Sugar stocks are getting sweet

Friday, Jun 24, 2016 22:56

Sugar stocks are recording their best results after five years. — Photo

HA NOI (Biz Hub) – Five years after staying silent in the market, sugar stocks rose with high liquidity, thanks to better sales from local firms and higher demand in the world market.

According to the market data, sugar stocks were recording their best results after five years.

In particular, yesterday, shares of Son La Sugar JSC (SLS) rose 402 per cent over last year's level to reach VND120,000 (US$4.5) on the northern bourse. Shares of Kon Tum Sugar Joint Stock Company (KTS) also increased nearly four-fold from last year to reach VND64,000 each yesterday on the southern bourse.

At the same time, shares Thanh Cong Tay Ninh JSC (SBT) rose 129 per cent, shares of Lam Son Sugar Joint Stock Corporation grew by 64 per cent, and shares of Bien Hoa Sugar Joint Stock Company shot up 42.11 per cent.

The rise in those stocks was due to better results of leading local sugar manufacturers in the first quarter of this year.

The total sales of the five big firms reached nearly VND34 trillion, an increase of 80 per cent over the same period last year. Their gross profit also reached VND470 billion, up 89 per cent.

In the first quarter, SBT reached total sales of VND1.24 trillion, 2.2 times higher than in the same period last year, thanks to the merger with Gia Lai Sugar JSC (SEC) last year. Similarly, BHS recorded sales of nearly VND1.2 trillion, up 55 per cent thanks to the merger with Ninh Hoa Sugar (NHS).

Meanwhile, Q1's sales of LSS, KTS and SLS, also rose 104 per cent, 103 per cent and 29 per cent, respectively, in the first quarter.

Also, due to the higher prices and lower cost for production, all the companies registered much better profits in Q1.

According to local securities experts, the global prospect, after world sugar prices notched up an impressive record this year, would be a boost for local sugar firms. The sugar futures contracts on the intercontinental exchange floor recorded a 23-year high in February due to lower production caused by El Nino globally.

According to the industry outlook report from Vietcombank Securities Company (VCBS), there was a shortfall of 3.5 million tonnes of sugar in 2016 after five years of surpluses.

Nguyen Ngoc Thach, head of the brokerage section Sai Gon Securities Inc, said domestic drought conditions reduced Việt Nam sugar production to 15.9 per cent or 1.59 million tonnes, however, the shortage raised domestic sugar prices by 35.6 per cent from 2015.

Thach said the price would go up during 2016 and 2017 and benefit local firms.

Caution needed

However, experts also noted that under the trans-Pacific Partnership Agreement (TPP), sugar firms were among those who benefitted the least.

While TPP fetched great benefits to other industries such as textile and seafood, sugar producers were seen to face serious challenges because of the fierce competitiveness of TTP members.

While TPP rival Australia was the world's third largest sugar exporter and could produce a tonne of sugar at about $20, Việt Nam, one of the least productive sugar manufacturers, could produce a tonne of sugar at between $55 and $60.

VCBS said Việt Nam must face up to the stiff competition in the next three years, so local firms should stabilise and expand the cultivated area as well as enhance productivity and output to join the game.

Under the development plan, SBT has expanded to Cambodia with 3,000 hectares of sugar plantation during the 2015-2016 period while SLS planned to expand its capacity by 17 per cent. – VNS

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