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Industrial zone enterprises plan to reduce profits in 2020 due to COVID-19

Industrial zone enterprises plan to reduce profits in 2020 due to COVID-19

Monday 13, 04 2020
After a profitable 2019, even though the 2020 revenue of Industrial Zone Enterprises (IZE) is expected to increase, their profit does not share the same fate.

Phuoc Hoa Rubber doubles their interest goals

To begin with, Phuoc Hoa Rubber (PHR), due to the rubber industry facing multiple challenges, has planned to take advantage of its abundant land bank to promote its operation in industrial land lending.

With certain advantages regarding industrial areas, in 2020, PHR sets a total revenue goal for the holding company of 2,460 billion VND, increasing by 52%, with a profit-before-tax of the holding company of 1,148 billion VND, doubling that in 2019.

The Board of Management of PHR also says that the company will build individual plans for particular scenarios to tackle the issues created by COVID-19 and work with Nam Tan Uyen Industrial Zone Joint Stock Company and VSIP Company on the progress of compensation payment so that PHR can complement its production and trading targets.

The Board of Management will also assign the Board of General Directors with the tasks of comprehensively restructuring and reforming the projects invested in by PHR, especially the project involving Truong Phat Rubber Joint Stock Company and the Phuong Hoa – Kampong Thom Rubber Development Limited Liability Company.

Moreover, the Board of Management of PHR has also passed the policy to submit to the Vietnam Rubber Group to be assigned to be an investor in two industrial-urban-service zones, Hoi Nghia and Binh My.

At the same time, the Board has also agreed on the policy of contributing capital to invest and trade in industries serving the industrial-urban-service areas, such as electricity, water supply, telecommunications, infrastructure, waste treatment, trees, etc.

In a previous comment, VDSC said that the industrial zones owned by PHR were all located in the most geographically favorable locations in Binh Duong, resulting in the expected lending prices to be at a high level of approximately 60-80 USD/m2 (in the Tan Binh zone) or of 90 USD/m2 (in the Nam Tan Uyen zone).

In addition, the lending demands were likely to rise as the FDI flowing into Vietnam in general and into Binh Duong, in particular, remained favorable, helping the industrial zone fields to become the main dynamic of PHR. However, these are comments made by VDSC before the complex developments of COVID-19.

Industrial zone enterprises plan to reduce profits in 2020 due to COVID-19

In 2020, IDV and BAX expect their interest to be double-digit

Sharing the increased interest goals in 2020 with PHR is Vinh Phuc Infrastructure Development (IDV). In the financial year 2020 (starting from 1st October 2019 to 30th September 2020), IDV sets a goal of 264 billion VND in revenue; 151.6 billion VND in profit-after-tax, respectively increasing by 62% and 54% compared to the performance results in 2019.

Notably, due to receiving the interest of 51 billion VND from the subsidiary VPID Ha Nam, in the first quarter of 2020, IDV earned 27.7 billion VND in revenue and 24 billion VND in profit-after-tax. Accordingly, despite a high growth interest goal, IDV has accomplished nearly half of its goal in the first quarter of the financial year 2020, reducing the pressure on the remaining quarters.

In 2020, IDV plans to promote attracting investment into the Chau Son Industrial zone, focus on the expansion of the Khai Quang Industrial Zone and the development of other new ones to exploit the reserved capital, generating overlapping revenues for the following years.

Thong Nhat Joint Stock Company (BAX) has also planned for its revenue in 2020 to reach nearly 296 billion VND, increasing by 46% and the profit-after-tax targets to reach more than 108 billion VND, increasing by 27%. The high growth dynamic of BAX mainly comes from the Bau Xeo Industrial Zone project and the Service Center Zone project.

The Company says that it will continue finishing the industrial zones’ infrastructures, attracting investment in land leasing for the remaining land areas and accelerating the implementation of the Service Center Zone project.

BAX has also planned to invest nearly 42 billion VND in the Bau Xeo Industrial Zone and nearly 216 billion VND in the Service Center Zone this year.

