Plastic companies experience worst quarter due to high material prices and COVID-19

Friday, Nov 05, 2021 08:19

Products inside Bao Minh Plastic's warehouse. — Photo

Many plastic enterprises witnessed strong declines in revenue and profits in the third quarter of the year due to higher raw material prices and disruptions in production and business activities caused by the COVID-19 pandemic.

At the online meeting on the third-quarter business results of Binh Minh Plastic JSC (BMP), General Director Nguyen Hoang Ngan admitted that this year’s third quarter was a bad record in 44 years of operation, with all three months posting losses.

This was the first quarterly loss since it was listed on the stock market in 2006, with a consolidated loss of nearly VND26 billion (US$1.14 million). In the same period last year, it posted a profit of VND153 billion.

During the period, its output was only 11,000 tonnes, down 59 per cent year-on-year. The fall was due to production suspension after HCM City applied social distancing. Its two key factories in Binh Duong and Long An provinces have a total capacity of 120,000 tonnes/year, but during that period, they could only run at 15-20 per cent.

Bao Viet Securities Company (BVSC) said that the third quarter of 2021 was an extreme quarter for Bao Minh as the price of raw materials increased, revenue decreased and the “three-on-site” model resulted in more expenses, including allowances for workers, medical tests and on-site accommodation.

As of September 30, Bao Minh Plastic’s revenue reached VND3.1 trillion, down 8 per cent, with profit after tax down 75.7 per cent to VND99.8 billion.

Higher raw material prices since the beginning of 2021 have created huge pressure for businesses in the plastics industry. Bao Minh Plastic leaders said that the prices of plastic materials increased sharply in May, then fell slightly, but have now rebounded.

Last year, the average price of plastic raw materials was about $1,000/tonne, but in 2021 it could rise to $1,600/tonne due to the influence of supply and difficulties in transportation.

Tien Phong Plastic JSC (NTP) said that its third-quarter profit still posted a big fall after adjusting the selling price due to a rise in raw material costs.

Of which, Tien Phong Plastic recorded consolidated revenue of VND1.01 trillion, down 15 per cent over last year, while its consolidated profit after tax slid by 43.6 per cent to VND77.7 billion. The company said that the reduction in interest expenses and other operating expenses helped increase profit after tax by VND24 billion, but a decrease of VND176 billion in sales caused profit after tax to fall VND53 billion.

In the first nine months, Tien Phong Plastic’s revenue was nearly VND3.4 trillion and profit after tax was VND347.7 billion, up 1 per cent and 2 per cent year-on-year, respectively.

Similarly, the pressure of rising input costs and struggles in operation due to COVID-19 caused Da Nang Plastics JSC (DPC) to record a fall in revenue and profit after tax by 43 per cent and 62 per cent, respectively to only VND8.21 billion and nearly VND543 million.

For the first nine months of 2021, Da Nang Plastic’s revenue slid by 27 per cent in revenue to VND39.4 billion, but profit after tax still rose 40 per cent over last year to VND6.06 billion. This was thanks to high profit in the first quarter, which was mainly due to cost savings.

Speeding up in the few last months

Bao Minh Plastic has prepared all resources to return to production, Ngan said. As of October 19, about 98 per cent of the company's employees have received the first dose of the COVID-19 vaccine and 92 per cent the second dose. The rate of workers ready to return to work was 95 per cent.

The general director added that revenue is showing signs of improvement as in the first 20 days of October, it recorded an average daily revenue of about VND21 billion. This motivates Bao Minh Plastic to expect better business results in the fourth quarter of 2021.

However, the pressure of raw material prices is still a burden. Ngan forecast that in the last quarter, the prices of raw materials could reach $1,800/tonne, and could even set a record of $2,000/tonne. Accordingly, businesses will have to raise selling prices to ensure profit margins.

Plastic enterprises entered the fourth quarter with great pressure when business results were far from the whole year’s targets.

Bao Minh Plastic planned to achieve revenue of VND5.2 trillion in 2021, with profit after tax of VND523 billion. However, by the end of September, it completed more than 60 per cent of the revenue target and more than 19 per cent of the profit target.

Da Nang Plastic set a revenue target of VND85 billion, but only completed 47 per cent after nine months. Meanwhile, it expected to earn VND9 billion in profit after tax, down 11 per cent over 2020, and it has accomplished 84 per cent of the target.

Tien Phong Plastic also lowered its profit target in 2021 to VND432 billion, down 17 per cent. By September 30, it completed 70 per cent of the revenue plan and 80 per cent of the whole year profit plan. — VNS

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