Coal enterprises: revenue over hundred trillion VND, how much profit?

Coal enterprises are facing many difficulties. Source: Internet

Modest profits

In 2020, reporting the business results of Vietnam Coal - Minerals Industry Group (TKV), production volume was 38.5 million tons of coal, consuming 42 million tons; loading and excavating about 188 million m3, digging nearly 255,000m. Help revenue reach VND 123,425 billion, equal to 89% of the plan. The whole group's profit reached VND3,000 billion, equal to 86% of the plan.

However, deep analysis into the business results of some member enterprises showed that profits are still not expected. Accordingly, despite having trillions in revenue, the coal industry has a profit every year of only a few tens of billions of VND, even suffering losses some years.

For example, Mong Duong Coal Joint Stock Company recorded revenue in 2020 of more than VND2,077 billion, but after-tax profit was only VND 27.8 billion, about VND2 billion higher (8%) compared to the same period in 2019. The reason is that in addition to the expenses of selling and managing businesses and taxes, Mong Duong Coal Joint Stock Company had to spend more than VND2,421 billion for production and business costs. Similarly, with Six Than Coal Joint Stock Company, the profit in 2020 reached VND5.6 billion while the revenue was VND3,120 billion - the lowest profit among the member enterprises of TKV.

In particular, the Northern Coal Joint Stock Company, in 2020, the company's revenue reached over VND10,990 billion, higher than VND10,857 billion of 2019, however, after-tax profit only reached VND54.7 billion, 14% lower than 2019. In particular, in the fourth quarter, the after-tax profit of Northern coal losses to VND2.58 billion, compared with profit of over VND38.9 billion in 2019. According to the explanation, the reason for the fourth quarter of the company has a gross profit in sales and providing services decreased over the same period, the financial costs increase.

Expected export of 1.55 million tons of coal

TKV set goals in 2021 to exploit 38.5 million tons of coal, consume 42 million tons; gaining revenue of VND123,880 billion and profit of VND3,000 billion. However, this enterprise also stated in 2021 it continues to have many difficulties because of the situation of coal inventories at the end of 2020 were at a high level, while forecasting market demand in 2021 is only equivalent to 2020. Moreover, conditions for production of mines to depth, the large production cost also affects the implementation of TKV's technical economic indicators.

In order to achieve the above goal, according to General Director Dang Thanh Hai, TKV will conduct intersections of opening mines to expand space and reduce management and production costs; development of coal mines according to criteria: "Green mine, modern mine, and high output mine"; standardizing logistics service warehouses for import and export, processing, mixing and coal consumption. Along with that, TKV will promote investment in applying science and technology to increase labor productivity, product quality, cost savings, lower costs and improve working conditions for employees.

In particular, to solve difficulties for the coal industry, TKV and the Northeast Corporation have asked to export 1.55 million tons of coal in 2021 (TKV exports 1.5 million tons and Northeast Corporation Export 50,000 tons), because in 2020, TKV and the Northeast Corporation agreed to export 2.05 million tons of coal. However, the volume of export coal is estimated at 2020 only about 714,000 tons (equal to 34.8% of the plan approved by the Prime Minister). In particular, TKV reached about 700,000 tons, the Northeast Corporation reached about 14,000 tons.

Therefore, the Prime Minister and the Ministry of Industry and Trade have passed the proposal for 2021. According to the Ministry of Industry and Trade, export coal is high quality and exports are priced, used for production plants’ steel. Meanwhile, coal for electricity production is much cheaper, the supply in the world market is also more abundant. Therefore, coal exports will help the income reach higher than consumption in the domestic market; at the same time, the impact is not large to the plan to provide electricity and operate the electrical grid in 2021.

Moreover, the permission to export all kinds of coal will help the coal enterprises actively implement production and business; there are conditions to exploit foreign long-term credit; there are additional foreign currency importing materials and equipment for coal production and import of coal for electricity; maximum discount for electricity production.