Rubber companies set cautious profit targets this year

11:00 | 05/03/2021 Companies

Most rubber companies are setting cautious profit targets for this year over forecasts that rubber prices will remain at low levels.

rubber companies set cautious profit targets this year
Most rubber companies were setting cautious profit targets for this year over forecasts that rubber prices will stay at low levels — VNA/VNS Photo

The Việt Nam Rubber group (VRG) at its shareholders meeting in late February announced the 2021 business plans which set the after-tax profit 12 percent lower than 2020.

Specifically, VRG targeted to earn revenue of VND27.1 trillion and after-tax profit of VND4.6 trillion, an increase of 4.2 percent in revenue by a drop of 12 percent in profit against 2020.

VRG predicted that 2021 would be a difficult year, especially for latex production which was the core business of the group, as rubber prices were forecast to stay at low levels.

In 2020, the company earned revenue of more than VND25.9 trillion and after-tax profit of VND5.23 trillion, representing rises of 5.67 percent and 29.8 percent over 2019, respectively. The profit mainly came from the VNR’s divestment of 11.8 percent of stakes at Sài Gòn VRG Investment Corporation.

According to Bản Việt Securities Company, VRG earned net profit worth VND1.1 trillion from the divestment, which helped the company to reach such high profit.

Lowering profit target in 2021 in the context of unpredictable market would be understandable for VRG, Bản Việt Securities said.

Other rubber companies also set cautious targets.

Tây Ninh Rubber Joint Stock Company (TRC) set a profit target for 2021 nearly 50 percent lower than last year. TRC targeted to earn revenue of VND301 billion and pre-tax profit of VND57 billion, 29.6 percent and 48.8 percent lower than last year, which were said to be very cautious targets after the company reported revenue of VND326 billion, up 8.3 percent and net profit of VND93 billion, up 11 percent, in 2020.

Even rubber companies which had advantages for developing industrial property – a sector considered to be profitable – set modest targets.

Phước Hòa Rubber set revenue at VND1.921 trillion, a drop of 15 percent, and after-tax profit of VND715 billion, a drop of 35 percent, against 2020. This was the lowest profit target of Phước Hòa Rubber since 2019 when the company started to convert its land into industrial property.

Phước Hòa Rubber said that the company was facing difficulties from anticipated low rubber demand in 2021, a shortage of labour and impacts of weather and diseases. In addition, the COVID-19 pandemic would cause difficulties in attracting investments in its industrial zones.

According to a report of FPT Securities, rubber prices were forecast to stay at low levels in 2021, around VND32-33 million per tonne, which would continue to have negative impacts on the latex production of rubber companies and forced many companies to sell rubber wood instead and convert land into industrial property.

Rubber wood prices were predicted to be high this year, driven by the high demand for export of wood and wooden products. Rubber wood prices were forecast at VND250 million per ha, up four percent against last year.

The global production shift was providing opportunities for rubber companies which converted their land into industrial zones.

This year would see a strong divide in business results among rubber companies, FPT Securities said.

Theo VNS