Vietnam’s Hoa Phat Group posted a net loss of nearly 2 trillion dong in Q4 2022

, Vietnam’s Hoa Phat Group posted a net loss of nearly 2 trillion dong in Q4 2022

Materials costs and weak domestic demand weigh on bottom line.

Vietnam’s Hoa Phat Group, Southeast Asia’s top steelmaker, posted a net loss of nearly 2 trillion dong ($85 million) for the October-December period, staying in the red for a second straight quarter amid declining domestic construction and high raw materials costs.

The red ink marked a sharp reversal from the year-earlier 7.4 trillion dong profit. Revenue fell 42% to 26 trillion dong.

Four of the group’s seven blast furnaces, including at its main Dung Quat steelworks in Quang Ngai province, paused operations from November to adjust production levels to the decrease in demand. Three remain offline, with the reduced output likely to continue.

For the full year, revenue slipped 5% to 142 trillion dong and net profit dropped 76% to 8.4 trillion dong.

Domestic steel supply and demand tightened in the first half of 2022 on Russia’s invasion of Ukraine. Earnings were strong in the first half, but the second-half slump dragged down full-year performance.

The Communist Party has been stepping up its campaign against corruption, aggressively investigating financial and capital market fraud relating to the real estate business. The chairpersons of major conglomerate FLC Group and real estate developer Van Thinh Phat Group were arrested in 2022.

The investigations have shaken the industry and made financial institutions reluctant to lend. Construction projects in Vietnam have been postponed one after another, pushing down steel demand. And with the high cost of raw materials, steelmakers are being hit hard from two sides.

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