As cement sector sours, foreign firms eye M&As
As cement sector sours, foreign firms eye M&As
The hard time in Vietnam’s cement industry is creating golden opportunities for foreign investors to buy in domestic cement companies on the verge of bankruptcy.
Nguyen Van Diep, chief administrative officer of Vietnam National Cement Association, said that the mergers and acquisitions (M&As) trend was considered the most effective tool for restructuring the domestic cement sector as cement firms were facing great challenges.
In the past three years, there have been approximately 10 M&A deals in this sector. Foreign investors, mostly from Asean countries, covet investments in Vietnam’s cement sector, according to Vietnam Association of Financial Investors (VAFI).
VAFI explained that under policies to promote domestic consumption of countries like Thailand, Malaysia, Indonesia and the Philippines, those countries’ stock markets are experiencing continuous growth in the recent years. This means that businesses in those countries can easily attract cheap equity while many Vietnamese companies are struggling to stay afloat amid mounting inventories and the woeful real estate market.
Domestic entities seem financially unable or unwilling to purchase local cement factories. For example, state-run Vietnam Cement Industry Corporation (Vicem), one of Vietnam’s largest cement producers, lacks capital because many affiliates have invested more in cement production lines in the recent years, while the total debt to Vicem is approximately four times as high as the total equity capital.
Nghiem Hoang Son, deputy director of Peakward Vietnam Ltd, a subsidiary of Hong Kong’s Peakward Enterprises Holding Ltd, predicted that M&A activities in Vietnam’s cement sector would increase in the coming time as the Vietnamese government has tightened up licencing new cement projects in fear that product oversupply could result in market chaos. He cited Germany’s Heidelberg Cement and Indonesia’s PT Gama as companies hunting for opportunities to enter the Vietnamese market.
Managing director Tan Sri Francis Yeoh of Malaysia’s YTL Cement Bhd, which is considering an investment in Vinaconex’s operating $285 million Cam Pha Cement facility in northern Quang Ninh province, was quoted thusly: “The group already has a presence in Vietnam. We are already providing power services in the country and hope to strengthen our presence in this country,”
Previously, PT. Semen Indonesia Tbk, Indonesia’s largest cement producer, bought Thang Long cement plant.
Son said that if more foreign investors took part in the game, it would change Vietnam’s cement sector.
vir
