Many businesses taste sweet success due to high price of sugar cane

May 17, 2023 - 10:09
With concerns about tightened supply affecting global food security, global sugar prices have skyrocketed.
Lam Sơn Sugarcane's material area. Its net profit increased by 22 per cent, reaching more than VNĐ7 billion. Photo courtesy of Lam Sơn Sugarcane

HÀ NỘI - Closing the third quarter of the 2022 - 2023 crop year, the sugar industry achieved brighter business results than expected because the global sugar price rose to the highest level in more than a decade.

With concerns about tightened supply affecting global food security, global sugar prices have skyrocketed.

Specifically, global raw sugar prices have recorded an increase from the beginning of April, touching 24.67 US cents per pound on April 19, the highest level since Q1/2012.

In addition, the impact of domestic trade remedies has also limited a large amount of imported sugar, so supply and demand are more balanced. Domestic sugar prices are expected to remain at a high level.

The Securities Corporation of Vietnam Joint Stock Commercial Bank for Foreign Trade (VCBS) said in its sugar industry report for the first quarter of 2023 that the protection measures for the domestic sugar industry had made imported sugar volume decline. The sugar imports from Thailand, Laos and Cambodia in the first quarter decreased by more than 12 per cent year on year.

Việt Nam imposes an anti-dumping levy on some sugar products imported from five Southeast Asian countries but originating from Thailand.

The purchasing price of sugarcane has also recovered to an average of VNĐ1.05-VNĐ1.1 million per tonne due to the scarcity of supply, creating favourable conditions for farmers to expand the raw material area.

Sugar price is forecast to increase by around VNĐ18,000-18,500 per kilo thanks to increased domestic demand. Less competitive price of imported sugar after being taxed has also boosted demand for domestic sugar.

The above information brought a positive business outlook to sugarcane enterprises in the third quarter of the 2022 - 2023 crop from January 1 to March 31, 2023.

Leading was Kon Tum Sugar (KTS) with a net profit of more than VNĐ12 billion, 3.2 times higher than in the same period last year. This is a business that regularly maintains a profit of less than VNĐ4 billion per quarter, but in the third quarter of the 2022 - 2023 crop, the company had strong growth thanks to high sugar consumption in the domestic market.

Meanwhile, Sơn La Sugar (SLS) had a second consecutive quarter of net profit of over a hundred billion Vietnamese đồng. Specifically, the third quarter's net profit reached more than VNĐ109 billion, up 90 per cent. It was a record high in its profit for a quarter.

One of the advantages that helped SLS achieve this result was that the company is exempt from corporate income tax due to its agricultural product processing activities carried out in Sơn La Province, a locality with extremely difficult socio-economic conditions.

In addition, income from financial activities in this period increased by 100 per cent to nearly VNĐ11 billion, including VNĐ8 billion being the interest on loans for investment in raw material areas.

Lam Sơn Sugarcane (LSS)'s net profit increased by 22 per cent, reaching more than VNĐ7 billion because all expenses were significantly reduced over the same period, although net revenue decreased by more than 15 per cent.

A major player in the industry is Quảng Ngãi Sugar (QNS), the owner of the Vinasoy brand, whose financial year normally ends on December 31 of each year.

At present, the company has announced the consolidated financial statements of the third quarter of 2023 with net revenue of nearly VNĐ2.13 trillion and net profit of nearly VNĐ317 billion, up 17 per cent and 80 per cent, respectively, over the same period of last year.

Regarding each business segment, Quảng Ngãi Sugar said there were some products with high growth such as sugar products with growth in sales volume at 90 per cent and revenue at 80 per cent, thereby contributing VNĐ746 billion to total revenue.

However, the soy milk segment still played a key role with VNĐ817 billion in revenue, a reduction of more than 8 per cent.

While most businesses received positive results, Thành Thành Công - Biên Hòa (TTC AgriS, Hose: SBT) announced the third quarter financial statements of the year 2022 - 2023 with weaker results.

SBT's net revenue was about VNĐ5.71 trillion, up 62 per cent. Of which, the sugar business accounted for nearly 91 per cent, reaching more than VNĐ5.174 trillion, up 76 per cent.

However, SBT's net profit dropped 27 per cent to more than VNĐ149 billion because financial expenses doubled in the same period, while selling and administrative expenses also increased significantly.

In general, the profit of most sugarcane enterprises in the third quarter increased sharply compared to the same period last year. The high price of sugar is one of the main factors improving the profitability of sugarcane producers.

In the agricultural industry report published at the beginning of April, VNDirect Securities Company said that companies mainly using domestic sugarcane materials, such as SLS and LSS, will benefit more from the upward trend in sugar prices.

For enterprises importing raw sugar to produce refined sugar such as QNS or SBT, the high selling price of sugar in 2023 will partly offset the increase in imported raw sugar prices.

In line with business results, stocks of the sugar industry boomed in both market price and liquidity recently. This industry was one of the few industries that attracted cash flow during the quiet period of the market.

LSS shares hit the ceiling at VNĐ12,150 per share on May 8, increasing by 90 per cent compared to the beginning of the year.

During the same period, KTS shares reached VNĐ26,300 each share, up 79 per cent, and QNS shares rose by 32 per cent to VNĐ44,500 per share. The "big firm" SBT gained the lowest growth at 14 per cent to VNĐ16,600 per share.

Especially, SLS became a phenomenon on the stock exchange when continuously conquering its historical peak. It set a new peak of VNĐ175,000 per share on April 25, an increase of 43 per cent compared to the beginning of the year. It is one of the most "expensive" stocks on the stock exchange at the moment. VNS