The worst might be behind the steel industry but it is hard to determine whether the market has recovered, Tran Dinh Long, chairman of Hoa Phat Steel, has said.
“In 2022 the steel industry was going through a difficult cycle. I predicted this at last year’s meeting, and honestly it was worse than expected,” he said at the 2023 annual general meeting on Thursday.
“However, the most difficult period has passed, and the internal strength of Hoa Phat in particular is good, and now it completely depends on the demand side.”
Steel is an industry that depends on the real estate market and the government’s public spending policy. Long said now “everything is very slow.”
Hoa Phat’s January and February results were negative, but the losses were lower than the management had feared, he said.
Things have been better in March, he said without providing figures, but promised to announce them at the end of April.
Asked about his past assertion that “Hoa Phat cannot make steel forever,” he said that applied for the long term and is a path that all large corporations must tread, but not easy to implement in the short term.
“In theory, it is right to not put all your eggs in one basket, but in practice it is not easy. In my mind, it is always about diversification.”
In 2023 Hoa Phat expects consolidated revenues of VND150 trillion ($6.39 billion) and profit after tax of VND8 trillion, both up 5% from the previous year.
The conservative plan is due to the likely difficult situation at least until the middle of this year, according to the management.
Raw material prices are rising while financial costs are set to remain high amid soaring interest rates, but selling prices have not increased proportionately.
For the last two years Hoa Phat has been preparing financially for its Dung Quat II steel plant.
Long said plans for new investment would also be put on hold, including in mines in Australia and in property and other areas domestically, to focus on Dung Quat II.
Hoa Phat had sought to buy two iron mines in northern and southern Australia and a coal mine in eastern Australia, but the current situation has forced it to ask the Australian government to delay them.
The Dung Quat II Iron and Steel Production Complex will cost VND85 trillion and become operational in early 2025.
It is expected to earn revenues of VND80-100 trillion.
Long said the important step of signing contracts with all contractors has been completed, and the plant is entering the active construction phase.
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