Vietnam Cement Market Report 2017

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Content is removed for demo purpose

Date: 21st May 2017

Dear clients

Re: The publication of Vietnam Cement Market Report, 2017

StoxPlus has been issuing the annually updated Vietnam Cement Market

Report in the last fifth years, providing the first and most

comprehensive report on this sector. Taking into account feedbacks

from our clients, in addition to the comprehensive analysis of the

market itself, we updated Vietnam Cement Market Report this year with

the focus on analyzing end-users demands and domestic supply capacity

together with highlights and price of cement in Vietnam.

The purpose of research work is to have an in-depth understanding of

Vietnam cement market and assessing potentiality of the market and

how to penetrate the market for current players. We also highlighted

the cement end-users segment in which driving the market movement,

including the domestic construction demands.

In addition to our experience in this industry, we have conducted

various discussions and interviews with industry players, cement end-

customers at executive levels to grasp local insights and the practical

ways of doing cement business in Vietnam.

We understand that this is a targeted but also an open research. We

would be happy to provide any further information to address any

questions that you may have, for any specific sector or target business

in Vietnam.

Should you have any questions, please contact I myself or our Biinform

Managing Director, Ms. Lan Nguyen at +84 (8) 3823 3485 or her email:

[email protected]

Yours sincerely,

Nguyen Quang Thuan

CEO

StoxPlus Corporation

StoxPlus Joint Stock Company

Head Office

5th Floor, Anh Minh Building

36 Hoang Cau, Dong Da

Hanoi, Vietnam

telephone: +84 (4) 3562 6962

facsimile: +84 (4) 3562 5055

stoxplus.com

Ho Chi Minh City Branch

2nd Floor, May Plaza

63D Vo Van Tan Street, District 3

Ho Chi Minh City, Vietnam

telephone: +84 (8) 3823 3485

facsimile: +84 (8) 3827 3068

@ 2017 StoxPlus Corporation.

All rights reserved. All information contained in this publication is copyrighted in the name of StoxPlus, and as such no part of this publication may be

reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including

photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher.

mailto:[email protected]

3


Table of Contents

Part Content Page

Abbreviation 4

Executive Summary 5 - 7

1 Vietnam Cement Sector Analysis 8 - 28

1.1 Consumption 8 - 13

1.2 Supply Analysis 14 - 25

1.3 Forecast Analysis 26 – 28

2 Competition Dynamics 29 - 50

2.1 Market shares 29 - 31

2.2 Cement Pricing 32 – 43

2.3 Industrial Performance of Listed Companies 44 – 50

3 Vietnam Cement Demand Analysis 51 – 67

3.1 Summary 51 – 52

3.1 Demand from Residential Construction 53 – 55

3.2 Demand from Non-Residential Construction 56 - 60

Part Content Page

3.3 Demand from Infrastructure 61 - 64

3.4 Analysis of Selected Construction Hub 65 - 67

4 Foreign Interest on the sector 68 – 72

4.1 Significant M&A in the Sector 68 - 72

5 Macroeconomics 73 -90

5.1 Macroeconomics in Vietnam 73 - 76

5.2 Driving Force 77 - 86

5.3 Regulatory Framework 87 - 90

Appendices 91 - 109

Appendix 1: Listed Cement Companies’ Factsheet 91 – 99

Appendix 2: Profiling of selected cement

companies100 – 109

4


Abbreviation

No. Abbreviation Stand for

1 CAGR Compound Annual Growth Rate

2 CFO Cash Flow from Operating Activities

3 D/E Debt over Equity

4 EBIT Earnings Before Interest and Taxes

5 EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization

6 FDI Foreign Direct Investment

7 FOB Freight on Board

8 IPO Initial Public Offering

9 mn million

10 p.a per annum

11 RMC Ready-mixed concrete

12 SOEs state-owned enterprises

13 TPP The Trans-Pacific Partnership

14 US$ United States dollar

15 VAT value-added tax

16 VICEM Vietnam Cement Industry Corporation

17 VNCA Vietnam National Cement Association

18 y-o-y year-over-year

5


We have completed the review of the cement

market in Vietnam. Information covered

includes market size and potentiality,

competition dynamics and profiles of major key

end-users and major players.

Below are the most critical findings that could

be important for your consideration.

