An employee works inside a bag factory of An Phat Bioplastics JSC (AAA). Its profit after tax in the first 6 months rose by 45 per cent compared to the same period last year. — Photo courtesy of the company
Paper and packaging firms have reported positive business earnings despite the impact of the coronavirus pandemic.
Dong Hai Joint Stock Company of Bentre (DHC) achieved revenue of VND1.7 trillion (US$73.8 million) in the first 5 months of this year and profit after tax of VND264 billion, up 57 per cent and 67 per cent, respectively on 2020.
This result was surprising as since the fourth wave of the coronavirus pandemic broke out at the end of April, many businesses have had to halt production.
With these results, the company has fulfilled two-thirds of its yearly targets. Based on charter capital of VND560 billion, it is estimated that DHC's income per share in the first 5 months of the year was VND4,700.
According to DHC, the domestic paper packaging industry is facing great business opportunities, thanks to developing industries, such as agriculture, forestry, fisheries and processing, using a lot of paper packaging. The trend of using paper to replace plastic packaging to limit environmental damage is also becoming more common.
DHC's Giao Long paper mills 1 and 2 are now operating at full capacity. To catch market opportunities, the company is investing in the construction of Giao Long paper mill 3. It will be built in Phu Thuan Industrial Park in the southern province of Ben Tre, near the company’s current factories. It will supply higher grade paper and increase capacity by at least 120 per cent.
Plastic packaging
Plastic packaging firms also saw positive Q1 performance.
An Phat Bioplastics JSC reported profit after tax in the first 6 months rising by 45 per cent compared to the same period last year.
This year, the company sets a target of VND9 trillion in revenue and VND550 billion in profit after tax, up 21 per cent and 94 per cent, respectively compared to 2020.
AAA plans to expand packaging production capacity, especially biodegradable packaging. The company is focusing on major export markets such as Europe, Australia, Japan and the United States, and at the same time continue to develop environmentally friendly plastic products for the domestic market.
Thuan Duc Joint Stock Company (TDP) targets revenue and profit after tax of VND1.97 trillion and VND88 billion, an increase of 45 per cent and 21 per cent, respectively compared to 2020.
Sales of packaging for animal feed and agricultural products in the domestic market also grew steadily. By 2020, TDP’s products were exported to 40 countries.
The company plans to expand production of supermarket bags for export. It will build one more PP non-woven fabric factory, four automatic 9-color rotogravure printing factories and necessary auxiliary equipment to produce PP packaging. The total investment capital of the projects is more than VND150 billion.
According to the company, the market will improve as many developed countries have reopened their economies after wide-scale coronavirus vaccinations.
The company will add three to five more factories to serve exports, aiming to reach VND7 trillion in revenue by 2025.
Rising prices
The global shortage of containers and the disruptive supply chain due to the pandemic is causing a shortage of imported Old Corrugated Containers, the material for the production of new corrugated containers. This has led to higher prices of input materials.
At Bien Hoa Packaging Company, domestically produced paper materials can only meet 80 per cent of production needs, so due to shortage of input material, the company’s 6-month profit after tax decreased by nearly 42 per cent, reaching VND18.6 billion.
Other companies, however, have had an advantage in input materials.
Thanks to Giao Long Paper Factory, DHC can self-supply most of the materials for its carton packaging factory. Its gross profit margin is higher than that of other companies in the same industry.
With packaging technology from recycled Polypropylene, Thuan Duc Joint Stock Company is less affected by fluctuations of prices of plastic granules on the world market.
An Phat Bioplastics JSC said that it still could self-supply materials for the production of thin film packaging, produced by its member company An Tien Industries.
The outlook of the packaging industry is forecast to be very positive by SSI Securities Joint Stock Company.
The consumption of paper packaging in Viet Nam is expected to increase by 12 per cent from 2021 to 2025 thanks to continuing urbanisation.
The paper packaging segment also benefit from the rapid growth of e-commerce in the domestic market.
Meanwhile, the output of plastic packaging in 2021 may increase by 9.2 per cent over the same period of 2020, reaching 112,000 tonnes, according to SSI. VNS