VIETNAM CEMENT INDUSTRY REPORT Q1/2018 1
Content Summary 4 2.2.5 Supply-Demand 32 1. Business environment 6 2.2.6 Cement and clinker export 33 1.1 Macroeconomic situation 6 2.2.7 Price movement 39 1.2 Legal framework 12 2.3 SWOT analysis 42 2. Industry overview 21 2.4 Cement industry planning 45 2.1 World cement industry 21 2.5 Outlook and forecast 48 2.1.1 Production 21 2.5.1 Driving forces of industry development 49 2.1.2 Consumption 24 2.5.2 Driving forces of output industry development 50 2.2 Vietnam cement industry 25 3. Enterprise analysis 51 2.2.1 History of Vietnam cement industry 25 3.1 Profitability 63 2.2.2 Definition and Classification 27 3.2 Performance efficiency 66 2.2.3 Basic production process 28 3.3 Financial strength 69 2.2.4 Scale and market share 30 3.4 Return on investment 72 2
Abbreviations ADB Asian Development Bank PPP Public Private Partner BOT Build Operate - Transfer GDVC General Department of Vietnam Customs EVN Vietnam Electricity Corporation GSO General Statistics Office of Vietnam FDI Foreign Direct Investment TKV Vietnam National Coal and Mineral Industries Holding Corporation Limited FIA Foreign Investment Agency VICEM Vietnam Cement Industry Corporation ICR International Cement Review VIRAC VIRAC Joint Stock Company VNCA Vietnam National Cement Association 3
Summary Vietnam cement market continues to have excess supply Cement quality is determined by two main factors: limestone materials and technology, equipment. Logistic is still the weak point of the cement companies in Vietnam. The perspective of cement demand can vary significantly based on the development of infrastructure projects and real estate cycles. 4
Summary Cement prices in the country are stable over the years, the lowest in the North, and the highest in the South Three groups of cement suppliers in Vietnam: Production expenses: Sales strategy: Because of the competition within the industry with large cement companies joining the market, small cement firms are forced into bankruptcy or merger because they are not competitive enough. 5
Content 1. Business environment 1.1 Macroeconomic situation 1.2 Legal framework 6
1. Business environment 1.1 Macroeconomic situation Gross domestic product in 2017 is estimated to increase by 6.81% compared to 2016, GDP growth rate by quarter, 2015-2017 Sources: VIRAC, GSO GDP by current price and GDP per capita, 2013-2017 GDP per capita has increased strongly over the past few years. Sources: VIRAC, GSO 7
1. Business environment 1.1. Macroeconomic situation % Industrial production index of the manufacturing, 2012-2017 Source: VIRAC, GSO VND/USD exchange rate, 2013-2017 In 2017, the VND / USD exchange rate was quite stable around VND 22,400. Source: VIRAC, SBV 8
1. Business environment 1.1 Macroeconomic situation State revenues and expenditures VND trillion State revenues, 2017. VND trillion Government expenditures, 2017 Source: VIRAC, GSO Source: VIRAC, GSO 9
1. Business environment 1.1 Macroeconomic situation The rate of development of social investment capital increasing at current prices, 2013-2017 The investment capital for society development by current prices for economic sectors, 2010 2016e Sources: VIRAC, GSO 11
1. Business environment 1.1 Macroeconomic situation Billion USD FDI capital, 2015-2017 Foreign direct investment FDI attraction by sector, 2017 Sources: VIRAC, FIA Sources: VIRAC, FIA 11
Content 1. Business environment 1.1 Macroeconomic situation 1.2 Legal framework 12
1. Business environment 1.2 Legal framework - Group of general regulations Decision No.1488/QD-TTg established stricter conditions for new entrants by establishing different technical requirements: Regulations on WHRPG (according to Decision No.1488/QĐ-TTg): 13
1. Business environment 1.2 Legal framework - Group of general regulations WHRPG system: Advantages Disadvantages WHRPG Funds: 14
1. Business environment 1.2 Legal framework - Group of price regulations Decree No. 177/2013 / ND-CP 15
1. Business environment 1.2 Legal framework - Group of price regulations Tax policy: 16
1. Business environment 1.2 Legal framework - Group of price regulations 17
1. Business environment 1.2 Legal framework - Group of environmental and resources regulations Environmental Protection Tax applied since 1/2012 No Parameter Concentration C (mg/m³) A B1 B2 Taxable Items Unit Tax rate raised by National Assembly (VND/unit) Tax rate raised by the Standing Committee Natural Resources Tax applied since 2/1/2014 Environmental Protection Tax (EPT) Type of resource Taxation (%) Applicable rate (%) tax Natural Resources Tax (NRT) 18
1. Business environment 1.2 Legal framework - Group of environmental and resources regulations However, the tax rate on the resources has been reacted strongly by the business 19
