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Hoa Sen in position to face difficulties

Released at: 14:15, 28/12/2018 BUSINESS SPOTLIGHT

Hoa Sen in position to face difficulties

Photo: Hoa Sen Group

Group adopting measures to ensure its continued dominance in Vietnam's steel industry.

by Thanh Thanh

When the Hoa Sen Group announced its highest-ever debt level, of VND15.9 trillion ($682 million), at its 2017-2018 annual general meeting, it was considered a matter of some disappointment. But in its business results for the third quarter of 2018, the group’s steel output exceeded 1.8 million tons and revenue stood at VND34 trillion ($1.45 billion), up 13 per cent and 32 per cent, respectively, year-on-year. Both domestic and export revenue recorded outstanding growth, of 34 and 27 per cent, respectively, and after-tax profit was VND410 billion ($17.6 million). The group’s products are now available in 75 countries and territories around the world.

It ranks first in steel plate, with a market share of 34 per cent, and second in steel pipe, with 17.8 per cent, according to a Vietnam Steel Association (VSA) report released on November 30. It is also among the three leading production and business companies in the plastic pipe market after ten years of operations, with a plastic pipe output of 5,000 tons per month.

To gain these outstanding results, the group has expanded its markets over the last three years, improved its production capacity by investing in new plants nationwide, and expanded its retail distribution channels. It now has 500 retail outlets and eleven plants with a designed capacity of 2.5 million tons per annum; the most plants and highest capacity in Southeast Asia. Its plants are located in strategic locations in Vietnam’s three regions - northern, central, and southern - which helps it cut transport costs and rapidly meet customer demand, increasing product competitiveness.  

In order to effectively resolve its financial problems, group leaders put forward practical policies such as reducing interest expenses by cutting inventories to a minimum; reducing the cost of sales by restructuring its distribution network towards a provincial branch model where operating costs are optimized while delaying the opening of new branches and evaluating the effectiveness and promoting the capacity of existing branches; streamlining its human resources, introducing an ERP system to reduce personnel costs and management in a professional manner; and cutting investment projects in the real estate sector.

The group cut its debt from VND15.9 trillion ($682 million) as at June 30 to VND12.4 trillion ($534.5 million) as at December, or by VND3.48 trillion ($150 million). This was an impressive result that demonstrated the swiftness and determination of Hoa Sen in optimizing its production and business activities in a very short period of time.

Not only facing difficulties in overseas markets due to trade barriers, steel companies are also facing tough competition in the domestic market. Hoa Sen sees this as an advantage, as it possesses a strong distribution network.

The group plans to transfer its current operating model to a provincial branch management model, managing all business activities within a provincial distribution network. This will help it cut management, operations, and accounting and tax declaration activities and enhance its management efficiency.

2018 was a year full of uncertainty for the group but it continues to be recognized by local and international institutions, proving its contribution to the economy and society and helping it affirm its leading position into the future.

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