M&A deals put pressure on plastics industry

12:20 | 19/08/2018 Industry

(VEN) - The Vietnam plastics industry has seen high growth of 14-15 percent per year. In 2017, total export value of the Vietnamese plastics industry reached over US$3 billion, an increase of 17.6 percent compared to the previous year, with the main markets being Japan, the US, the Republic of Korea, China and Southeast Asian countries. Currently, a series of big names of the Vietnamese plastics industry are facing mergers and acquisitions (M&A), forcing them to seek the most appropriate way to develop.

ma deals put pressure on plastics industry

M&A deals

Thailand’s Nawaplastic Industries (Saraburi) Company, an affiliate of Thailand’s Siam Cement Group (SCG), has become the biggest shareholder of the Binh Minh Plastics Company (BMP), a leading firm in Vietnam’s plastics industry, with 51.1 percent of shares. The SCG has also held shares in other Vietnamese plastics companies.

In addition to Thai firms, Korean players are also eyeing the Vietnamese plastics market. The Dongwon Systems Corporation has become a major shareholder of the Tan Tien Plastic Packaging Joint Stock Company, holding a 97.83 percent stake. Tan Tien is one of the leading units in the field of composite packaging for the food industry, with an average annual turnover of VND1.3-1.5 trillion. Most of Tan Tien’s customers are big names such as Unilever, Ajinomoto, Acecook, Vedan, Miwon and Vinamilk.

Japanese firms are also showing an interest, as reflected in several deals. Japan-based MeiwaPax Group spent US$16.5 million buying the Saigon Trading and Packaging Joint Stock Company (Saigon Trapaco). Another Japanese company, Oji Holding Corporation, acquired the United Packaging Company Limited in Vietnam. Sagasiki Vietnam bought the Goldsun Printing and Packaging Joint Stock Company.

Opportunities and challenges

The massive influx of investment from foreign investors into the plastics industry is aimed at taking advantage of investment incentives in land, taxes and material prices, energy, as well as cheap labor in order to save costs and achieve the best profit. Vietnam’s participation in a series of free trade agreements has also presented foreign companies with advantages in this regard.

To stand firm in the market, Vietnamese plastics companies have to promote restructuring, strengthen investment in advanced technologies, machinery and equipment, and enhance human resource training.

According to the Vietnam Plastics Association, consumption of plastics per capita will increase to 45kg per year by

2020, equivalent to a growth rate of four percent per year. Once the EU-Vietnam Free Trade Agreement (EVFTA) is

signed, possibly later this year, plastics exports to the EU will rise further since Vietnam’s plastic products are not

subject to anti-dumping duties in the EU like other Asian countries (an average tax rate from 8-30 percent).

Thao Ngoc