Plastic businesses report contradictory earning results

Inside a Tien Phong Plastic Joint Stock Company factory. The company expects revenue and profit in 2021 to reach 4.8 trillion VND and 460 billion VND, respectively. (Photo courtesy of the company)

While many plastic enterprises reported positive results in both revenue and profits in the fourth quarter of last year, there are still enterprises reporting a decline in profits, even suffering losses.

HCD Investment Production and Trading Joint Stock Company announced that their Q4 profit nearly doubled last year’s figure to reach 15.5 billion VND (682,500 USD).

HCD attributed the profit growth to the sharp increase in oil prices and plastic resins prices, while the company stored a large amount of imported inventory at a time of low prices.

For the whole year of 2021, HCD's revenue reached 732 billion VND and profit after tax of more than 48 billion VND, up 47 percent and 3.3 percent respectively compared to 2020.

Tien Phong Plastic Joint Stock Company expects revenue and profit in 2021 to reach 4.8 trillion VND and 460 billion VND, respectively. The leader of this business attributed the growth to co-operation with Sekisui Group, giving the company the opportunity to supply Japanese ODA projects in Southeast Asia in the field of infrastructure.

However, a survey by VnBusiness showed that not all plastic enterprises had reported positive business results in the fourth quarter of 2021.

Da Nang Plastics Joint Stock Company (DPC) reported a loss for the first time in Q4 as its revenue reached only 9 billion VND, down 26 percent on the same period last year, while management costs increased sharply due to the relocation of the entire company into an industrial park.

This caused DPC to suffer an after-tax loss of more than 1.2 billion VND in the fourth quarter, while in the same period last year, it achieved a profit of 4 billion VND.

In 2021, DPC achieved a revenue of more than 48 billion VND, profit after tax of nearly 5 billion VND, down 27 percent and 41 percent respectively over the same period in 2020.

According to plastic enterprises, the sharp increase in plastic resin prices, customer support costs, warehousing costs, and logistics costs compared to the previous year caused the companies’ profits to decrease deeply.

"The price of plastic raw materials has never been as high as in the first half of this year, which caused a huge impact for most of us plastic businesses,” said Nguyen Hoang Ngan, General Director of Binh Minh Plastics Joint Stock Company (BMP).

Mirae Asset Securities (MASVN) said that the plastic industry was maintaining an overall revenue growth rate of 16-18 percent in the period of 2016-2020. Therefore, the plastic industry will continue to maintain a high growth rate of around 15 percent per year in the coming years.

In the recent report of Bao Viet Securities Company (BVSC), the price of PVC resin hit a record high of 1,600 USD per tonne in mid-April. After that, although it cooled down to 1,360 USD per tonne, PVC resin price still increased by 9 percent compared to the beginning of 2021 and increased by 54 percent compared to the average price of 2020.

Plenty of room for growth

According to experts, the outlook for the plastic industry this year is favourable thanks to Vietnam’s recent signing of a series of new-generation FTAs, such as CPTPP, EVFTA and RCEP.

Tran Viet Anh, General Director of Nam Thai Son Import-Export Joint Stock Company, said in early 2022 the company had continuous export orders, most notably an order of about 4,000 tonnes to the European market with a value of more than 8 million USD.

Son said the manufacturing industry of the US was being affected by the increasing number of COVID-19 cases. Meanwhile, China, a major supplier of plastic products to the US market, also reduced output, so orders poured into Vietnam.

Vietnam's plastic industry has a lot of potential, though foreign investment in this industry in recent years has not been significant and the room for foreign investors was still very large, he said.

LEGO Group (Denmark) and Vietnam-Singapore Industrial Park Joint Venture Company Limited (VSIP) have just signed a memorandum of understanding to build a new factory with a total investment of 1 billion USD. It is expected to be constructed in the second half of 2022 and start operating in 2024. According to calculations, the factory will create about 4,000 job opportunities within the next 15 years, as well as indirectly support local businesses.

Many domestic plastic enterprises have also started to invest heavily in technology to produce high-quality plastic products for domestic use and export, such as Thaco - TPC Plastic Components Production Co. Ltd., a member unit of Thaco Auto Group. The company has been equipped with a system of modern equipment lines, contributing to increasing the localisation rate for domestically manufactured and assembled vehicles and at the same time promoting exports to countries like Russia and Malaysia.

Tran Viet Anh also pointed out many limitations of domestic plastic enterprises in terms of capital and raw materials.

“Local companies face the most difficulties in sourcing raw materials, because foreign enterprises and FDI enterprises already have a stable supply source, while domestic plastic enterprises have to import 80 percent of its raw materials, which affects the prices of raw materials,” he said.

“There should be tax and capital incentives to support plastic businesses to develop in the near future,” he said./.