Vietnam’s failing cement makers fear foreign buy-outs
Vietnam’s failing cement makers fear foreign buy-outs
Cement industry insiders are worried that foreign investors will swallow up domestic producers through merger and acquisition activities as many Vietnamese companies are on the verge of bankruptcy.
A representative of state-run Vietnam Cement Industry Corporation (Vicem), Vietnam’s largest cement producer, admitted that many domestic firms were on the verge of bankruptcy due to the falling domestic demand, high interest rates and oversupply. Vicem itself is already burdened by profligate and inefficient affiliates, while the total debts owed to Vicem are approximately four times its total equity capital.
Despite the rich potential offered by mergers and acquisitions (M&As) in the sector, no domestic strategic investor has sufficiently strong financial resources to be able to purchase weak cement factories.
Nguyen Quang Cung, chairman of Vietnam Cement Association (VCA) said foreign investors were poised to buy cash-strapped domestic cement firms to ease entry into the Vietnamese market and pick up cheap licences to quarry clinker. He worried that as foreign investors become the main shareholder, it was hard to control export cement prices or clinker mines.
Many foreign investors have said they were willing to buy faltering cement firms but only on the condition that they can pick up the licences to exploit clinker production.
Harish Ta Paria, director of Alliance Mineral said that domestic cement firms would struggle if they did not own clinker quarries.
Foreign-invested firms now accounts for up to 30 per cent of the Vietnamese cement sector’s total output, according to VCA.
However, Nguyen Ngoc Dao, a consultant for Gimpex Group said “Why do we have to worry? We have policy and tax tools. These should encourage foreign investors to enter the Vietnamese market while ensuring our mineral resources stay in-country.”
In the past three years some ten M&As have occurred in Vietnam’s cement sector. The recent M&A deals showed that foreign investors, mostly from ASEAN countries, remain keen on Vietnam’s cement sector, the Vietnam Association of Financial Investors claimed last year.
Tan Sri Francis Yeoh, managing director of Malaysia’s YTL Cement Bhd which could become an investor in Vinaconex’s $285 million Cam Pha Cement facility in the northern province of Quang Ninh was quoted as saying, “The group already has a presence in Vietnam. We’re already providing power services in the country and hope to strengthen our presence.”
PT. Semen Indonesia Tbk, previously known as Semen Gresik, Indonesia’s largest cement producer, bought the Thang Long cement plant.
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