Spending over VND9 trillion ($391.3 million) in the first half of the year on the construction of its Dung Quat Iron and Steel integrated complex through borrowings, Hoa Phat Group is paying an enormous amount of interest on its debts each day.
According to Hoa Phat Group’s consolidated financial statement for the second quarter, the group was paying up to VND215.38 billion ($9.36 million) in interest expense for the period, an up of almost 60 per cent on-year. In the first six months through June, Hoa Phat has spent an accumulated VND400.58 billion ($17.41 million) in its borrowing costs. On average, interest expense costs the firm some VND2.2 billion ($95,652) each day.
As at June 30, the Hanoi-based industrial manufacturing conglomerate reported its short-term borrowings at VND13.926 trillion ($605.47 million) and long-term borrowings at VND20.305 trillion ($882.83 million), an advance of 21.5 per cent and 58.5 per cent compared to the end of 2018.
The higher debts were partly used for the construction of various projects, including the Dung Quat Steel Production Complex Project, in which Hoa Phat had invested a total of VND 42.919 trillion ($1.87 billion) by the end of June, an increase of VND9.165 trillion ($398.45 million) compared to the beginning of the year.
In terms of proceeds, the group announced a revenue of VND15.330 trillion ($666.52 million) for the second quarter, a rise of 6 per cent on-year. Its post-tax profit for the period amounted to VND2.05 trillion ($89.13 million), a fall of 7 per cent on-year.
In the first half of 2019, the total steel supply swelled by 22.9 per cent on-year, reaching 1.34 million tonnes. Exported construction steel, in particular, rose 35 per cent on-year. Hoa Phat steel currently accounts for 25 per cent of the local steel market.
Hoa Phat attributed its lower profits to the higher iron ore cost, which added up to $120 a tonne, an up of almost 200 per cent on-year. In addition, the rising selling expenses as well as general and administration costs also ate up some of the group’s profits.
As the Dung Quat Steel Production Complex Project has completed its first phase of construction, it will be ready for trial production in July and fully operation by March 2020. In the second half of the year, Hoa Phat thus expected its construction steel production volume to bolster.
The group set its targeted revenue at VND6.7 trillion ($291.3 million) for 2019, a decrease of 22 per cent on-year, taking into account the slowdown in the real estate sector that curbs demand for construction steel in 2019.
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