.
In the second half of 2019, if the price of iron ore remains high and the construction market shows little improvement or gets worse, Hoa Phat will perform worse, according to the chairman.
The company will meet its sales volume target for the year of three to four million tonnes. It may even beat its sales volume target, but not by much.
In addition, the company will continue paying dividends in cash for 2020. The company issued a total of 1.66 billion bonus shares for 2018, 2017 and 2016 dividend payouts.
Hoa Phat has more than 2.76 billion shares listed on the Ho Chi Minh Stock Exchange (HoSE) with the trading code HPG.
The company's shares gained 0.7 per cent on Friday to end the week at VND22,550 per share. Its shares have lost more than 33 per cent from their all-time peak of VND34,000 per share on January 3, 2018.
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