Enterprises appear to have been cautious when drawing up business plans for 2019.

After seeing profits exceeding targeted levels over the last four years and reporting huge profit of VND8.6 trillion in 2018, Hoa Phat Group has unexpectedly lowered the targeted profit by 22 percent to VND6.7 trillion for 2019.

The leading steel manufacturing group projects revenue increase of 24 percent to VND70 trillion, but it thinks the profit will decrease, which shows the cautiousness of its board of management.

REE, which made a profit of 30 percent higher than initially planned, is also predicting lower profit for 2019, at VND1.465 trillion, or a decrease of 18 percent, though the revenue is estimated to increase by 10 percent.

The Ca Mau Gas & Fertilizer JSC has slashed the targeted profit by 63 percent to VND240 billion despite the projected revenue increase of 10 percent. 

2019 is the first year for the company to apply the new gas price level. The US-China  trade war, the decrease in gas supply, and climate change will also affect consumption.

Other manufacturing enterprises are also setting lower profit targets. PV Gas’ targeted profit is 32 percent lower than the previous year, while Thanh Cong Group’s is 7 percent, though it will enjoy big benefits from CPTPP.

Reasons

Current conditions don’t support businesses. Bank loan interest rates began rising in late 2018, which means that financial costs will increase this year. 

Enterprises still rely on bank loans and only a few large corporations can raise funds through share or bond issuance.

Businesses can see the signs of monetary policy being tightened. As the central bank strictly controls credit growth, commercial banks will have to restrict lending and choose borrowers more selectively.

As a result of the monetary policy tightening, many businesses will find it difficult to access bank loans, affecting production.

As for import/export companies, analysts said the rising protectionism in many countries has had an impact on trade. Many countries have devalued their currencies to give advantages to their exports.

Some big groups, after reaching a critical point in their core business fields, are trying to jump into other business fields. The Gioi Di Dong, the mobile phone distributor, for example, is now selling drugs and food as well.

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