Vietnam's rice export prices have increased continuously, however, the profits of businesses in the industry have been eroded by high cost of capital and interest costs.
According to a recent report by the Ministry of Agriculture and Rural Development , rice exports in the first four months of the year reached nearly 3 million tons, equivalent to more than 1.5 billion USD. The above results increased by 44% in volume and 55% in value compared to the same period in 2022. The average export price of rice in the first four months is estimated at 526 USD per ton, an increase of 8%. This price helps Vietnamese rice surpass Thailand to become the world's leading rice and is also the highest level in the past two years.
Prices have been increasing continuously but the business results of rice enterprises are not optimistic. Loc Troi Group (LTG) lost more than VND 80 billion in the first quarter of the year, while in the same period last year it had a positive profit of VND 184 billion, or in the last quarter of 2022 it still made a profit of nearly VND 209 billion. The management said that the sharp increase in interest expenses (nearly 3 times) was the main reason for the loss.
Despite operating in many business segments, rice is still the backbone of this enterprise, accounting for more than 68% of total revenue, equivalent to more than VND 1,675 billion. During the period, the cost of goods sold continued to account for a large proportion, so the rice segment only recorded a gross profit of VND 9 billion. This level is half lower than the first three months of 2022.
Other large enterprises in the industry such as PAN Group or Trung An High-Tech Agriculture (TAR) did not suffer losses but their profits also decreased sharply. In particular, Trung An, with most of its cash flow coming from rice, recorded a 6% decrease in revenue and a 69% decrease in after-tax profit, down to VND8.5 billion. The company explained that the main reason was due to high interest expenses, up nearly 59% over the same period.
As for the Southern Food Corporation (Vinafood II), pre-tax profit reached more than VND500 million, equivalent to the same period last year, while after-tax profit belonging to the parent company's shareholders still lost more than VND7 billion. Profits were small even though revenue increased by 65%, reaching nearly VND4,170 billion. This period, the company's profit margin was quite thin, and the sharp increase in expenses eroded profits.
The story of corporate profits going against export rice prices has been recorded since last year. The VNDirect analysis team once pointed out the reality that most rice businesses recorded a decrease in gross profit margin in 2022 due to pressure on input costs such as fertilizer costs and increased rice purchase prices.
However, the outlook for this industry in the coming time is predicted to be positive by many units. A recent report by Vietcombank Securities (VCBS) said that favorable weather creates an advantage for the domestic rice industry compared to countries such as China, the Philippines, and India. Despite the possibility of El Nino (causing high temperatures and reduced rainfall), the International Grains Council (IGC) forecasts that Vietnam's rice output will still reach 29 million tons, higher than Thailand's 20 million tons.
In addition, input costs are expected to cool down this year thanks to the de-escalation moves in Europe and increased global fertilizer supplies, which will also create a favorable environment for rice production and trading.
According to the Vietnam Food Association (VFA), the disruption of food supply in many countries has benefited the Vietnamese rice industry, with orders increasing. In addition to the Philippines, China and the EU are also increasing their imports of quality goods from Vietnam. Exporters say supply is not meeting demand, so rice prices may continue to increase in the second quarter.
Siddhartha
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