Tung Ho Steel Enterprise Corp (東和鋼鐵) yesterday said its Vietnamese plant would remain in the red next quarter due to lower gross margin, but there was a chance for the plant to break even within one to two years.
The plant in Vung Tau City, Ba Ria-Vung Tau Province, reported combined losses of about NT$400 million (US$12.89 million) in the first half of this year, due to increases in manufacturing costs and weak steel pricing, the company said.
“Steel prices and customer demand did not improve this quarter, as customers remained conservative [about market outlook] amid the ongoing US-China trade dispute,” chairman and president Henry Ho (侯傑騰) told an investors’ conference in Taipei.
The plant, which has a capacity of 50,000 tonnes per month, has produced about 20,000 tonnes of steel a month since it started operations early this year, he said.
Formosa Ha Tinh Steel Corp (台塑河靜鋼鐵) earlier this year began selling billets earlier, adding to the already slumping steel market in Vietnam, Tung Ho said.
Ho said that he expected competition from Formosa Ha Tinh Steel would ease after the plant shifted its products to coils and wire rods in the next few years.
The company remains bullish about its Vietnamese facility, which accounted for 10 percent of its overall sales of NT$30.37 billion in the first eight months, as the Vietnam Steel Association forecast the market is to grow at a compound annual growth rate of 11.7 percent between 2013 and this year, the company said.
It expects rebar output in Taiwan would grow 10.48 percent year-on-year to 1.02 million tonnes this year, from 920,660 tonnes, as a growing number of local firms are to relocate their production lines from China and rollouts of public infrastructure projects, such as the MRT Wanda Line, would boost demand, the company said.
In the first half of the year, net income climbed 25.23 percent to NT$711.63 million from NT$568.4 million a year earlier. Earnings per share increased to NT$0.71 from NT$0.57, the company’s financial statement showed.
Gross margin dipped from 8.88 percent to 8.34 percent.
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