With the efforts of Chairman Le Phuoc Vu, why did Hoa Sen Group’s profit after tax still decrease by 77% in the first quarter of 2022?
At the end of April, businesses rushed to announce their financial results for the first quarter of the year. For Hoa Sen Group Joint Stock Company (Hoa Sen Group), this is the time to announce the second quarter financial statements based on the business year of the business.
Contrary to the growth of steel enterprises in the first quarter such as Hoa Phat, Nam Kim,… Hoa Sen Group saw a decrease in profit after tax in the first 3 months of the year by 77% compared to the same period last year.
The first reason must be mentioned is that the growth rate of COGS was higher than the growth rate of revenue, leading to a 24% decrease in gross profit. At the same time, selling and administrative expenses increased by 43% and 143% respectively over the same period.
Looking at the company’s second quarter financial statements, the gross profit margin of the manufacturing segment in the first three months of this year decreased sharply over the same period, from 26% to 13%. While the gross profit margin of the commercial segment did not change much (about 10%).
The main production item that makes Hoa Sen’s name is galvanized steel, in which the main production material is HRC (hot rolled coil) steel. HRC accounts for more than 80% of the cost of input materials, making the profit of the whole industry fluctuate greatly according to the price of this material.
HRC price movement on Shanghai Futures Exchange in the past 1 year. Source: ceicdata
In addition, Hoa Sen’s staff expenses also increased dramatically in both selling expenses and general and administrative expenses when compared to the same period last year.
Specifically: staff expenses in selling expenses increased from 43 billion to 249 billion. Staff expenses in enterprise management expenses increased from 5 billion to 64 billion. In total, Hoa Sen’s office and sales staff expenses in the first three months of the year increased 5.5 times.
As a result, in the first 6 months of the fiscal year 2021 – 2022, although net revenue grew by 48%, Hoa Sen’s consolidated profit after tax only reached VND 872 billion, down 48% compared to the same period last year.
In addition, net cash flow in the period of Hoa Sen Group was negative by more than 164 billion dong, because net cash flow from operating activities and investing activities were both negative 185 and 187 billion dong, respectively.
Money spent on procurement and construction of fixed assets of enterprises in the second quarter was 218 billion dong, up 36% over the same period.
Previously, on March 21, 2022, Hoa Sen Group held the annual general meeting of shareholders in 2022. Accordingly, Hoa Sen Group submitted to the General Meeting of Shareholders a consolidated business plan for the financial year. 2021 – 2022 on the basis of ensuring stable and sustainable production and business activities.
Specifically, in the fiscal year 2021 – 2022, the target of sales volume is 2,000,000 tons, revenue is 46,399 billion VND and profit after tax is from 1,500 to 2,500 billion VND depending on the situation of the epidemic, surrounding environment. political turmoil, steel price fluctuations, energy prices and input costs.
Compared to the business results achieved in the fiscal year 2020 – 2021 with net revenue of 48,727 billion dong, completing 148% of the plan, reaching 177% over the same period and profit after tax reaching 4,313 billion dong, complete After reaching 288% of the plan and reaching 374% over the same period, the profit target of the year 2021 – 2022 of Hoa Sen Group is quite modest.
Also at this year’s meeting, Chairman of the Board of Directors of Hoa Sen Group (HSG) Le Phuoc Vu said that recently, he has been on duty at the office regularly to meet with suppliers.
“I have to be the one to pave the way for it directly,” Vu shared his role in Hoa Sen Home building material supermarket chain – a project he considers his “last effort” before leaving the group. .
In previous years, he lived mainly in the mountains, only went down to the city for a meeting with the board of directors for a few months and then immediately returned.
Last year, the head of Hoa Sen announced to withdraw from the company in 2026, on the occasion of its 25th anniversary. In the remaining time, he wants to transform this group from a manufacturer of steel sheets and plastic pipes into a distributor of building materials and interior decorations.
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