1) Cement market in Vietnam has followed

the upward trend since 2013, especially in

domestic consumption

Of which, total consumption of cement market

in Vietnam reached 76.9mn tons in 2016, grew

4.5% compared with 2015. However, the driver

of the market only came from the domestic

consumption meanwhile the export witnessed

the negative growth recently.

Cement Sales Volume Growth in Vietnam, 2008-

2016

2) The market perceived the high growth

rate in the North, moderate growth rate in

the South and unexpectedly watched the

negative growth in Central of Vietnam

Executive Summary

3) Export in both clinker and cement

suffered notable fell as result of high

competitive landscape from China as well as

the rise of export tax

China and India were the main competitors in

exporting cement. China has facilitated the

exporting clinker and cement since 2014 due to

the excess of domestic supply. The price of

products remained low for which Vietnamese

cement could not beat.

Cement & Clinker Export by Value, 2016

Philippines and Bangladesh maintained the

main countries in which imported cement and

clinker from Vietnam, accounted for more than

60 percent of total market.

Notwithstanding, the price of clinker was

falling but it still considered as a solution for

excess supply in Vietnam.

4) Production capacity of Vietnam surged in

2016, reached 100.3mn tons.

2008 2009 2010 2011 2012 2013 2014 2015 2016

Export Domestic TOTAL


6


5) The majority of cement facilities in

Vietnam are small-scaled with the

production capacity of less than 1 MTPY

Cement Facilities in Vietnam by Production Scale,

2016

As observed by StoxPlus, a number of mega

“delayed” cement projects in Vietnamese

Government’s Master Plan on cement industry

development are commenced given increasing

cement demand thanks to the heat-up of real

estates and construction market

6) Cement market in Vietnam was very

fragmented with four main group of players

of which VICEM was the biggest players from

Vietnam

Executive Summary

Production Capacity in Vietnam by Group of

Players, 2016

7) Cement price remained stable in both

PCB30 and PCB40. The price in the South

presented a higher rate compared with the

rest

8) Despite contributing only 7% of total

consumption, infrastructure development is

a fundamental cement demand source in

Vietnam

Estimated cement market size in 2016 by end-use

sector

9) Amongst list of mega city in Vietnam, Da

Nang appeared as the most potential

construction hub in 2017


7


Da Nang is a dynamic city with good

infrastructure, skyscrapers, luxury hotels,

commercial centres and bridges. While Grade A

occupancy is high, Da Nang’s office market

continues to be dominated by sub-standard

Grade B and C buildings.

Accumulated FDI in Da Nang, break down by

sector, 4M2016

10) Is this a good time for M&A in cement

market in Vietnam?

Only two acquisitions of cement business from

Thai companies in 2016 - 2017 with deal value

up to US$736 million, are proving that cement

is always an attractive industry in Vietnam.

In the past five years, M&A in cement industry

has become more and more popular as foreign

businesses tented to acquired local businesses

and some local firms acquired under-performed

companies. The difference is that foreign

companies step into the large market share,

strong brand. Domestic M&A deals were mostly

mergers of small projects.

Executive Summary

11) Vietnam cement is facing the new tax

export tariff – 5% which may reduce the

competitiveness of Vietnamese cement

It is estimated that cement enterprises export

cement will be subject to 5% export tax and

not be refunded 10% VAT, but foreign

enterprises when buying cement is not subject

to VAT 10 %. Meanwhile, if calculated

according to new regulations, the cost of

export may increase to US$4.5 per ton of

clinker (the average FOB price of US$30 per

ton) and US$7.5 per ton of cement in which

FOB price is US$50/ton. At this price,

Vietnamese cement can not compete in

exporting market with China and India.

12) Higher efficiency in operation helped

cement companies have sufficient cash flows

from operation to not only pay the interest

expenses but also return the initial

No. FDI Sectors

2015 4M/2016 Change

Investment

Capital %

Investment

Capital %

(%)

(US$ mil) (US$ mil)

1 Real Estate

2 Manufacture

3 Education

4 Hospitality

5 Construction

6 Others

Listed Cement Companies in Vietnam


8


Section 1: Vietnam Cement Market Highlights 2016

Contents

1.1 Consumption

1.2 Supply Analysis

1.3 Forecast Analysis

9


Total cement sales volume in Vietnam followed the upward trend with a moderate growth

of xx% in 2016


1.1 Consumption

Source: StoxPlus

Note: Export data takes into account of both cement & clinker (translated into cement)

Figure xx: Cement Sales Volume Growth in Vietnam, 2008-2016

Source: StoxPlus

Vietnam cement sales volume reached 76.9 million tonnes in 2016,

posting a moderate increase of 4.5% compared to the previous

year. It is noted that data takes into account of two main

components including (i) domestic consumption and (ii) export.

