Bright and dark profit picture of steel and cement enterprises

The construction materials industry report recently released by Vietnam Investment Rating Joint Stock Company (VIS Rating) shows that in the construction materials industry, steel companies recorded impressive profit growth in 2024, while cement and tile companies had divergence in business results.

In 2024, the construction materials industry – comprising the top 30 steel, cement and ceramic tile companies by revenue – recorded a 13% year-on-year revenue growth and a 111% year-on-year increase in net profit. Steel companies led the industry’s recovery, achieving a 14% year-on-year revenue growth and a 123% increase in net profit.

Driven by the upturn in the infrastructure and industrial park construction market, domestic steel sales increased by 9% year-on-year, reversing the 9% decline of the previous year. The average gross profit margin of steel companies improved to 9.1% (2023: 7.5%), thanks to lower prices of key input materials.

VIS Rating experts expect steel companies' profits to continue to increase in 2025 thanks to increased construction demand and recent anti-dumping tax measures to protect domestic businesses.

According to VIS Rating, steel companies recorded impressive profit growth in 2024, while cement and tile companies had mixed results.

Meanwhile, cement companies continued to report operating losses in 2024 due to low revenue and excess capacity. Cement companies’ operating losses fell to VND65 billion in 2024, from VND200 billion last year.

Despite a 3% yoy increase in revenue, gross profit margin narrowed to 8.7% and selling expenses increased by 4% yoy in 2023. Weak demand and sales in both domestic and export markets forced many companies to cut prices and operate below optimal capacity. Cement export sales fell 14% yoy in 2024, mainly to Bangladesh.

VIS Rating forecasts that in 2025, domestic sales will accelerate thanks to the recovery of construction activities, helping to reduce the impact from major export markets.

For tile companies, VIS Rating assessed that the restart of housing projects helps to temporarily stop the decline in business profits.

In 2024, ceramic tile sales increased by 15% y-o-y, supported by a 9% y-o-y increase in export sales in 2023. Ceramic tile companies covered by VIS Rating's research recorded little change in revenue (0.4% y-o-y) and a 2.5% increase in net profit, showing stability after a double-digit decline during the difficult real estate period from 2022 to 2023.

For example, Vicostone - a subsidiary of Phenikaa (rated A, stable outlook), recorded a slight decrease in revenue of 1% over the same period, while Viglacera - a subsidiary of Gelex (rated A, stable outlook), increased its tile revenue by 3% compared to 2023. In 2025, VIS Rating expects the recovery of the residential real estate market to contribute to improving sales and profits for tile companies.

According to VIS Rating, the financial leverage and debt coverage of the companies in the rating agency's research scope will remain stable in 2024. Total debt of the industry will increase by 21% yoy in 2024, mainly due to long-term debt to finance new projects, such as Hoa Phat's Dung Quat 2 steel project. Average annual interest rates will decrease from 6% to 3.7% in 2024 and average interest expenses will decrease by 26% yoy thanks to the low interest rate environment. This will result in the company's earnings before interest and tax (EBIT) to interest expense improving to 4.5 times in 2024, compared to 2.2 times in 2023.

On the other hand, operating cash flow (CFO) decreased by 57% year-on-year in 2024, mainly due to large steel companies such as Vietnam Steel Corporation (TVN), Hoa Sen Group Corporation (HSG), and Nam Kim Steel Corporation (NKG) taking advantage of low prices in the fourth quarter of 2024 to stock up on raw materials.

“We believe this decline will reverse by 2025 on the back of improving sales, supported in part by reduced competition from imported steel following the imposition of new anti-dumping duties,” the report said.

VIS Rating experts expect that steel group profits will continue to be consolidated in 2025, as recent anti-dumping tax measures will help support domestic enterprises. Cement and tile companies’ profits will improve thanks to the upturn in new infrastructure and housing projects.

Thu An

Source: https://doanhnghiepvn.vn/doanh-nhan/buc-tranh-loi-nhuan-sang-toi-cua-doanh-nghiep-thep-xi-mang/20250401093343328