HA NOI (VNS) — The repeated drops in the value of the Euro in 2014 proved advantageous for companies that conduct a sizeable proportion of lending in the currency, thus boosting their profits.
On the stock exchange, four companies, including PetroVietnam Power Nhon Trach 2 Co. (NT2), Vicem But Son Cement Co. (BTS), Ha Tien 1 Cement Co. (HT1) and Bim Son Cement Co. (BCC), reported big profits earned from foreign exchange fluctuations.
The Euro has lost 18.5 per cent of its value, compared with the Vietnamese dong since March 2014, and the dong has traded around VND24,000 a Euro in recent days.
The European Central Bank cut interest rates several times last year and launched stimulus packages in efforts to curb inflation and prop up weakening economic growth in the region that had driven down the Euro's value.
The currency is expected to continue sliding this year after the launch of a new quantitative easing programme worth around 1.1 trillion Euros last week, which will become effective in March. In addition, an unstable outlook for Egypt, which is considering the possibility of leaving the European Union, will make development in the region more complicated.
NT2 recorded the biggest Euro-nominated loans, worth more than VND3.4 trillion (133 million Euro) and the big slide in the Euro resulted in the company earning a profit of VND425 billion (nearly US$20 million). Its pre-tax profit thus soared to over VND933 billion ($43.6 million) for the whole year, an impressive figure if compared with the humble initial target of just VND7.67 billion ($358,400) set early last year.
The company's share price also shot up from more than VND6,000 ($0.28) a share in January 2014 to around VND23,000 ($1.07) this week.
NT2 is listed in the unlisted public company market (UPCoM) and plans to move to the HCM Stock Exchange this May.
With a loan of over VND1.8 trillion (equivalent to 75.3 million Euro), cement maker Ha Tien 1 also earned a big profit of VND94 billion ($4.4 million) from the foreign exchange difference. This helped the company earn a sizeable before-tax profit of VND396 billion ($18.5 million) in 2014, as high as 19 times its annual target.
Its share price on the HCM Stock Exchange was also 3.5 times the price it saw early last year, up from VND5,300 ($0.25) in January to VND18,600 ($0.87) a share yesterday.
In a relative comparison, Vicem But Son Cement Co. was the biggest gainer, owing to the Euro's loss. Its profit of VND130 billion ($6 million), stemming from forex fluctuations, was even bigger than its annual profit of VND122 billion ($5.7 million) for the whole year.
Bim Son Cement, with a total Euro loan of over VND1 trillion (43.4 million Euro) by the end of 2014 is yet to report its annual earnings, but its nine-month profit was pegged at VND66 billion ($3 million), of which the forex profits accounted for 80 per cent of the total profit, or VND53 billion ($2.5 million).
Share prices of both Vicem But Son and Bim Son more than doubled last year.
In January 2015, the value of the Euro slumped by another 9 per cent. Thus, businesses which had borrowed considerably in this currency are expected to continue benefiting from this slide. In addition, the six-month EURIBOR (the market benchmark for Euro interest rates) is unlikely to rise in the medium term, resulting in the continuation of the ongoing low lending rates. — VNS