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Rubber companies set glum business targets

Rubber prices are at a record low since October 2016, fetching only $1.57 per kilogramme. In this context, rubber companies are setting cautious business targets.

The price of rubber has been forced down by sharp decreases in the world market price and global demand. The price of rubber on the Tokyo Commodity Exchange fell by 1.1 per cent to $1.57 per kilogramme, equivalent to $1,570 per tonne.

One of the reasons dragging down rubber prices is the decreasing oil price. Moreover, at this time of the year exploitations halts, decreasing output.

According to the Ministry of Industry and Trade’s Department of Export and Import, in the first five months of this year exported rubber volume increased lightly, but its value reduced. Rubber exports in the first five months were estimated at 424,000 tonnes worth $620 million, up 17.4 per cent in volume but down nearly 20 per cent in value compared to the same period in 2017.

The changes in the price of rubber made rubber companies more careful in their business planning, as well as caused concerns for shareholders. At the recent annual general shareholders’ meeting of Dong Phu Rubber JSC (code: DPR), the board of management was asked about the sharp decrease in the 2018 selling price. DPR set the selling price at VND36.5 million ($1,608) per tonne and consumption volume at 16,500 tonnes this year.

Chairman Dang Gia Anh said that the company issued these figures based on the real market price from the fourth quarter of 2017 and forecasts for 2018. The price of rubber has been on a decreasing trend, and the average of DPR’s rubber price in the first five months was VND35.9 million ($1,580) per tonne, lower than the planned average price, and 26 per cent down on-year. Notably, it was only VND34.1 million ($1,502) this May.

In this context, DPR’s gross profit from business and production was VND148 billion ($6.52 million) in the first five months, up 9 per cent compared to the same period last year, but profit from the rubber business reduced sharply to VND14.2 billion ($625,600), down 70 per cent on-year.

This year, Dong Phu Rubber JSC expects to gain VND781.7 billion ($34.44 million) in sales revenue and VND245.7 billion ($10.8 million) in pre-tax profit. Shareholders will get dividends at the ratio of 40 per cent. This figure also showed decreasing growth in comparison to the same period last year.

Meanwhile, Phuoc Hoa Rubber JSC (code: PHR) sees many difficulties in the year ahead such as lack of employees, unusual weather conditions impacting planting, yield, sales, and profit, while the company is still liquidating its old rubber plantation.

PHR set its targets at VND1.606 trillion ($70.75 million) in revenue and VND400.5 billion ($17.64 million) in pre-tax profit, down 2.8 and 2.7 per cent compared to the same period last year. Notably, in the first quarter of 2018, the sales of PHR sharply reduced to VND268 billion ($11.8 million) from VND412 billion ($18.15 million), and gross profit decreased by 16.6 per cent on-year.

Hoa Binh Rubber JSC (code: HRC) also set lower targets than last year's performance. The total revenue is targeted at VND145.6 billion ($6.4 million) and after-tax profit is at VND5.5 billion ($242,300), down 14 and 35 per cent. In the first quarter, HRC recorded only VND1 billion ($440,000) in gross profit, down 41 per cent compared to the same period last year and amounting to only 18 per cent of the annual plan.

In the same situation, the selling price of Tay Ninh Rubber JSC (code: TRC) was at VND35.9 million ($1,582) per tonne in April 2018, while average of production costs were VND33.5 million ($1.476), so the company earned only VND2.4 million ($105.7) per tonne. The high production costs sharply reduced TRC's profit this term, while other profits recorded only VND5.5 billion ($242,300), very far from the VND27.3 billion ($1.2 million) that the company achieved in the same period last year.

TRC’s gross revenue in the first quarter also decreased slightly to VND80.8 billion ($3.56 million), gross profit to VND11.4 billion ($0.5 million), equaling 33 per cent on-year and capturing 13 per cent of the annual pre-tax profit target.

On the securities market, most rubber stocks have been impacted by the sector’s difficulties and started falling. Over the ten days from June 14 to 26, the price of PHR declined by 12.1 per cent, TRC by 3.4 per cent, HRC by 9.5 per cent, and DPR by 4.1 per cent.

