two thirds of the significant losses
occurred despite VICEM's nine-month revenue reaching nearly VND20.5 trillion, contributing VND730 billion to the budget. But the company (TCT) lost nearly 219 billion VND. The main reason is that the financial cost has increased the fastest from 2006 to now.
Banks' interest rates range from 12% to 21.5%, and the exchange rate difference is as high as $540 billion, which mainly increases the production costs of VICEM and its branches and reduces profits. The cost of raw materials has also increased: petrol prices have risen by 32%, electricity by 15.28% and coal by 41%.
This was followed by the impact of the credit crunch policy, which delayed the progress of many investment projects financed by the state budget, as well as the calm of the real estate market, which led to the interconnection of many cement production enterprises. Continue to sell goods at a lower selling price (even lower than cost of selling goods).
At the same time, the representative of the Ministry of Finance confirmed that the production efficiency of the cement industry was significantly reduced despite sales, as the current rate of return/equity ratio was below 9%. Cement production continues to grow. Currently, many cement companies do not have reciprocal capital when investing and must borrow up to 100%. VICEM's external debt repayment problem was also difficult, as 6/9 units suffered losses, while the exchange rate difference remained significant.
In addition, with such high profit margins, VICEM will have a hard time convincing banks to lend money for production investments. The Deputy Minister of Construction, Nguyen Tran Nam, confirmed: The essential presence of VICEM is that, compared to joint ventures and the private sector, the cost of production remains high while investments have been made to modernize the technology. In particular, the electricity and coal consumption specifications are still too large, resulting in high production costs. At the same time, among joint ventures, state-owned and private enterprises, the labor productivity of the cement industry is currently the worst. Even ten times lower than world. In
2011 in particular, VICEM's underlying investment rate was too high compared to the general case due to interest expense and depreciation of up to 35%. In addition, the product of VICEM still is drab, without high grade cement, oil industry appropriative cement, harbor resists sulphate cement.
Synchronous solution
At a meeting between Vice Premier Huang Changhai and relevant ministries of VICEM on September 23, 2011, Vice Premier Huang Changhai said, In principle, if the capacity of VICEM exceeds 70%. Up to now, enterprises can not lose money. However, due to the risk of financial cost when the exchange rate fluctuates and the loan structure is too large, although the government does not encourage cement exports, the financial cost rises and the production efficiency is low. In the long run, it can meet the needs of infrastructure development, but in the short run, expanding export markets to increase consumption-reducing inventories is still the right direction for VICEM to be applied.
Regarding the 2011-2015 program, VICEM needs to recalculate the risks to come up with a reasonable solution. VICEM needs to establish each specific standard and roadmap to reduce the consumption specification of raw materials-fuel inputs, improve labor productivity. In addition, VICEM is committed to improving the production structure, innovating mining technology according to environmental standards, and collecting waste gas to generate electricity. As a state-owned enterprise, VICEM must still take the lead in stabilizing cement prices in the market, the vice premier stressed.
The deputy prime minister also asked the state bank to instruct commercial banks to give priority to the use of foreign currencies so that enterprises can repay their debts without adjusting interest rates by signing loans. For the Ministry of Construction, it is necessary to continue to pay attention to the development plan of the cement industry suitable for the market; to firmly and strictly manage the plan; and to provide specific research and suggestions to the government on the efficiency of using cement as roads.
The Government has also asked the Ministry of Construction, in cooperation with the Ministry of Industry and Trade, to implement a key machinery programme to produce equipment for cement plants as a substitute for imported products. Regarding the Ministry of Construction, Vice Minister Nguyen Nan-nam said that the first important task that VICEM needs to deploy immediately is to increase production to reduce fixed costs. Continue to adjust prices appropriately.
VICEM must make calculations to reduce coal consumption because most plants waste this material. In particular, VICEM needs to develop a research program to develop high-quality and specialized cement products; develop concrete mixing plants to add value.
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