ATIGA, smuggled sugar, low sugar prices – A nightmare for the sugar industry
According to the Vietnam Sugar Association (VSSA), the sugarcane production activity in the 2018 – 2019 season did not meet the plan due to the decrease in the area, some areas reduced to 20 – 30%, productivity also decreased compared to the plan. plan, only 63.42 tons / ha, the word sugar also decreased slightly compared to the previous season sugar reached 9.7 CCS.
The total output of sugarcane provided to the factory was 12.2 million tons, producing nearly 1.2 tons of sugar.
Besides, the low sugar price is under the impact of smuggled sugar and commercial fraud, making the sugarcane price lower.
Although sugar mills have tried to curb the plummeting sugar price while sugar prices have fallen continuously, people still switch to other crops.
Along with that, some drought-stricken areas reduce the area and productivity and quality of sugarcane. Some areas affected by pests and diseases also affect productivity and quality.
VSSA said inventories at the sugar mills until the end of the crop about 600,000 tons, is still a year with high inventories in recent years.
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| Compare production results of crop year 2018 – 2019 and 2017 – 2018. (Data: VSSA. Graphic: Linh Phan) |
“Right from the beginning of the crop year 2018-2019, under the impact of smuggled sugar and commercial fraud, on the grounds of fighting smuggling sugar, many members of the Association have announced dumping of sugar below production cost.
Although sugar price is low, but in the long run, many member enterprises owe money to farmers' sugar, ”VSSA said.
The association also said that many businesses, including enterprises that have committed to buy sugarcane at a stable price before, have even reported buying sugarcane at very low prices, below production costs.
The Association also informed that the Government has approved the consumption of sugar through the open path and sub-border gate in Lao Cai, but most of the sugar exported through this border gate is the production production line so it cannot be resolved. be able to inventory domestic sugar produced from sugarcane.
A series of sugar industry giants are having difficulties
The big players in Vietnam's sugar industry continue to face difficulties in the 2018-2019 season because of falling sugar prices. Although many companies have increased revenue, their profit after tax has decreased.
The 2018-2019 season (starting from July 1, 2018 to June 30, 2019), although the net revenue of Son La Sugar Joint Stock Company increased by 46% to over VND 877.6 billion but profit after tax decreased by over 45% to 63.2 billion dong. Gross profit margin at 13.3%, down from 41% compared to the previous crop.
Explaining the reason for the sharp decrease in profit after tax, the company said that the price of this year's sugar price has fallen by more than 6% to 9,616 VND / kg. The price of molasses also decreased by 5.5% to VND 1,832 / kg. Molasses revenue in this season also dropped more than 26% to VND 29.1 billion.
As of June 30, Son La Sugar's short-term debt is nearly 592 billion dong and long-term debt is over 205 billion dong, down by 11% and 21% YoY respectively.
In its annual report for the 2018-2019 season, the company said that due to its geographical location adjacent to Thailand, the ATIGA agreement is a great opportunity for cheap sugar from Thailand to enter Vietnam and dominate the market. domestic sugar cane.
Plus the difficulties from the disadvantageous characteristics from the raw material areas such as difficulty in mechanization, soil, unfavorable weather, to the level of technology, … makes it difficult for domestic sugar prices to compete with foreign sugar. Imported mainly from Thailand.
“In fact, when ATIGA has not yet taken effect, the company has had to reduce the selling price, causing the profit margin to gradually decline. If there is no appropriate response, the economic efficiency will decrease even possibly leading to the situation. more and more production losses, “Son La Sugar said.
Similar to Son La sugar cane, although the revenue of Thanh Thanh Cong – Bien Hoa Joint Stock Company increased, profit after tax decreased.
Accordingly, in the 2018-2019 season, sales and service sales of Thanh Thanh Cong – Bien Hoa Joint Stock Company this year recorded an increase of 10% compared to the 2017-2018 season to over VND 11,000 billion.
However, the company's profit margin decreased 2.3 percentage points to 2.8%. Profit after tax decreased by 42% to VND 545 billion.
In the last quarter of 2018 – 2019 alone, Thanh Thanh Cong – Bien Hoa's after-tax profit decreased by 80% to VND 29.4 billion.
Explaining this sharp decline, the company stated that the average selling price is lower than the same period, while the previous season's inventory of sugar with high cost of goods remains and continues to shift to this case.
In addition, the impact of world sugar prices fell sharply and the amount of smuggled sugar across the border increased, causing the domestic sugar price to continuously decline. This is the direct cause of lower profit after tax.
Selling expenses for the whole year increased by 26.3% over the same period. The main reason is that the industry's total consumption increased from 571,502 tons in the 2017 – 2018 year to 748,632 tons in the whole year.
The company has invested in the distribution system to develop consumer channels, small and medium customer channels to ensure sustainability and stability, and promote export channels. This has increased selling expenses over the same period.
Lam Son Sugar Joint Stock Company recorded a revenue increase of nearly 31% compared to the crop year 2017-2018 to VND 1,759 billion. However, the company's profit after tax decreased by 67% to VND 1,323 billion. Cost of goods sold and services increased by 37% to VND 1,619 billion.
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| Compare revenue and profit of some sugar companies over each crop year 2018 – 2019. Graphics: H. USA |
Unlike other companies in the industry, soya milk is the key product that brings revenue to Quang Ngai Sugar, this is also the leading enterprise in soy milk market under Vinasoy brand.
Sugar production currently contributes only one fifth of Quang Ngai Sugar's total revenue and also plays a role in providing raw materials for the soy milk segment.
In the first 9 months of 2019, the company's sugar production revenue reached VND 1,268 billion, down 28% compared to the same period last year.
The sugarcane area in the 2019-2020 crop is expected to decrease
VSSA expects that the country's sugar area in the 2019-2020 season will reach more than 157,800 hectares, down 18% compared to the 2018/2019 crop year. Sugar production is expected to decrease by 17.5% to nearly 968,000 tons.
In 2019, VSSA continues to propose to extend the opening of the sugar industry until 2025. However, in a written response to the opinion of National Assembly member Thach Phuoc Binh, of the Delegation of the Delegation of the People's Committee of Tra Vinh Province, Prime Minister Nguyen Xuan Phuc said this is not feasible.
According to the Prime Minister, in 2018, the Government has allowed the delay of the removal of sugar import quota in ASEAN until 2020 to give Vietnam sugar industry more time to prepare.
“Thus, starting from 2005 when ASEAN countries start to establish economic communities, the sugar industry has a total of 15 years to prepare for integration.
If they continue to delay the implementation of commitments on sugar products, countries may have retaliatory measures and claim for compensation, Vietnam's economic and prestige impact is very great, especially in the context of Vietnam will assume the role of ASEAN Chairman in 2020, “the Prime Minister said.
In a response to National Assembly Member Thach Phuoc Binh's questioning about the difficulties of the sugar industry, Deputy Prime Minister Trinh Dinh Dung said that opening markets in international trade does not mean accepting unfair competition. equal.
The Government will continue to direct the Ministry of Industry and Trade to study to advise the continued application of ATIGA-allowed principles and safeguard measures such as the right to levy anti-subsidy tax to ensure fair competition, the right to apply the reintegrating tax and non-tariff barriers to protect domestic production from the sudden increase in imports when necessary.
VSSA has sent a document to the Ministry of Industry and Trade unanimously advocating the Ministry of Industry and Trade's implementation of the commitment to abolish tariff quotas on sugar products from January 1, 2020.
However, VSSA also proposed to the Ministry of Industry and Trade to consider establishing necessary management and supervision mechanism to legally and promptly prevent negative impacts of integration on the domestic sugar industry.
According to CI
