A worker of the Southern Rubber Industry Joint Stock Company (Casumina or CSM). CSM's pre-tax profit reached nearly VND40 billion in the first half of this year, 4 times higher than the same period last year and fulfilling 27 per cent of the yearly plan. — Photo casumina.com

The Viet Nam Rubber Group JSC (VRG) plans to invest in tyre and tube production via mergers and acquisitions (M&As) over affiliate companies of the Viet Nam Chemical Group (Vinachem).

In a recent meeting with the Committee for Management of State Capital (CMSC), GVR said that they were focusing on restructuring the business, increasing investment in the rubber industry, adding that the M&As would help close the value chain of rubber tyre and tube products.

Currently, GVR is focusing on five main activities of planting and processing rubber latex, processing rubberwood, processing rubber industrial products, running industrial parks on rubber cultivation land and high-tech agriculture.

In the natural rubber segment, GVR is managing more than 400,000ha of rubber with an average yield of 1.56 tons per ha in 2019. However, this business has been on a downward trend in recent years due to low selling prices.

The impact of the COVID-19 pandemic further hurts the demand for rubber, resulting in lower output.

Therefore, expanding tyre and tube production can help the group earn more. In fact, the group started to penetrate this segment in 2017, when it started to partner with The Southern Rubber Industry Joint Stock Company (Casumina or CSM) to produce VRG-branded rubber tyres.

Vinachem is a multidisciplinary conglomerate involved in chemical production. As for the tyre segment, Vinachem is a major player in the industry with four-member units producing rubber tyres, namely Da Nang Rubber (DRC), Sao Vang Rubber (SRC), Southern Rubber Industry (CSM) and Inoue Rubber Vietnam Co Ltd.

In 2019, there were 9.4 million units of bicycle tyres sold, 6.48 million units of motorcycle tyres sold and 3.43 million units of car tyres sold.

DRC has a slightly higher production scale compared to other units with the output of tires and tubes of all kinds accounting for about one-third of the whole group.

In the first half of this year, DRC recorded net revenue down 17 per cent to VND1.59 trillion (US$68.7 million). Pre-tax profit reached VND107 billion, down 3 per cent compared to the same period in 2019 and fulfilled 38 per cent of the yearly plan.

According to the company, rubber tyre exports had improved after being hit hard in the second quarter by COVID-19. Export sales in July and August were both estimated at over $6 million, higher than the average of $4.4 million per month in the second quarter.

A full-steel radial tyre factory with a capacity of 600,000 tyres per year has come into operation, doubling the capacity of rubber tyre products of DRC.

Regarding CSM and SRC, after difficult periods in 2017-2018, business results improved in 2019 and early 2020.

CSM's pre-tax profit reached nearly VND40 billion in the first half of this year, 4 times higher than the same period last year and fulfilling 27 per cent of the yearly plan.

In H1, CSM recorded output of 18.14 million units for motorcycle tubes, 3.73 million units for bicycle tubes, 3.29 million units for motorcycle tyres, 2.46 million for bicycle tyres, and nearly 2 million units for all kinds of car tyres.

SRC reported pre-tax profit of more than VND33 billion in the first half this year, up 88 per cent over the same period in 2019 and exceeding 58 per cent of the yearly plan.

The company reported output of more than 15.9 million units for all kinds of tyres and tubes, of which motorcycle tubes accounted for 6.77 million units, bicycle tubes 4.27 million units, bicycle tyres 3.24 million units, motorcycle tyres 1.1 million units and car tyres 286,364 units.

In early 2018, the Prime Minister issued a decision to restructure Vinachem during the 2017-2020 period. Accordingly, this group would have to divest capital in all three tyre companies to below 51 per cent.

At DRC, Vinachem once filed an auction of 17.2 million shares with a starting price of VND25,170 per share in May 2019. However, the auction was cancelled because no investors registered to purchase the shares. Vinachem is still holding nearly 60 million DRC shares, equivalent to 50.51 per cent of charter capital.

In contrast, at SRC, Vinachem also held an auction of 4.2 million shares with the starting price of VND46,452 per share and attracted four investors to buy all shares. After the divestment, Vinachem still holds 36 per cent of charter capital.

Vinachem still holds 51 per cent of capital of CSM and 24 per cent of capital in Inoue Rubber Vietnam Co Ltd. — VNS