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Rubber companies set glum business targets

Rubber prices are at a record low since October 2016, fetching only $1.57 per kilogramme. In this context, rubber companies are setting cautious business targets.

The price of rubber has been forced down by sharp decreases in the world market price and global demand. The price of rubber on the Tokyo Commodity Exchange fell by 1.1 per cent to $1.57 per kilogramme, equivalent to $1,570 per tonne.

One of the reasons dragging down rubber prices is the decreasing oil price. Moreover, at this time of the year exploitations halts, decreasing output.

According to the Ministry of Industry and Trade’s Department of Export and Import, in the first five months of this year exported rubber volume increased lightly, but its value reduced. Rubber exports in the first five months were estimated at 424,000 tonnes worth $620 million, up 17.4 per cent in volume but down nearly 20 per cent in value compared to the same period in 2017.

The changes in the price of rubber made rubber companies more careful in their business planning, as well as caused concerns for shareholders. At the recent annual general shareholders’ meeting of Dong Phu Rubber JSC (code: DPR), the board of management was asked about the sharp decrease in the 2018 selling price. DPR set the selling price at VND36.5 million ($1,608) per tonne and consumption volume at 16,500 tonnes this year.

Chairman Dang Gia Anh said that the company issued these figures based on the real market price from the fourth quarter of 2017 and forecasts for 2018. The price of rubber has been on a decreasing trend, and the average of DPR’s rubber price in the first five months was VND35.9 million ($1,580) per tonne, lower than the planned average price, and 26 per cent down on-year. Notably, it was only VND34.1 million ($1,502) this May.

In this context, DPR’s gross profit from business and production was VND148 billion ($6.52 million) in the first five months, up 9 per cent compared to the same period last year, but profit from the rubber business reduced sharply to VND14.2 billion ($625,600), down 70 per cent on-year.

This year, Dong Phu Rubber JSC expects to gain VND781.7 billion ($34.44 million) in sales revenue and VND245.7 billion ($10.8 million) in pre-tax profit. Shareholders will get dividends at the ratio of 40 per cent. This figure also showed decreasing growth in comparison to the same period last year.

Meanwhile, Phuoc Hoa Rubber JSC (code: PHR) sees many difficulties in the year ahead such as lack of employees, unusual weather conditions impacting planting, yield, sales, and profit, while the company is still liquidating its old rubber plantation.

PHR set its targets at VND1.606 trillion ($70.75 million) in revenue and VND400.5 billion ($17.64 million) in pre-tax profit, down 2.8 and 2.7 per cent compared to the same period last year. Notably, in the first quarter of 2018, the sales of PHR sharply reduced to VND268 billion ($11.8 million) from VND412 billion ($18.15 million), and gross profit decreased by 16.6 per cent on-year.

Hoa Binh Rubber JSC (code: HRC) also set lower targets than last year's performance. The total revenue is targeted at VND145.6 billion ($6.4 million) and after-tax profit is at VND5.5 billion ($242,300), down 14 and 35 per cent. In the first quarter, HRC recorded only VND1 billion ($440,000) in gross profit, down 41 per cent compared to the same period last year and amounting to only 18 per cent of the annual plan.

In the same situation, the selling price of Tay Ninh Rubber JSC (code: TRC) was at VND35.9 million ($1,582) per tonne in April 2018, while average of production costs were VND33.5 million ($1.476), so the company earned only VND2.4 million ($105.7) per tonne. The high production costs sharply reduced TRC's profit this term, while other profits recorded only VND5.5 billion ($242,300), very far from the VND27.3 billion ($1.2 million) that the company achieved in the same period last year.

TRC’s gross revenue in the first quarter also decreased slightly to VND80.8 billion ($3.56 million), gross profit to VND11.4 billion ($0.5 million), equaling 33 per cent on-year and capturing 13 per cent of the annual pre-tax profit target.

On the securities market, most rubber stocks have been impacted by the sector’s difficulties and started falling. Over the ten days from June 14 to 26, the price of PHR declined by 12.1 per cent, TRC by 3.4 per cent, HRC by 9.5 per cent, and DPR by 4.1 per cent.

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