Rubber companies set lower profit targets for 2021

As a bear market for rubber is anticipated in 2021, Vietnamese rubber companies have edged down their profit targets for the year.

In its business plan announced at an extraordinary shareholders’ meeting at the end of February, the Vietnam Rubber Group (VRG) targets VND4.6 trillion (US$199.68 million) in after-tax profit in 2021, a year-on-year fall of 12%.

It forecast another tough year, particularly for rubber latex, with blame being placed on lower prices. The group’s rubber wood and rubber products will both face fierce competition.

Gross revenue topped VND25.99 trillion last year and after-tax profit VND5.23 trillion, up 5.67% and 29.8%, respectively. Growth was mainly spurred by its divestment from the Sai Gon VRG Investment JSC.

Experts from the Viet Capital Securities JSC said that VRG pocketed some VND1.1 trillion from the divestment, and without this its profit would scarcely have reached such a high level.

It is understandable that VRG has adjusted its profit target downwards this year, they said, in the context of unanticipated changes in the global market.

Other rubber firms like the Tay Ninh Rubber JSC (TRC) and the Phuoc Hoa Rubber JSC (PHC) also remained prudent in setting targets for 2021.

TRC aimed at VND301 billion in revenue and VND57 billion in pre-tax profit, down 29.6% and 48.8% year-on-year.

Meanwhile, PHR, who holds a huge advantage in developing industrial real estate, lowered its revenue target by 15% to VND1.92 trillion and after-tax profit target by 35% to VND751 billion.

Along with gloomy prospects for material rubber demand this year, PHR is also facing other difficulties, including stunted rubber plantations, a shortage of workers, unfavourable climate conditions, and disease in its rubber trees. Revenue and profit will also be critically affected by weakening investment in industrial zones due to the COVID-19 pandemic.

According to a report from the FPT Securities JSC (FPTS), rubber prices will remain low in 2021, at around VND32-33 million per tonne, leaving a negative impact on the sector’s latex business.

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