STK faces mounting challenges

The company is pinning its hopes on the Unitex Project to drive its production and business operations forward.

Sharp Decline in Net Profit

In the textile and apparel value chain, STK operates upstream, providing midstream and downstream companies with raw materials. The business imports recycled PET bottles and PET resin from China under a long-term contract with its only foreign partner, the U.S. market, and is totally dependent on imported raw materials. Furthermore, textile mills in Thailand, South Korea, and Japan (17%) as well as foreign-invested enterprises (FDIs) headquartered in Vietnam (70%) are among STK's major clients.

As one of Vietnam’s top three synthetic yarn manufacturers by revenue and export value, STK faced significant challenges in 2024 due to weakened demand, order shortages, and exchange rate fluctuations that severely impacted its revenue and post-tax profit.

According to STK’s audited 2024 financial report, the company recorded a net revenue of VND 1,210 billion, unchanged from 2023. However, net profit dropped to VND 12.4 billion, marking a 73% decline compared to its unaudited earnings. This translates to an 86% year-on-year drop in net profit, reaching the lowest level in 17 years.

Intense Competition

Currently, STK competes with three other major global yarn producers—Formosa, Hualon, and Billion. Among them, Formosa is STK’s direct competitor in the recycled yarn segment, while Hualon and Billion focus on other segments such as standard synthetic yarn, PET resin, and finished fabrics of medium quality.

STK holds a competitive advantage in Vietnam’s recycled yarn market by producing high-quality products tailored to mid- and high-end customers. Leveraging its Chips Spinning technology, STK has developed durable products with excellent dyeing capabilities that meet stringent client requirements. Its eco-friendly recycled yarn aligns with the global sustainability trend, providing a strong competitive edge.

However, the ongoing trade war and the rapidly evolving yarn industry have placed STK in a precarious situation. The international market is shifting toward a more diverse range of fiber imports, including recycled, bio-based, smart, antibacterial, and flame-resistant yarns. Additionally, customers now impose strict sourcing requirements, demanding, for instance, 100% Australian or U.S. cotton. Failure to comply with these origin regulations could result in heavy penalties.

Challenges in 2025

According to documents prepared for the upcoming Annual General Meeting, STK has set ambitious targets for 2025, aiming for net revenue of VND 3,270 billion (a 270% increase) and net profit of VND 310 billion (a staggering 2,498% increase compared to 2024). If achieved, these would be the highest revenue and profit figures in STK’s history.

STK attributes its projected revenue growth to the Unitex plant, a large-scale project in Tây Ninh. The facility is designed to allocate 60% of its capacity to recycled yarn, 20% to value-added yarn, and 20% to standard yarn. With a production capacity of 60,000 tons per year, Unitex requires an estimated investment of $120 million across two phases.

It is anticipated that Unitex's first phase will start operations in Q1 2025, boosting STK's overall production capacity by 60% to 96,000 tons annually. After that, the business expects revenue to expand by 45% and net profit to rise by 36% over its five-year average.

Based on indications of market demand, Unitex's second phase will move forward, with operations expected to start in 2027. When STK is completely operational, its annual production capacity will climb to 120,000 tons, which is a 90% increase over present levels. By the time all stages are finished, the business expects to have increased sales by 141% and net profit by 71% above its five-year average.

However, STK’s financial struggles make capital mobilization a critical challenge, as the company must rely on private share issuance to fund its projects. Furthermore, competition from major players like Formosa continues to add pressure. These factors leave STK in an increasingly difficult position, both domestically and in the global market.