Where does SMC’s profit come from?

According to its Q1/2025 financial report, SMC recorded net revenue of nearly VND 1,847 billion, a 17% decrease compared to the same period in 2024. Meanwhile, the cost of goods sold rose by 17% year-over-year to VND 1,804 billion, resulting in a 37% decline in gross profit to nearly VND 43 billion.

Notably, SMC’s financial income dropped sharply to just VND 5.7 billion, a 98% plunge compared to the same period last year, due to no longer recognizing gains from the sale of NKG shares. In Q1/2024, the company had recorded nearly VND 327 billion from this sale.

Although the company significantly cut expenses—interest costs fell by 22% to just over VND 41 billion; selling expenses decreased by 31% to nearly VND 18 billion; and general and administrative expenses dropped by 14% to VND 23 billion—SMC still recorded a loss of over VND 16 billion from core operations, compared to a profit of over VND 168 billion in the same period last year.

However, thanks to nearly VND 17 billion in other income, the steel company managed to narrowly avoid a quarterly loss, posting a post-tax profit of nearly VND 127 million—almost a complete wipeout compared to the same period in 2024.

According to the company’s leadership, the primary reason for this downturn is the slow and uncertain recovery of both the global and domestic economies in Q1/2025, particularly due to geopolitical tensions and global tariff and trade wars.

Additionally, the steel industry is facing significant headwinds such as falling steel prices and weak demand. Fierce competition from domestic and imported steel producers is directly impacting SMC’s output and revenue.

Recently, SMC also released its audited consolidated financial statements for 2024, revealing that post-tax profit had dropped by 75% compared to its previously unaudited report, falling to just over VND 12 billion.

Nevertheless, with a return to profitability in 2024, SMC avoided mandatory delisting of its shares. The company had previously reported consecutive losses in 2022 and 2023.

Despite dodging delisting, the steel company still faces major concerns as its core business remains weak. The return to profitability was largely due to provision reversals and other income, not from improved operations.

Furthermore, SMC continues to face an audit warning about its going concern status due to an accumulated loss of VND 140 billion, negative operating cash flow of over VND 500 billion, and short-term liabilities exceeding short-term assets by about VND 600 billion.

Previously, the company revised its 2024 financial report, changing its net result from a loss of VND 287 billion to a profit of VND 48 billion. This adjustment was due to a 51% reduction in provisions for doubtful receivables, from VND 663 billion to VND 328 billion.

While company executives attribute part of the weak performance to low domestic steel demand, data from the Vietnam Steel Association (VSA) shows that total steel sales in Q1/2025 reached 7.501 million tons, a strong 12.2% increase year-over-year.

According to the VSA, this growth in domestic demand is mainly driven by public investment disbursement. In Q1/2025, public investment disbursement reached an estimated 17.6%, 2.8 percentage points higher than the same period last year. Major infrastructure projects such as the second phase of the North–South Expressway, Long Thanh Airport, and ring roads in Hanoi and Ho Chi Minh City have created strong demand for construction steel.

The construction steel segment posted outstanding growth: production reached 3.003 million tons, up 10.6%, and sales hit 3.075 million tons, up 19.9%.

In Q1/2025, domestic construction steel prices ranged from VND 13.6–14 million per ton, with a slight increase of VND 50–100/kg in March.

The VSA notes a clear divergence in the Q1/2025 Vietnamese steel market: strong domestic consumption fueled by public investment and recovering demand, contrasted by export challenges due to global trade protectionism.

Looking ahead to Q2 and the second half of 2025, VSA forecasts that the steel industry's growth will largely depend on the pace of public investment disbursement and infrastructure projects, which are expected to generate strong demand for construction and other types of steel. With a GDP growth target of 8% in 2025 and double-digit growth from 2026–2030, steel demand from the construction and manufacturing sectors is expected to steadily increase.

VCBS Securities also expects steel prices in Vietnam to recover, supported by a rebound in the real estate sector and accelerated public investment in the final year of the 2021–2025 period. Additionally, Vietnam's anti-dumping duties on Chinese steel are helping support local steel prices.