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

November 05, 2021 - 08:18

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.

Products inside Bảo Minh Plastic's warehouse. Photo

HÀ NỘI — 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 Bình Minh Plastic JSC (BMP), General Director Nguyễn Hoàng Ngân 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 VNĐ26 billion (US$1.14 million). In the same period last year, it posted a profit of VNĐ153 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 Bình Dương 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.

Bảo Việt Securities Company (BVSC) said that the third quarter of 2021 was an extreme quarter for Bảo 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, Bảo Minh Plastic’s revenue reached VNĐ3.1 trillion, down 8 per cent, with profit after tax down 75.7 per cent to VNĐ99.8 billion.

Higher raw material prices since the beginning of 2021 have created huge pressure for businesses in the plastics industry. Bảo 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.

Tiền 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, Tiền Phong Plastic recorded consolidated revenue of VNĐ1.01 trillion, down 15 per cent over last year, while its consolidated profit after tax slid by 43.6 per cent to VNĐ77.7 billion. The company said that the reduction in interest expenses and other operating expenses helped increase profit after tax by VNĐ24 billion, but a decrease of VNĐ176 billion in sales caused profit after tax to fall VNĐ53 billion.

In the first nine months, Tiền Phong Plastic’s revenue was nearly VNĐ3.4 trillion and profit after tax was VNĐ347.7 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 Đà Nẵng Plastics JSC (DPC) to record a fall in revenue and profit after tax by 43 per cent and 62 per cent, respectively to only VNĐ8.21 billion and nearly VNĐ543 million.

For the first nine months of 2021, Đà Nẵng Plastic’s revenue slid by 27 per cent in revenue to VNĐ39.4 billion, but profit after tax still rose 40 per cent over last year to VNĐ6.06 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

Bảo Minh Plastic has prepared all resources to return to production, Ngân 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 VNĐ21 billion. This motivates Bảo Minh Plastic to expect better business results in the fourth quarter of 2021.

However, the pressure of raw material prices is still a burden. Ngân 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. 

Bảo Minh Plastic planned to achieve revenue of VNĐ5.2 trillion in 2021, with profit after tax of VNĐ523 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.

Đà Nẵng Plastic set a revenue target of VNĐ85 billion, but only completed 47 per cent after nine months. Meanwhile, it expected to earn VNĐ9 billion in profit after tax, down 11 per cent over 2020, and it has accomplished 84 per cent of the target.

Tiền Phong Plastic also lowered its profit target in 2021 to VNĐ432 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