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Vietnam’s wood companies forecast lower profit

Vietnam’s wood companies forecast lower profit

Tuesday 23, 08 2022
With orders decreasing, Vietnam’s wood industry forecast lower profit in the remainder of 2022.

Wood industry facing challenges

In the past 5 years, Vietnam's export of wood and wood products has grown rapidly, gaining an increasingly high position in the world furniture market.

However, in recent months, the wood industry has been facing a decline in orders, resulting in the possibility of no growth or very low growth in 2022.

Mr. Nguyen Liem, Chairman of Binh Duong Woodworking Association, said that in recent months, the wood market has been gloomy when the revenue and orders of businesses are declining in many major export markets.

According to a survey of wood associations in Ho Chi Minh City, Binh Duong, and Dong Nai, in recent months, orders of businesses have decreased by 50%.

wood industry

According to Mr. Nguyen Liem, the COVID-19 pandemic, the Russia-Ukraine conflict, and high inflation in many countries, especially in major global markets, including the US, the EU, etc., are the reasons for the high rise in the consumer price index.

When goods become expensive, consumer demand for non-essential products will decrease, which leads to a high inventory of wooden products in markets, and importers will limit purchases.

Experts forecast that the growth of the wood industry this year would be the highest at only a few percent, not being able to achieve the figure of 19% as last year.

With the current world economic situation, it is very difficult to fulfill the export target of 16.5 billion USD in 2022.

In addition to the impact of the economic situation, inflation, allegations of origin fraud, raw material origin, etc., are also becoming threats to the growth and sustainable development of Vietnam's wood industry.

Mr. Ngo Sy Hoai, Vice President and General Secretary of the Vietnam Timber and Forest Products Association, said that the wood industry is facing more and more cases related to trade remedies.

The frequency of warnings and initiation of investigations has increased, and the loss Vietnamese wood enterpriseshave suffered are increasing. In the last 3 years, Vietnam has faced more risks of trade remedies.

Forecast lower growth

52 wood companies in Vietnam participated in a survey for the report about changes in Vietnam’s wood exporting markets. 45 of which export to the US.

52 wood companies

Of the 45 enterprises that exported to the US market surveyed, 33 said their current revenue had decreased by nearly 40% compared to the first months of the year. Only 10 companies reported an increase in revenue compared to the previous months, but the increase was only 11%, which is quite small.

There are 39 out of 52 enterprises interviewed whose products are exported to the EU market. In the first months of 2022, the export revenue of this group of businesses was significantly affected. Specifically, 24 companies saw revenue decline in the first months of the year, with an average decrease of about 42.2%. Several companies have lost all their revenue from this market in recent months; 4 enterprises saw a slight increase in export revenue to the EU market with an average of 14%.

Of the 52 surveyed enterprises, 26 are directly involved in exporting to the UK market. In the first months of 2022, enterprises exporting to this market also faced difficulties. Specifically, of the 26 enterprises, 17 experienced a decrease in export revenue to the UK, with an average decrease of 42.8%.

Among 52 enterprises participating in the survey, more than 80% forecast that their revenue in 2022 will decrease compared to 2021. Specifically, 19 companies forecast to have a decrease in revenue of less than 30%; 13 enterprises forecast a decrease of 30 - 50%, and 10 expect a decrease of over 50%. Only 3 companies forecast their revenue to increase in 2022 compared to 2021 with an increase of 10-20%. The remaining 7 forecast revenue in 2022 are unchanged compared to 2021.

Over 90% of enterprises surveyed said that their order volume had dropped sharply compared to the same period in 2021, averaging 44.4%. Meanwhile, only 3 enterprises, equivalent to 6% of the total number of participants in the survey, had a modest increase in order volume, averaging 18.3%.

Enterprises surveyed

Commenting on the status of orders by the end of 2022, 37 enterprises, equivalent to over 70% of those surveyed, said they expected their order volume to decrease compared to 2021. Only 4 companies expect the number of orders to increase, and 11 others believe that their orders will not change much.

Wood enterprises expect that the export situation will not improve much, and the number of orders to all markets will continue to decline sharply in the remainder of 2022. The US, EU, and UK markets are forecast to be over 40%, while exports in other markets have a lower decline.

 

Compiled by VietnamCredit

 

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