SZL, TIP, SZC, D2D expect their interest to drop and even plan to lower their targets

Different from the aforementioned firms, SZL, TIP, SZC, and D2D are all being careful due to the unforeseeable developments of COVID-19 as they have set decreased profit goals in 2020.

Urban Industrial Development No. 2 Company expects its business costs in 2020 to drop sharply as the total revenue will be at only 414 billion VND, decreasing by 49%; and the profit-after-tax will be at 178.7 billion VND, decreasing by 51.5%.

Before 2019 ended, D2D had made an impression with net revenue of 763 billion VND and a profit-after-tax of 368.5 billion VND, which are respectively 2.7 times and 4 times higher than those in 2018, and reached 126% in revenue and 338% in profit-after-tax.

The company explained the reason for the sudden increase in business results was the profit difference mainly due to the higher investment efficiency of Loc An KDC project than the Thong Nhat Ward Residential Area project, Bien Hoa City. Sonadezi Long Thanh (SZL) has passed the 2020 business plan with a revenue target of more than 409 billion VND, decreasing by 4% and a profit-after-tax of 87 billion VND, decreasing by 16% compared to that what they achieved in 2019.

With the complex developments of COVID-19, Sonadezi Long Thanh has authorized the Board of Management to adjust the business plan to suit the practice based on the implementation situation in the first 6 months of 2020.

However, the targets may not be decreased by over 30% or the Board must get the shareholders’ comments via documents if they want to reduce the targets by more than 30%. Industrial Zone Development Tin Nghia (TIP) will submit their 2020 business plan with an estimated total revenue reaching nearly 166 billion VND, dropping 24% compared to that in 2019 due to the fall in the real estate sector, the shortage of supply, and the stable industrial zones trading sector.

The planned profit-after-tax will be 93 billion VND, dropping by 19%. In 2020, the company expects to continue the exploitation of the remaining land and the first phase market of the Tam Phuoc residential area and resettlement of 18ha, the construction investment and lending of the Kiot – Lane No.3.

The company will also research, survey, and consider investing in infrastructure enterprises in industrial zones in the province and the Southeast region which still have the land fund and have good development directions.

Tin Nghia assesses that this year there will be many difficulties as even though new projects are created by the competent authorities, the administrative procedures are still slow, complex and problematic, in addition to the costs of compensation, site clearance, and the increased unit price of construction affecting the investment capital.

In addition, the attraction of FDI will also be affected by the impact of COVID-19 on the operation of enterprises in industrial parks. Sonadezi Chau Duc (SZC) has also approved a revenue plan of 371.5 billion VND in 2020, which is an increase of 13% compared to the real results in 2019. The profit-after-tax was 115 billion, down 14%.

However, facing the complicated situation of the COVID-19 epidemic, Sonadezi Chau Duc's Board of Directors says that this will greatly affect the Company's investment attraction situation, resulting in the revenue and profit being not as good as people have as expected.

The Board of Directors is authorized by the General Meeting of Shareholders to make adjustments to the plan for 2020 based on the production and business situation of the first 6 months of the year but not exceeding 30% of the revenue and profit mentioned above. In 2020, for the main activity of leasing industrial land, the company invites investors to lease land in 2020 with an area of about 50 hectares.

The revenue from industrial land leasing, factory leasing, management fees, and industrial infrastructure services is about 282 billion VND. The expected revenue from operating the existing road toll stations is 64.5 billion VND.

The company will continue to carry out the construction of the technical infrastructure system of Chau Duc Urban Industrial Park and golf course, maintain the maintenance of BOT 768 road infrastructure and implement the adjusted 768 BOT project.

The plan for the basic construction investment in 2020 is about 843 billion VND, and the site clearance compensation is about 699 billion VND. On the listing floor, after a significant decrease due to the influence of the general market, the stock prices of many businesses in industrial parks are being evaluated to be in the attractive zone.

​>> Unless COVID-19 ends soon, only 15% of enterprises will maintain operation


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