Profits of seafood exporters will recover at the end of the year

Processing shrimp for export at Sao Ta Food Joint Stock Company

The light is slowly shining

Ho Quoc Luc, Chairman of the Board of Directors of Sao Ta Food Joint Stock Company, said that domestic commercial shrimp has fallen to the bottom, lower than anyone who cares about domestic shrimp. This leads to the fatigue of farmers, there will be no motivation to raise the difficult rainy season. The low price of commercial shrimp in the country is a foundation for the increase in consumption and export.

Le Hang, communications director of the Vietnam Association of Seafood Exporters and Producers (VASEP), said that, in addition to the difficulties caused by the poor market's consumption power, enterprises producing and exporting shrimp and pangasius have been affected. Profit decline because the price of feed, seed and input costs are all high, the cost is high, while the selling price is low, it is still difficult to sell, leading to inventory, which makes costs go up.

Forecasting the next few months, Le Hang assessed, the main import markets of seafood such as the US, EU, China, Japan... will continue to be dominated by inflation and inventories.

Specifically, seafood inventories are being released gradually in markets after a long time when importers have reduced their purchases, demand is expected to increase again in the second half of the year. However, inflation in many markets has not shown any signs of cooling down, preventing the recovery of seafood consumption and import demand in the US and EU...

According to SSI Securities Joint Stock Company (SSI), in June 2023, Vietnam's seafood export turnover was estimated at 800 million USD, down 21% over the same period; in which, shrimp and pangasius exports reached 341 million USD respectively, down 18% over the same period, but up 3% over the previous month and USD 156 million, down 26% over the same period and down 2% compared to the same period last year. last month.

Exports of shrimp and pangasius in the first half of 2023 reached 1.6 billion USD, down 31% over the same period and 885 million USD, down 38% over the same period.

SSI has yet to see any signs of demand recovery from major export markets such as the US, Europe and China due to persistent inflation and slow inventory handling.

In the first 6 months of 2023, SSI estimates the average selling price of shrimp and pangasius to the US to reach US$10.6/kg, down 12% and US$3.5/kg, down 26% respectively compare to the same period.

Regarding input materials, SSI observed a decrease in the price of raw shrimp and fish (accounting for 20% of COGS) by 9% and 4% respectively over the same period, while the price of aqua feed remained at high level.

The average price of aqua feed peaked in May 2023 at 14,900 VND/kg and feed companies only started reducing the price of aqua feed from June 2023 (about 300 VND/kg). Thus, the price of aqua feed is still 8% higher than the same period in the first 6 months of 2023.

Reduced production costs

Although there are still difficulties to face, seafood exporters will start to record improved profits in the second half of 2023 thanks to reduced costs including lower input prices, lower transportation costs. Quarter 3 accelerated of the seafood industry in general, of shrimp in particular. Shrimp businesses are sure to feel the situation and have a thorough preparation.

Due to the fact that feed prices account for 60% of COGS, coupled with a decrease in the average selling price of the industry in the first half of 2023, analysts from SSI believe that most companies, SSI analysts said. Manufacturing in the industry all have narrow margins and profits may have bottomed out in the first half of 2023.

According to SSI, although the prospect of orders to the US and China is still uncertain due to the slow recovery of the economy and high inventory levels, companies dealing in seafood export will start to see the profit margin improved in the second half of 2023, thanks to lower costs including lower input prices (shrimp, raw fish and aqua feed); reduced shipping costs.

SSI expects that leading exporters to the US market such as Vinh Hoan Joint Stock Company (stock code: VHC) will record a slight decrease in profits or flat rate over the same period in the third quarter of 2023 (due to average selling price peaked in the third quarter of 2022) and positive profit growth from the fourth quarter of 2023.

According to SSI management, orders in the third quarter of 2023 are gradually improving compared to the second quarter of 2023 in terms of consumption volume. SSI expects net revenue and net profit to reach VND11 trillion and VND1.3 trillion, respectively, down 17% and 34% y/y in 2023. In 2024, SSI expects revenue Vinh Hoan's net profit and net profit will increase sharply.

For Nam Viet Joint Stock Company, SSI estimates net revenue and net profit in 2023 at VND 4.9 trillion, up 1% and VND 465 billion, down 31%. However, SSI estimates that net sales and net profit will rebound strongly in 2024, as exports will begin to recover by the end of the fourth quarter of 2023 or the beginning of 2024.

With Sao Ta Food Joint Stock Company (stock code: FMC), SSI estimates net revenue of VND2.1 trillion, down 25% y/y in the first 6 months of 2023. In June 2023, Shrimp export turnover of the enterprise increased sharply with a revenue of VND 442 billion, up 1% over the same period and 71% compared to the previous month, close to the peak of exports in 2022.

SSI expects revenue to bottom out in the second quarter of 2023 in absolute terms, and Sao Ta Food Joint Stock Company's revenue will recover from the second half of 2023.

According to VASEP, shrimp prices tend to bottom out and the shrimp export industry to the US may recover after the second half of 2023, when the peak export season is at the end of the third quarter of 2023.

In 2023, SSI estimates net revenue and profit after tax of parent company shareholders to reach VND 5.7 trillion, up 0.2% last year and VND 330 billion, up 7% compared to 2022.

From the above results, experts said, in 2024, it is estimated that net revenue and profit after tax of parent company shareholders will reach VND 6.2 trillion, respectively, up 8.2% over the same period and VND 368 billion, up 11.2% over the same period. With a higher average selling price, the Japanese market will help Sao Ta Food Joint Stock Company achieve positive profit growth in 2023.