High inventories hurt local companies
High inventories hurt local companies
Businesses are struggling to sell products in the second-half of the year despite reports of decreasing inventories.
According to the Viet Nam Cement Association, in the first half of this year, 29.5 tonnes of cement were sold, 1.5 tonnes higher than the same period last year. About 76 per cent was for domestic use.
However, the association's president Nguyen Van Thien said that the increase did not reflect the recovery of the domestic market.
He said the growth was due to exports soaring 200 percent over the same period last year, while domestic sales decreased by 4 per cent.
A recent survey by the Viet Nam Chamber of Commerce and Industry (VCCI) revealed that nearly 70 per cent of domestic companies have been unable to clear their inventories and effectively exploit the market.
Truong Ngoc Minh, Deputy Director of Viglacera Tien Son, told Dau Tu (Investment) newspaper that his company must reduce production and deal with surplus inventory from the first half of the year. The company was now operating at only two thirds of its capacity.
At the end of last month, the company's inventory was equivalent to the production output for two months and the company's profits were down VND1 billion (US$47,620) for the first half of the year.
A projected profit of VND11 billion ($523,810) for the year will not be met unless the market thrives for the remainder of the year, Minh said.
According to the Viet Nam Steel Corporation (Vnsteel), production output only reached 42 percent of the year's plan, reaching 675,900 tonnes, while the unsold volume was estimated to be more than 190,000 tonnes.
Vnsteel's general director Le Phu Hung said despite production cuts, inventory remained high due to low demands during the first six months of the year.
He added that only seven of the 13 VnSteel members showed a loss for the six-month period.
However, VCCI's survey said that the business and production forecasts were expected to increase for the second-half due to improvements in the Government's macroeconomic policies.
Dang Duc Thanh from VCCI urged companies to maximise capital through restructuring in order to reduce their reliance on bank loans. Capital should be raised through joint-ventures, issuing bonds or by withdrawing from non-core business.
Statistics from the Ministry of Industry and Trade showed that the inventory index for manufacturing and processing industries dropped from 19.9 per cent to 16.5 per cent in the February-March period, 13.1 percent in May and 9.7 per cent in June.
vietnamnews
