What challenges for PLC?

Facing this situation, PLC’s Board of Directors planned to propose to shareholders a reduction in the pre-tax profit target from VND 140 billion, as set by the 2024 AGM, to VND 65 billion.

Core Business Segments in Decline

According to the first nine months of 2024's financial report, PLC's business results have "plummeted." In particular, compared to the same period last year, revenue decreased 16.7% to VND 4,808 billion, and after-tax profit decreased 71.8% to VND 23 billion. Consequently, the business has only met 29% of the pre-tax profit goal set by the 2024 AGM, but 62% of the updated plan.

The management of PLC claims that the sluggish distribution of public investment in Q3 2024 was the cause of the performance drop. All business segments had a sharp decline in revenue: the lubricant segment saw a 14% drop in revenue to VND 417 billion, the asphalt segment saw a 27% decline to VND 654 billion, and the chemical segment saw a 30% year-over-year decline to VND 389 billion.

Additionally, many enterprises in the wood and footwear industries either halted or scaled back production, reducing the demand for PLC’s chemical solvents to just 70–80% of the same period in 2023.

Domestic Competition Pressures

Demand from governmental investment initiatives might "revive" PLC's sales volume in 2025. However, because of intense domestic competition, the company's profit margins continue to be poor. Notably, PLC's largest revenue-generating segment, asphalt, is exhibiting long-term symptoms of deteriorating gross margins, dropping from an average of 11–13% to just 8.1% in Q3 2024.

The primary cause is the rivalry from import wholesalers, which has caused asphalt costs to consistently decline despite a slow recovery in demand from the infrastructure development industry.

Currently, PLC holds the largest market share in the asphalt industry (30% nationwide), with a production capacity of 400,000 tons/year. However, in 2024, trade and import companies gained a pricing advantage due to a global oversupply, particularly from the Chinese market. Imported asphalt prices have been declining since the beginning of the year, negatively affecting PLC’s production and business operations. To remain competitive, PLC has had to lower its selling prices to survive.

Adjusting Business Plans

PLC said that the economic climate and outside variables had a detrimental effect on its main businesses, especially chemicals and asphalt. When creating the 2024 business plan, the company admitted that the overall economic challenges were greater than its capacity for anticipating.

Consequently, PLC must modify its business objectives to conform to the real circumstances. The Board of Directors intends to present an updated plan to the AGM that would cut the original plan by 53% to a target pre-tax profit of VND 65 billion. Additionally, the dividend payout ratio will drop from at least 10% to at least 5%.

Additionally, PLC’s financial debt at the end of Q3/2024 was recorded at VND 1,865 billion, down 10% compared to the beginning of the year. However, according to DSC, PLC has not provided clear information regarding the purpose of the funds raised earlier this year. Consequently, PLC faces significant interest payment pressures amid unfavorable business operations.