Exchange rate volatility drives down third quarter earnings
Vietnam's foreign exchange rates fluctuated greatly in the third quarter, influenced by global currency volatility resulting in a negative impact on earnings of many listed companies.
According to data available on the financial website ndh.vn, the US dollar increased 3.1% against the Vietnamese dong in the third quarter while prices of the Japanese yen and euro went up 5.1% and 3.9%, respectively, during the period.
Around 385 companies have published the third-quarter earnings reports on the two stock exchanges as of October 28, accounting for 56% of total listed companies. Many posted lower profits due to forex losses.
"Foreign exchange rates were very volatile in the third quarter which adversely affected business results of many companies, particularly the ones which borrowed heavily in foreign currencies, or their businesses rely on imports," Thanh Thuy, a stock analyst was quoted on the ndh.vn.
With a majority of loans in the greenback, Century Synthetic Fiber Corporation (STK) saw their July-September financial expense rise almost ten times against the same quarter of last year to VND21 billion (US$937,500), thus trimming its profit to just VND7 billion (US$312,500), down 76% year-on-year.
Its nine-month profit reached nearly VND62 billion (US$2.8 million), equivalent to just 41.4% of the company's yearly target.
Petroleum, transportation and rubber companies were also among the biggest losers.
Vietnam Tanker Co (VTO) incurred a forex loss of VND24 billion (US$1.1 million) in the third quarter, pushing its financial expense up 400% compared year-on-year to VND38.6 billion (US$1.7 million) while driving its profit down 82.3% to VND3.3 billion (US$147,300).
As of September 30, VTO incurred a US dollar-denominated debt of VND856 billion (US$38.2 million) while its loans in Singaporean dollars was VND40.5 billion (US$2.5 million).
Vietnam Petroleum Transport Co (VIP) and Vinaship (VNA) were doubly hit by both forex fluctuations and poor business performance.
VIP earned VND1.4 billion (US$62,600) in net profit in the last three months, significantly down from a VND16.5 billion (US$737,000) profit in the third quarter of last year. Meanwhile, VNA incurred a loss of VND20 billion (US$893,000) during the period and adjusted its plan from a profit of VND2 billion (US$89,300) to a loss of VND60 billion (US$2.7 million) by year-end.
VNA posted a cumulative loss of VND38 billion (US$1.7 million) in the previous two quarters.
Financial expense of the Southern Rubber Industry Co (CSM), one of the biggest listed rubber companies with a market cap of over VND2 trillion (US$89.3 million), also increased by 62% against the same period of last year due to forex volatility. Its net profit thus was down 32.6% year-on-year to VND53 billion (US$2.4 million).
Apart from borrowing heavily in foreign currency, the tyre manufacturer's business depends on imported raw material which accounts for 65% of its total material input.
Also seeing rises in financial expenses due to forex fluctuations were Dry Cell and Storage Battery Co (PAC) and Ha Tien 1 Cement Co (HT1), which posted impressive earnings with net profits rising 16% and 77% year-on-year, respectively. However, VicemBut Son Cement Co (BTS) incurred a loss of VND24.5 billion (US$1.1 million) in the period.
Almost 300 companies have yet to report their financial statements, including large ones which attributed their delays in preparing lengthy consolidated financial reports. The number of companies which will likely suffer from forex fluctuations is expected to rise as many are borrowing in foreign currencies, particularly in the US dollar and euro.
Around 385 companies have published the third-quarter earnings reports on the two stock exchanges as of October 28, accounting for 56% of total listed companies. Many posted lower profits due to forex losses.
"Foreign exchange rates were very volatile in the third quarter which adversely affected business results of many companies, particularly the ones which borrowed heavily in foreign currencies, or their businesses rely on imports," Thanh Thuy, a stock analyst was quoted on the ndh.vn.
With a majority of loans in the greenback, Century Synthetic Fiber Corporation (STK) saw their July-September financial expense rise almost ten times against the same quarter of last year to VND21 billion (US$937,500), thus trimming its profit to just VND7 billion (US$312,500), down 76% year-on-year.
Its nine-month profit reached nearly VND62 billion (US$2.8 million), equivalent to just 41.4% of the company's yearly target.
Petroleum, transportation and rubber companies were also among the biggest losers.
Vietnam Tanker Co (VTO) incurred a forex loss of VND24 billion (US$1.1 million) in the third quarter, pushing its financial expense up 400% compared year-on-year to VND38.6 billion (US$1.7 million) while driving its profit down 82.3% to VND3.3 billion (US$147,300).
As of September 30, VTO incurred a US dollar-denominated debt of VND856 billion (US$38.2 million) while its loans in Singaporean dollars was VND40.5 billion (US$2.5 million).
Vietnam Petroleum Transport Co (VIP) and Vinaship (VNA) were doubly hit by both forex fluctuations and poor business performance.
VIP earned VND1.4 billion (US$62,600) in net profit in the last three months, significantly down from a VND16.5 billion (US$737,000) profit in the third quarter of last year. Meanwhile, VNA incurred a loss of VND20 billion (US$893,000) during the period and adjusted its plan from a profit of VND2 billion (US$89,300) to a loss of VND60 billion (US$2.7 million) by year-end.
VNA posted a cumulative loss of VND38 billion (US$1.7 million) in the previous two quarters.
Financial expense of the Southern Rubber Industry Co (CSM), one of the biggest listed rubber companies with a market cap of over VND2 trillion (US$89.3 million), also increased by 62% against the same period of last year due to forex volatility. Its net profit thus was down 32.6% year-on-year to VND53 billion (US$2.4 million).
Apart from borrowing heavily in foreign currency, the tyre manufacturer's business depends on imported raw material which accounts for 65% of its total material input.
Also seeing rises in financial expenses due to forex fluctuations were Dry Cell and Storage Battery Co (PAC) and Ha Tien 1 Cement Co (HT1), which posted impressive earnings with net profits rising 16% and 77% year-on-year, respectively. However, VicemBut Son Cement Co (BTS) incurred a loss of VND24.5 billion (US$1.1 million) in the period.
Almost 300 companies have yet to report their financial statements, including large ones which attributed their delays in preparing lengthy consolidated financial reports. The number of companies which will likely suffer from forex fluctuations is expected to rise as many are borrowing in foreign currencies, particularly in the US dollar and euro.