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Rubber companies (TRC) set cautious profit targets this year
Most rubber companies are setting cautious profit targets for this year over forecasts that rubber prices will remain at low levels.
The Viet Nam Rubber group (VRG) at its shareholders meeting in late February announced the 2021 business plans which set the after-tax profit 12 per cent lower than 2020.
Specifically, VRG targeted to earn revenue of VND27.1 trillion and after-tax profit of VND4.6 trillion, an increase of 4.2 per cent in revenue by a drop of 12 per cent in profit against 2020.
VRG predicted that 2021 would be a difficult year, especially for latex production which was the core business of the group, as rubber prices were forecast to stay at low levels.
In 2020, the company earned revenue of more than VND25.9 trillion and after-tax profit of VND5.23 trillion, representing rises of 5.67 per cent and 29.8 per cent over 2019, respectively. The profit mainly came from the VNR’s divestment of 11.8 per cent of stakes at Sai Gon VRG Investment Corporation.
According to Ban Viet Securities Company, VRG earned net profit worth VND1.1 trillion from the divestment, which helped the company to reach such high profit.
Lowering profit target in 2021 in the context of unpredictable market would be understandable for VRG, Ban Viet Securities said.
Other rubber companies also set cautious targets.
Tay Ninh Rubber Joint Stock Company (TRC) set a profit target for 2021 nearly 50 per cent lower than last year. TRC targeted to earn revenue of VND301 billion and pre-tax profit of VND57 billion, 29.6 per cent and 48.8 per cent lower than last year, which were said to be very cautious targets after the company reported revenue of VND326 billion, up 8.3 per cent and net profit of VND93 billion, up 11 per cent, in 2020.
Even rubber companies which had advantages for developing industrial property – a sector considered to be profitable – set modest targets.
Phuoc Hoa Rubber set revenue at VND1.921 trillion, a drop of 15 per cent, and after-tax profit of VND715 billion, a drop of 35 per cent, against 2020. This was the lowest profit target of Phuoc Hoa Rubber since 2019 when the company started to convert its land into industrial property.
Phuoc Hoa Rubber said that the company was facing difficulties from anticipated low rubber demand in 2021, a shortage of labour and impacts of weather and diseases. In addition, the COVID-19 pandemic would cause difficulties in attracting investments in its industrial zones.
According to a report of FPT Securities, rubber prices were forecast to stay at low levels in 2021, around VND32-33 million per tonne, which would continue to have negative impacts on the latex production of rubber companies and forced many companies to sell rubber wood instead and convert land into industrial property.
Rubber wood prices were predicted to be high this year, driven by the high demand for export of wood and wooden products. Rubber wood prices were forecast at VND250 million per ha, up four per cent against last year.
The global production shift was providing opportunities for rubber companies which converted their land into industrial zones.
This year would see a strong divide in business results among rubber companies, FPT Securities said.
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