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Minh Tu
While the Covid-19 pandemic hurt many businesses, it brought higher profits to some industries. Let’s look at some success stories
The year 2020 was a “fiasco” for many enterprises in Vietnam. Nearly 102,000 businesses withdrew from the market, 14% more than in 2019. According to FiinGroup’s estimates, in 2020, listed companies’ revenues dropped by 8%, excluding the finance industry. Profits dropped by 21% compared to the previous year. Certain sectors were heavily affected by the Covid-19 pandemic, including aviation and tourism, while the oil and gas industry faced a tough year due to low oil prices.
However, during the pandemic, many businesses in both non-financial and financial sectors sustained positive growth.
Money in the banks
According to FiinGroup’s estimates, listed banks achieved profit growth of 10% in 2020, despite the pandemic’s severe economic impacts. This growth came from the development of banks’ three main income streams: net interest, services, and other activities.
Vietcombank announced a 2020 pre-tax profit of VND 23 trillion, equal to the previous year. The bank retained its title as the most profitable credit institution in the system. Meanwhile, Vietinbank achieved a pre-tax profit of VND 16.450 billion, up by 43% over 2019. Private banks such as TPBank and MSB also announced profits of VND 4.2 trillion (up by 22%) and VND 2.5 trillion (up by 94%) over the same period in 2019.
A high net interest margin (NIM) was key to helping the banking sector’s profit growth last year. According to SSI Research, banks’ NIM showed impressive recovery thanks to the ongoing reduction of deposit rates following three adjustments by the State Bank. Loan packages with preferential interest rates for customers impacted by Covid-19 were halted and the non-term deposit (CASA) ratio improved.
The banks also enjoyed steady growth of non-interest income. This development was fueled by foreign exchange trading and securities investment. Payment services, trade finance, and bancassurance also recovered. In addition, the State Bank’s Circular 01 allowed banks not to make provisions for non-performing loans to firms affected by Covid-19. Therefore, many experts noted that the risk provision level did not reveal the pandemic’s full impact on the banking industry’s profits.
One private bank’s general director explained that this industry’s 2020 profits were helped by businesses’ quick recovery when the pandemic was brought under control. Banks also actively pursued revenues beyond those from credit interest.
Strong as steel
Mirae Asset described 2020 as a brilliant year for steel stocks and the galvanized steel industry. Leading companies like Hoa Phat, Hoa Sen, and Nam Kim saw their stock prices grow by 100% to 200% after one year, much higher than the increase of the VN-Index. These businesses achieved obvious growth.
In the first nine months of 2020, Hoa Phat’s profits reached VND 8.845 billion, higher than its results in 2019. In the fiscal year 2019-2020, Hoa Sen’s profits grew by over 200%, reaching VND 1.153 billion.
The steel industry’s needs were directly related to real estate. The domestic real estate market did not bloom in 2020 due to the Covid-19 pandemic. The domestic output of construction steel and flat steel declined in the first four months of 2020 but recovered as of May. Key factors supporting this industry were the government’s policy to promote public investment for economic recovery and strong demand from the Chinese market. Domestic construction steel prices increased by 25% in 2020, bringing strong business results for this industry.
Livestock, up and kicking
Dabaco, a leading enterprise in the livestock industry, announced 2020 after-tax profits of VND 1.4 trillion, over four times higher than in the same period in 2019 and higher than the company’s charter capital. Other pig farming enterprises like Mitraco and Dolico also gained a profit growth of several percent.
Many livestock businesses enjoyed impressive growth in profits when the price of live pork soared in 2020 due to a shortage resulting from an outbreak of African swine fever. This disease killed about six million pigs. By the end of 2020, the total number of pigs in Vietnam reached over 26 million, up by 5% compared to the beginning of the year, but only equal to 85% of the number prior to the African swine fever outbreak. From the beginning of April, at times the price of pork rose to VND 100,000 per kilogram. Since the middle of this year, the price of pork gradually dropped, then stabilized at VND 68,000-70,000 per kilogram.
While small businesses found it hard to replace their stock, large-scaled enterprises gained advantages, thanks to more breeding animals and a standardized breeding process. Nationwide, 16 big livestock enterprises increased their numbers of pigs by up to over 5.5 million, 160% higher than before the swine fever outbreak.
Fertilizer: growing profits
Many listed fertilizer companies such as Binh Dien Fertilizer, Ca Mau Fertilizer, and PVFCCo increased their profits from 50% to 310%, according to data from the first nine months in 2020, compared to the same period of 2019.
According to SSI Research, Vietnam’s fertilizer industry benefited when the Covid-19 pandemic hampered international trade, and domestic urea fertilizers were chosen to replace imported fertilizers. Vietnam’s urea production capacity is about 2.7 million tons per year – enough to meet the domestic market’s demands.
Due to lower imports of urea, local companies increased their output to make up for the shortfall, and faced less competition. The analysts added that the average price for export rice in 2020 increased by 13% compared to 2019, resulting in more land devoted to rice crops. Therefore, last year’s demand for fertilizer was also higher than that in 2019.
A hard year has passed, yet countless challenges remain in 2021. However, the World Bank forecasts Vietnam’s economy could grow by 6.8%, while HSBC predicts up to 7.6% growth. The prospect of economic recovery gives many firms high hopes for a brighter future.
