Rising plastics prices weigh on businesses

VIETNAM, March 19 –

Inside a Tiền Phong Plastic Joint Stock Company factory. The gross profit margin of Tiền Phong Plastic Joint Stock Company (NTP) fell sharply last year, from 31% to 24%. — Photo courtesy of the company

HÀ NỘI — The price of plastic resin has risen sharply following the price of oil, putting pressure on plastic companies.

According to data from the global financial portal Investing, the price of polyethylene (PE) resin increased by 10.4% over the last three months, from December 9, 2021 to March 8, 2022. Similarly, the price of polypropylene ( PP) resin increased by more than 10 percent.

Plastic resins are made from petroleum products, usually PP and PE. Therefore, fluctuations in oil prices have directly affected the price of plastic resins.

Plastic resins account for about 60-70% of the cost structure of plastic manufacturing enterprises, so the current high prices of plastic resins are driving up the input costs of plastic manufacturing enterprises.

In 2021, the price of raw materials rose sharply by 1.6 times, achieving a record rise in history, which greatly affected the performance of companies in the industry.

In a meeting with investors on February 17, 2022, Nguyễn Hoàng Ngân, general manager of Bình Minh Plastics Joint Stock Company (BMP), said last year that the company made a profit of VNĐ 214 billion (9 $.4 million), down 59% from 2020. It was also the lowest profit in 13 years.

In 2022, Bình Minh Plastics establishes a high-growth business plan, with target revenue of VNĐ5.68 trillion, an increase of 25% from 2021 and pre-tax profit up 109 % to reach 560 billion VNĐ.

This plan was built on the scenario in which the price of plastics in the last months of 2021 and the beginning of this year is stable. However, with new developments in the global geopolitical situation, the company may not achieve its goals.

Facing unfavorable market development, he said Bình Minh Plastics came up with a solution, which is to control input costs. The company will actively monitor commodity prices closely so that it can stockpile enough materials when prices drop.

“The board will think carefully to ensure the company’s competitiveness and profitability,” he said.

Since 2020, the price of plastic resins has risen sharply, affecting the profit margins of plastic companies. Increasing the stockpiling of raw materials is a strategy implemented by major plastics companies.

Bình Minh Plastics’ inventory at the end of 2021 stood at nearly VNĐ 619 billion, or nearly 22% of total assets.

At Tiền Phong Plastic, the inventory value was 1,080 billion VNĐ, which represents 22.1% of the total assets.

The gross profit margin of Tiền Phong Plastic Joint Stock Company (NTP) fell sharply last year, from 31% to 24%. However, the company maintained a slight increase in net profit of 4% compared to 2020 thanks to the reduction of financial expenses and selling and administrative expenses.

An Phát Xanh Plastic Joint Stock Company (AAA) saw its gross profit margin drop from 10.46% to 9.9%.

However, thanks to real estate leasing and land leasing revenue, the company still achieved positive profit growth for the full year of 2021.

Many other plastic companies have also seen their gross profit margin decline in 2021 due to rising raw material prices. —VNS

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