VietNamNet Bridge - The increasingly heavy pressure from both the overseas and domestic markets has forced many cement manufacturers to think of Merger & Acquisition (M&A) as a solution for their problems.

 


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The most difficult period for cement manufacturers has ended, thanks to the strong recovery of the real estate market, lower interest rates and policy on export encouragement. 

Ha Tien 1, a listed company, for example, reported turnover of VND5.571 trillion for the first nine months of 2015, an increase of 13.6 percent compared with the same period of last year. 

But Son, Bim Son and Vicem Hoang Mai have also reported satisfactory business results.

However, only 72 million tons of cement was sold in 2015, a modest increase of one percent compared with the year before. Though domestic sales were better in the year, the export volume decreased by 19 percent due to stiff competition in the world market.

The most difficult period for cement manufacturers has ended, thanks to the strong recovery of the real estate market, lower interest rates and policy on export encouragement. 
Cement manufacturers expect a prosperous 2016 as a lot of large-scale infrastructure projects will be carried out. 

A report shows that from now to 2030, total investment capital needed to implement road, airport and seaport projects would be up to VND220 billion. 

It is estimated that 75-77 million tons would be consumed in 2016 alone, up by 4.5-7 percent compared to 2015.

However, cement manufacturers understand that difficulties are still ahead. Though sales have improved in the last two years, oversupply still exists. 

According to StoxPlus, the Vietnamese cement market would not gain a supply & demand balance until 2022.

Meanwhile, Vietnamese manufacturers would have to deal with heavy pressure from foreign groups. Foreign cement giants including Swiss company Holcim, Indonesian PT Semen and Thai firm SCG all are present in Vietnam, and are considering scaling up production here.

The weak point of Vietnamese cement enterprises is high operation cost. StoxPlus estimates that the EBITDA Margin (earnings before interest, taxes, depreciation and amortization) of Vietnamese listed companies was 7-8 percent by the end of 2014, much lower than that of foreign rivals.

There are about 60 cement manufacturers and 45 percent of them have a small capacity of less than 1 million tons per annum. Therefore, analysts believe that merger & acquisition (M&A) will be a growing tendency in 2016 and upcoming years.

In fact, the M&A wave in the cement sector began in 2015. Hoang Long Cement, for example, took over Sai Son, while Vicem admitted Ha Long, Song Da and Song Thao. Prior to that, Viettel Group acquired Ha Long and Cam Pha companies.

In early 2015, PT Sement took over a Vietnamese company, while Holcim and Lafarge merged to form a giant enterprise with the capacity of $6 million tons per annum.


NCDT