SMC restructures to survive

Investors are watching closely, expecting SMC to streamline operations, navigate difficulties, and move beyond audit concerns to reaffirm its going-concern status and establish a new growth cycle.

Restructuring is no longer optional

Based on SMC’s consolidated cash flow from operating activities in 2025, which recorded a negative VND 75.4 billion, and as of December 31, 2025, short-term liabilities exceeded short-term assets by more than VND 687.79 billion, audit firm Moore AISC noted: “These factors raise significant doubt about SMC’s ability to continue as a going concern.”

On paper, SMC closed 2025 with seemingly improved figures: revenue reached VND 7,010.3 billion, down 21.5%, while accumulated profit turned positive at VND 40.49 billion, compared to a loss of VND 139.6 billion at the beginning of the year, officially eliminating accumulated losses.

However, the company remains heavily burdened by debt, far exceeding equity. Total liabilities stood at VND 2,049.2 billion, equivalent to 203.4% of total equity, including VND 2,013.3 billion in short-term debt and VND 35.9 billion in long-term debt. The company faces constant pressure to repay obligations immediately, while gross profit remains insufficient to cover financial, selling, and administrative expenses.

As a result, 2026 leaves SMC with little choice but to pursue decisive restructuring, with a primary focus on capital restructuring and balance sheet clean-up.

Which direction for restructuring?

SMC plans to submit to its General Meeting of Shareholders a rights offering at a 2:1 ratio to existing shareholders, equivalent to issuing 36.8 million shares at VND 10,000 per share, aiming to raise VND 368.03 billion. Of this, VND 168.03 billion will be used to repay loans, while the remaining VND 200 billion will be allocated to settling payables to suppliers.

Compared to earlier plans, the company has adjusted its priorities toward settling supplier debts rather than focusing primarily on short- and long-term borrowings. This signals a shift in capital restructuring strategy: debt repayment must go hand in hand with sustaining operations — a pragmatic approach in a context where survival requires continued forward movement.

At the same time, SMC is injecting capital into core subsidiaries, including SMC Phu My Steel Processing Co., Ltd. (an additional VND 50 billion) and SMC Phu My Precision Engineering Co., Ltd. (an additional VND 100 billion). This capital allocation toward processing and precision engineering reflects a strategic pivot from pure steel trading toward higher value-added segments, aiming to improve profit margins.

These adjustments suggest that beyond immediate survival through financial restructuring, SMC is also positioning itself for longer-term recovery once it emerges from its current debt-laden phase.

Nevertheless, the company’s 2026 business targets reflect continued caution. SMC projects revenue of VND 7,000 billion, down slightly by 0.1% year-on-year, and post-tax profit of VND 30 billion, a sharp decline of 84.8% compared to 2025 results. Lower profit targets may reduce pressure to chase short-term performance, allowing the company to stabilize operations and rebuild capacity more sustainably.

SMC also plans to accelerate digital transformation, streamline operations, and focus on steel trading and processing, while improving its capital and debt structure and strengthening human resources to enhance operational efficiency. In this context, human capital is emerging as the next critical lever of restructuring. The 2026–2031 term will mark significant leadership changes, with the election of five new Board members and three Supervisory Board members, continuing a generational transition that began in late 2025. As with any restructuring effort, the effectiveness of a lean and capable leadership team remains central.

While SMC’s upcoming shareholder meeting is expected to reinforce these commitments, the broader environment remains challenging. Global supply chains are fragmenting, geopolitical risks persist, and volatility in raw material prices continues to pressure margins across the steel industry. Domestically, competition remains intense.

SMC’s recovery will depend not only on its ability to resolve financial constraints and restore operational flexibility, but also on external factors such as input costs and demand from key sectors, particularly real estate and public investment.

SMC targets net profit of VND 30 billion in 2026, down 84.8% from 2025.