Construction firms see divergent earning results amid rising material prices

Construction enterprises have reported divergence in the first half of 2021 as a sharp increase in raw material prices has put them under pressure.

Steel currently accounts for roughly 20 percent of the input costs.

In the first half of this year, the prices of many construction materials continuously increased to record highs, steel alone recorded a rise of 40 percent. The price of cement with the composition of coal, electricity, gasoline, gypsum and additives also climbed from 30,000-40,000 VND per tonne.

The rising prices were attributed to a decline in demand caused by miners facing many difficulties amid the COVID-19 pandemic, a fragmented production chain and China’s policy of cutting steel production to protect the environment.

A number of contractors had to temporarily suspend and stop construction of projects to wait for steel prices to drop to avoid losses.

In the second quarter and the first half of 2021, many construction companies listed on the stock market recorded a decline in earnings while some others achieved impressive business results thanks to cost reductions and diversification.

Coteccons Construction Corporation (CTD), traded on the Ho Chi Minh Stock Exchange, reported Q2 revenue of 2.55 trillion VND (111 million USD), down 36 percent over the same period last year.

Deducting the cost of goods sold, the company earned 135 billion VND in pre-tax profit, only half of that in 2020. As a result profit margins decreased to 5.2 percent. Administrative expenses continued to record sudden increase from 70.7 billion VND to 122 billion VND, which, according to CTD's, was due to the pre-payment of expenses payable to employees.

Deducting expenses, CTD's after-tax profit was 45 billion VND in the second quarter, down 71 percent over the same period last year. Except for the loss in the fourth quarter of 2020, this is the company's lowest quarterly profit in recent years. In the first half of 2021, CTD reported an after-tax profit of only 99 billion VND, down 65 percent, fulfilling less than 38 percent of the profit target.

In the market, CTD stock is on an upward trend, trading around 63,000 VND per share.

Ricons Construction Investment JSC announced second-quarter revenue of 1.83 trillion VND, an increase of 10 percent over the same period last year. However, cost of goods sold rose significantly, thereby causing pre-tax profit to decline 27 percent year-on-year to 70 billion VND. In addition to the pressure of rising raw material costs, the company's administrative expenses also soared 49 percent to more than 42 billion VND.

As a result, the second quarter's after-tax profit decreased by 44 percent to 33 billion VND. In the first six months of 2021, Ricons achieved 3 trillion VND in revenue. Deducting expenses, the company reported a 38 percent decrease in after-tax profit to approximately 57 billion VND.

On the positive side, Hoa Binh Construction (HBC) in the second quarter achieved net revenue of 3.18 trillion VND, up 8 percent. The higher cost of goods sold caused a decrease in pre-tax profit of 17 percent, down to 195 billion VND.

But financial activities saw revenue soaring 7.5 times higher than the same period last year, reaching more than 65 billion VND, mainly from nearly 51 billion VND from the transfer of investments. The second-quarter after-tax profit jumped to nearly 66 billion VND, nearly 35 times higher than the second quarter of 2020.

HBC's revenue in the first half of the year reached nearly 5.4 trillion VND. Deducting expenses, the company reported an after-tax profit of more than 73 billion VND, 5.6 times higher than the same period in 2020.

Thanks to its wind power projects, FECON Corporation (FCN) achieved six-month revenue of 1.34 trillion VND and after-tax profit of 50 billion VND, up 12 percent and 39 percent, respectively over the same period in 2020. In the second quarter, FCN reported an after-tax profit of 35 billion VND, up 66 percent year-on-year.

In 2021, the company expects revenue to reach 3.9 trillion VND, profit after tax of 175 billion VND. Thus, in six months, the company has completed 27 percent of revenue and 29 percent of profit targets for the whole year.

Hung Thinh Incons Joint Stock Company (HTN) also recorded impressive results in the first half with revenue up 2.5 times higher than last year, reaching 1.7 trillion VND. Pre-tax profit soared by 399 percent to approximately 145 billion VND, the gross profit margin reached 8.5 percent.

It reported after-tax profit of nearly 83 billion VND in the second quarter, nearly 46 times higher than the same period last year.

In the first six months, HTN achieved 2.9 trillion VND in revenue and 120 billion VND in after-tax profit, up 66 percent and 3.3 percent year-on-year, respectively./.