1. Business environment 1.2 Legal framework - Group of Export Tax Regulations The Ministry of Finance issued Decree No.122/2016/ND/CP dated 1 September 2016 Materials: Clinker and cement: Import and Export Tariffs applied since 2016 No Item Export tax rate (%) Import tax rate (%) Decree No.122/2016/ND/CP 20
Content 2. Industry overview 2.1 World cement industry 2.2 Vietnam cement industry 2.3 SWOT analysis 2.4 Industry planning 2.5 Outlook and forecast 21
2. Industry overview 2.1 World cement industry 2.1.1 Production Million tons Global Cement Production, 2011 2076e Cement production by region 2015e Source: VIRAC, Statista Cement production in Asia is leading the world, 22
2. Industry overview 2.1 World cement industry 2.1.1 Production Cement production output of some countries, 2017 Top largest cement producing countries, 2017e No Country Production volume (million tons) Sources: VIRAC, Statista Sources: VIRAC, Statista China is currently the largest cement producer in the world, 23
2. Industry overview 2.1 World cement industry 2.1.2 Consumption Million tons Global Cement Consumption, 2010 2018e Consumption structure of cement worldwide, 2016 Source: VIRAC, Global Cement Source: VIRAC, International Cement Review 24
Content 2. Industry overview 2.1 World cement industry 2.2 Vietnam cement industry 2.3 SWOT analysis 2.4 Industry planning 2.5 Outlook and forecast 25
2. Industry overview 2.2 Vietnam cement industry 2.2.1 History of Vietnam cement industry Cement industry is one of the earliest established industries in Vietnam (along with coal, textile, railway...) 26
2. Industry overview 2.2 Vietnam cement industry 2.2.2 Definition and Classification Definition: Clinker Cement Classification Vietnam commonly used standards on cement today: 27
2. Industry overview 2.2 Vietnam cement industry 2.2.3 Basic production process 28
2. Industry overview 2.2 Vietnam cement industry 2.2.3 Basic production process 29
2. Industry overview 2.2 Vietnam cement industry 2.2.4 Scale and market share Manufacturing enterprises allocation by region, 2016e Source: VIRAC, GSO Chain allocation by area, 2016 30
2. Industry overview 2.2 Vietnam cement industry 2.2.4 Scale and market share Consumption market share of key enterprises, 2017e There are three main groups of cement suppliers in Vietnam: Source: VIRAC, VNCA 31
2. Industry overview 2.2 Vietnam cement industry 2.2.5 Supply-Demand million tons Cement supply - demand, 2011-2017e * Supply = total output of cement production; Demand = domestic cement consumption + export output of cement, clinker Source: VIRAC, VNCA 32
2. Industry overview 2.2 Vietnam cement industry 2.2.6 Cement and clinker export World s top 6 largest cement exporting countries 2016e million tons Source: VIRAC, VNCA, Uncomtrade 33
2. Industry overview 2.2 Vietnam cement industry 2.2.6 Cement and clinker export million tons Cement clinker exports, 2010-2017e Source: VIRAC, VNCA 34
2. Industry overview 2.2 Vietnam cement industry 2.2.6 Cement and clinker export Thousand tons Cement clinker exports, 1/2015-12/2017e Source: VIRAC, GDVC The situation of cement export in the upcoming time is forecasted to be more difficult as China's excess cement production and export prices are low, thus creating fierce competition for Vietnamese export cement. 35
2. Industry overview 2.2 Vietnam cement industry 2.2.6 Cement and clinker export In 2017, the main export markets for cement and clinker are Bangladesh and the Philippines. Export markets for cement and clinker, 2015-2017e million tons Source: VIRAC, GDVC 36
2. Industry overview 2.2 Vietnam cement industry 2.2.6 Cement and clinker export The cement exporters of Vietnam are divided into 2 types: Cement manufacturers: million tons/year Capacity of cement manufacturers for export in 2016 Trading company : Source: VIRAC, VNCA 37
2. Industry overview 2.2 Vietnam cement industry 2.2.6 Cement and clinker export The enterprises export cement directly, 2017 In 2017, for the export of cement directly, Vicem Ha Long, Nghi Son and Thang Long are the three largest exporting enterprises, Sources: VIRAC, VNCA Exporters of clinker directly, 2017 Sourcces: VIRAC, VNCA 38
2. Industry overview 2.2 Vietnam cement industry 2.2.7 Price movement Cement price in Vietnam is much lower than that of other countries in the region and the world average price. USD/ton Cement price, 2016 Source: VIRAC, ICR 39
2. Industry overview 2.2 Vietnam cement industry 2.2.7 Price movement Generally in 2017, cement prices are stable compared to 2016 because the price of raw materials and inputs, production costs are stable so the cement manufacturing factories hold cement price stably. Cement price, 2016 VND thousand/ton Sale price of cement at some cement companies, 2017 VND thousand/ton Retail price of cement in the areas, 2017 Source: VIRAC, Department of Price Management Source: VIRAC, Department of Price Management 40
