According to the General Director of NKG, steel prices have increased to exceed the business plan of development in 2021 scenario. Actually, the hot-rolled coil (HRC) price is currently at 930-950 USD/ton compared to the suggested one at 700-750 USD/ton.
The 2021 Annual General Meeting of Shareholders of Nam Kim Steel Joint Stock Company (HOSE: NKG) was held on April 24 morning.
DISCUSSION SECTION
Pricing of the hot-rolled coil has been increasing significantly. How does NKG manage the relevant risks?
General Director – Mr. Vo Hoang Vu: The business circumstance of the steel industry has currently been remarkably favorable, but there are various potential risks.
We have been focusing on two markets which are domestic and international. With the current export market, we can transfer all the increase in raw material costs into the final selling price because our group determines the selling deadline and the buying one, which should be matched together. In addition, we can immediately ”transship” because the demand for coated steel in Europe and North America is very good and also there is a shortage in supply. In terms of selling prices in Europe and North America are also of considerable different levels (should be higher) compared to Asia..
With regard to the domestic market, our selling price currently has a particular slow but not too big. On that basis, we always build a price strategy based on different periods of time. We can understand the closed price and the actual quantity of goods in hand to calculate the risk. In sum up, we are keeping this situation under control.
Does NKG plan to increase capital or increase capacity?
President – Mr. Ho Minh Quang: Currently, we have no plans to increase capital and invest. The deployment plans for steel pipe factories and steel mills are to optimize our current operating production capacity, which does not expand the production scale yet.
In the near future, if it is necessary and there is a demand, we will summon an Extraordinary General Meeting of Shareholders to request a capital increase.
Will Chu Lai Steel Pipe Factory continue to be deployed or not?
General Director –Mr. Vo Hoang Vu: In the period of 2019, we did not exploit the full capacity of this factory, hence, we honestly thought about developing in the Central region. However, from 2020, when domestic sales grow again, especially in steel pipe segment, we see that the South zone can still be developed.
If we continue with Chu Lai Project, NKG will lack raw materials. Currently, the company will be expanded in Binh Duong, along with our former factories being operated at full production capacity. In this context, raw materials will not be enough to supply to the Central region. As a result, the steel pipe factory project in Chu Lai should be temporarily postponed.
Is the 2021 business plan too optimistic? What if steel prices reverse?
General Director –Mr. Vo Hoang Vu: Actually, this plan was made at the beginning of the year, and some financial institutions shareholders have expressed their opinion if setting these numbers is too prudent? However, I affirm that we have already included the element of caution in this plan.
Steel enterprises are currently greatly efficient thanks to steel price improvement. Of course, when the price increases, there will also be a decrease, the key point is how we will manage that risks.
This strategy can be achieved in a half year. With the last 2 quarters, we will consider the actual situation. Therefore, we would like to keep and hold the current plan to avoid following the high planned numbers and lead to threats.
Could you please predict the Hot rolled coil price in 2021?
General Director – Mr. Vo Hoang Vu: Currently, the hot-rolled coil price is over $960/ton in the Asian and Vietnamese markets. Even this price is still much lower than the price in the US and European markets.
However, we will not base on the steel price increase to carry out the speculative activities, but we ought to calculate purchases cautiously.
Some suppliers have built domestic distribution channel, has Nam Kim had any plan for this?
General Director – Mr. Vo Hoang Vu: We’re not able to exactly analyze the market development and distribution channel policy of other firms. Nam Kim is trying to focus on the level of production, quality of products, cost of production, and prices in order to enhance competitive capabilities, in the meantime, we are creating a sale channel through distributors, steel service centers, and consolidating supplying prefabricated steel buildings.
How is the steel market expected in 2021 and in the future?
General Director – Mr. Vo Hoang Vu: In 2020-2021, the steel industry witnessed many unexpected and astonishing developments. At the beginning of 2020, the market stagnated; however, we believe that the global economy will recover in 2021 and further in the mid-term, and the steel market will accordingly benefit.
Prices have consistently increased due to lack of supply and an increase in the price of inputs. Basically, from a mid-term outlook, demand is getting better, especially the US and European market is in a shortage of steel.
Over the past ten years, developed countries have slowed down in building blast furnaces; these business activities mainly focus on China. Nevertheless, the Chinese government has been tightening steel production and exports as they become more aware of environmental pollution. Steel supply will no longer be as redundant before.
On this basis, the overall steel market is still attractive and looks potential in the long term. Meanwhile, the short-term may show a fluctuation in price. Hence, we are planning lots of scenarios in order to manage risks well.
Total revenue can reach 19,000 billion VND
Regarding the business plan for 2021, NKG board of directors submitted the shareholders to approve targeted revenue of VND 16,000 billion and VND 600 billion profit after tax, reflecting 38% and 103% up respectively comparing to 2020.
“This plan was built at the beginning of the year among steel prices much lower than now. At that time, the steel price was 700-750 USD/ton, but it increased to 930-950 USD/ton at the moment. Therefore, the total annual revenue of NKG may be 20% higher than the plan, possibly reaching 19,000 billion dong. This also depends on the price of steel in the near future.” – General Director Vo Hoang Vu shared.
According to President Ho Minh Quang, the business plan for 2021 is set out very carefully. “By the second quarter, the company can know for sure the profit after tax plan of about 600 billion dong,” he said.
Last quarter, NKG achieved a net revenue of VND 4,853 billion and profit after tax of VND 319 billion, fulfilling 30% and 53% of the whole year 2021 plan, respectively.
In light of the situation that prices keep very high and fluctuate unpredictably, GD Vu and his board of directors always closely follow up the market and continuously create scenarios in every period. In relation to buying–selling activities, “the work is being built with high cautiousness,” said GD Vu.
According to GD Vu, the financial situation of NKG remains healthy. “Currently, NKG’s assets are mainly contributed by Inventories, receivables, cash, and cash equivalent. Liquidity is completely good.” Said the GD.
In 2021, NKG’s board of directors set a production target of 900,000 tons. However, according to General Director Vu, the total capacity of NKG factories has now increased to 100,000 tons/month thanks to the successful application of Enterprise Resources Planning (ERP).
NKG is also investing in a steel pipe factory and steel coils warehouse in Binh Duong to optimize the capacity of the factories. Company leaders said that the space at the existing factory is “very cramped”.
“In order to increase the operating capacity of all factories and improve customer service, it is imperative to invest in warehouses and move some operations out of the factory area,” said NKG General Director.
The General Meeting of Shareholders ended with all proposals approved. Source: https://vietstock.vn/2021/04/dhdcd-nkg-doanh-thu-2021-co-the-dat-19-ngan-ty-dong-vi-gia-thep-vuot-kich-ban-ke-hoach-737-850600.htm?fbclid=IwAR2NceraNmw9U1vpEUqTsfOmCXycH969HduM_iJEC2t8iJ3ADA5OEQvv1O4
