With profits down and inventory up, sugar companies are in their most difficult period of the last 15 years.
June was the end of the 2017-2018 fiscal year of many sugar companies. The finance reports released so far all showed that they experienced a tough time.
Lam Son Sugar (LSS) reported losses in the latest quarter though its net revenue increased by 6 percent in comparison with the same period last year to VND732.9 billion. The higher financial cost, sales costs and enterprise management costs all caused the net loss of VND10.4 billion from business activities.
As such, LSS’s post-tax profit was modest at below VND4 billion for the 2017-2018 fiscal year and the total revenue was VND1.452 trillion, a 39 percent decrease from last year.
Casuco is facing the same problems. Its finance report showed revenue of VND1.065 trillion and post-tax profit of VND3.1 billion in the last fiscal year, decreasing by 21.5 percent and 95.5 percent compared with the last year.
The Kon Tum Sugar Company also reported the profit down by 78 percent to VND9 billion.
Even Thanh Thanh Cong Bien Hoa, the largest company with best production capacity, has also reported the profit decrease. Its combined revenue was VND10.364 trillion, while post-tax profit was VND546.7 billion, up by 61 percent.
However, the figures were lower than that of the previous fiscal year, when Thanh Thanh Cong and Bien Hoa were still two separate enterprises. In that year, the former had post-tax profit of VND339.3 billion and Bien Hoa VND289 billion.
The first difficult period occurred in 1999, just four years after the industry was established, when a lot of companies underwent hardships or were dissolved.
The difficulties have returned with the high inventory level (which was up to 70 percent of total output sometimes). The oversupply and weak demand have put a heavy burden on sugar companies.
VSSA cited a report as showing that the sugar price in the world market dropped by $17.75 per ton in July from the previous month to $317.85 per ton, much lower than the $498.13 and $432.07 per ton in 2016 and 2017, respectively.
The sharp fall in sugar price is attributed to the global output increase of 10.3 percent, or 2 percent higher than the demand increase. This means that domestic companies will have to compete with imports from regional countries.
Under the sugar industry development plan by 2020, Vietnam will dissolve unprofitable sugar mills. VSSA predicted that there would be 15 mills by 2025 instead of 40 currently.