2. Industry overview 2.2 Vietnam cement industry 2.2.7 Price movement USD/ton Export price of cement and clinker, 6/2015-12/2017 Export price Source: VIRAC, Department of Price Management 41
Content 2. Industry overview 2.1 World cement industry 2.2 Vietnam cement industry 2.3 SWOT analysis 2.4 Industry planning 2.5 Outlook and forecast 42
2. Industry overview 2.3 SWOT analysis Advantage: Limitation: 43
2. Industry overview 2.3 SWOT analysis Opportunities: Challenges: 44
Content 2. Industry overview 2.1 World cement industry 2.2 Vietnam cement industry 2.3 SWOT analysis 2.4 Industry planning 2.5 Outlook and forecast 45
2. Industry overview 2.4 Industry planning 2.4.1 Cement industry planning Decision No. 1488/QD-TTg of the Prime Minister approving the planning on development of Vietnam cement industry. 46
2. Industry overview 2.4 Industry planning 2.4.1 Cement industry planning Year Cement demand (million tons) 47
Content 2. Industry overview 2.1 World cement industry 2.2 Vietnam cement industry 2.3 SWOT analysis 2.4 Industry planning 2.5 Outlook and forecast 48
2. Industry overview 2.5 Outlook and forecast 2.5.1 Driving forces of industry development 49
2. Industry overview 2.5 Outlook and forecast 2.5.2 Driving forces of output industry development Forecast for value of construction and infrastructure, 2010 2022f Source: VIRAC Population growth, 2011 2017e Source: VIRAC, GSO 50
Content 3. Enterprise analysis 3.1 Profitability 3.2 Performance efficiency 3.3 Financial strength 3.4 Return on investment 51
3. Enterprise analysis 3.1 Typical enterprises in 2015 Top 10 cement enterprises with the highest revenue in 2016 Name of enterprise Classification Address 1 Ha Tien 1 Cement Joint Stock Company Charter capital (VND million) Revenue in 2016 (VND million) 2 The Vissai Cement Corporation 3 Nghi Son Cement Company 4 VICEM Hoang Thach Cement Company Limited 5 Bim Son Cement Joint Stock Company 6 VICEM But Son Cement Joint Stock Company 7 Thang Long Cement Joint Stock Company 8 9 VICEM Hoang Mai Cement Joint Stock Company Quang Ninh Cement and Construction Joint Stock Company 10 Sai Son Cement Joint Stock Company Source: VIRAC 52
3. Enterprise analysis Ha Tien 1 Cement Joint Stock Company Ha Tien 1 Cement Joint Stock Company 53
3. Enterprise analysis The Vissai Cement Corporation The Vissai Cement Corporation 54
3. Enterprise analysis Nghi Son Cement Company Nghi Son Cement Company 55
3. Enterprise analysis VICEM Hoang Thach Cement Company Limited VICEM Hoang Thach Cement Company Limited 56
3. Enterprise analysis Bim Son Cement Joint Stock Company Bim Son Cement Joint Stock Company 57
3. Enterprise analysis VICEM But Son Cement Joint Stock Company VICEM But Son Cement Joint Stock Company 58
3. Enterprise analysis Thang Long Cement Joint Stock Company Thang Long Cement Joint Stock Company 59
3. Enterprise analysis VICEM Hoang Mai Cement Joint Stock Company VICEM Hoang Mai Cement Joint Stock Company 60
3. Enterprise analysis Quang Ninh Cement and Construction Joint Stock Company Quang Ninh Cement and Construction Joint Stock Company 61
3. Enterprise analysis Ha Tien 1 Cement Joint Stock Company Sai Son Cement Joint Stock Company 62
Content 3. Enterprise analysis 3.1 Profitability 3.2 Performance efficiency 3.3 Financial strength 3.4 Return on investment 63
3. Enterprise analysis 3.1. Profitability VND million Net revenue growth, 2015-2016 Source: VIRAC 64
3. Enterprise analysis 3.1. Profitability VND million Gross profit growth, 2015-2016 Source: VIRAC 65
Content 3. Enterprise analysis 3.1 Profitability 3.2 Performance efficiency 3.3 Financial strength 3.4 Return on investment 66
3. Enterprise analysis 3.2 Performance efficiency Total asset turnover, 2015-2016 Unit: times Fixed asset turnover, 2015-2016 Unit: times Source: VIRAC Source: VIRAC 67
3. Enterprise analysis 3.2 Performance efficiency Inventory turnover, 2015-2016 Unit: times Source: VIRAC 68
Content 3. Enterprise analysis 3.1 Profitability 3.2 Performance efficiency 3.3 Financial strength 3.4 Return on investment 69
3. Enterprise analysis 3.3. Financial strength Payment ratio, 2015-2016 Source: VIRAC 70
3. Enterprise analysis 3.3. Financial strength Solvency, 2015-2016 Source: VIRAC 71
Content 3. Enterprise analysis 3.1 Profitability 3.2 Performance efficiency 3.3 Financial strength 3.4 Return on investment 72
3. Enterprise analysis 3.4 Return on investment % Profit ratio, 2015-2016 Source: VIRAC 73
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