• (i) Domestic consumption:

• (ii) Export:

Figure 1: Cement Sales Volume in Vietnam, 2007-2016

2016 vs. 2015

Sales Volume Growth

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Domestic Export

~

10


Source: StoxPlus


1.1 Consumption

Despite slower growth rate, domestic market continued to be the sector’s key driver

Figure 2: Sales Volume & Growth – DOMESTIC MARKET

Q1.2017 vs. Q1.2016

Sales Volume Growth

17.8million tonnes

~

DOMESTIC CONSUMPTION Q1/2017

11


Meanwhile, clinker and cement export suffered in 2016…

Figure 3: Clinker and Cement Export From Vietnam - Mn Tonnes

Source: StoxPlus

Note: Export data takes into account of both cement & clinker (translated into

cement)

Figure 4: xxx

Source: StoxPlus


1.1 Consumption

12


The significant increase of cement and clinker export to …

Figure 5: Cement & Clinker Export by Value, 2016

Source: StoxPlus

Note: Export data takes into account of both cement & clinker (translated into

cement)

Figure 6: Volume of Top 10 Clinker & Cement Export Destination , 2016,

in thousand tonnes

Source: StoxPlus


1.1 Consumption

13


Is clinker export a solution to moderate domestic market while price is falling?

Figure 7: Average FOB Clinker Export Price at Cam Pha Port in US$ per ton, 2015 - 2016

Source: StoxPlus


1.1 Consumption

Is clinker export a solution to moderate domestic market while price is falling?

14



Contents

1.1 Consumption

1.2 Supply Analysis


15



1.1 Consumption

The market is very fragmented with four main groups of players

Figure 8: Production Capacity (Million Tonnes per annum) in Vietnam by Group of Players, 2016

Source: StoxPlus

The fragmented of market has led

to the fierce competition not only

between each group of players but

also between companies within

groups

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Fuel

Supplier

Quarries

Other raw

materials

suppliers

Clinker

production

Clinker

StorageGrinding

Cement

Bulk

Storage

Packing

Cement

bags

storage

Wholesalers

Retailers

DIY Builders

Small &

Individual

Contractors

Government & Large

Construction Companies

Concrete

Companies

Lack of Clinker in the

South

Grinding stations in

Vietnam are small-

scaled

Vietnam remained clinker storage in the South

Figure 9: Production Flow of Vietnam Cement Sector

Source: StoxPlus


1.2 Supply Analysis

17


Bulk cement has become more and more preference

Figure 10: Difference in supply chain of Bulk and Bag cement in Vietnam

Source: StoxPlus

*Disclaimer: the proportion of Bag and Bulk cement is calculated based on the proportion of Lafarge Holcim in Vietnam

Projects in remote areas &

“transportation difficulties” area“Mega” projectsReady-Mixed concrete & Precast

2. Bulk cement

1. Bag cement

What type of supplying cement?

DEM

AN

D

SO

UR

CE

While bag cement is very popular in civil construction resulted on its mobilization and based on the scale of the projects, bulk cement is more

preferred from ready mixed concrete and precast companies, as well as from the mega project in which requires the huge amount of cement.


1.2 Supply Analysis

18


The majority of cement facilities in Vietnam are small-scaled with the production

capacity of less than 1 MTPY

Figure 11: xxx

Source: StoxPlus

Figure 12: Cement Facilities in Vietnam by Production Scale, 2016

Source: StoxPlus

Fragmentation in production – the possible answer for insufficient operation of Vietnam cement companies:


1.2 Supply Analysis

19


Source: StoxPlus


1.2 Supply Analysis

Vietnam cement production capacity increased by ….

Figure 13: Cement Production Capacity of Vietnam, 2015 - 2016

Launch of …

LAUNCH ….

20


WHOLECOUNTRY

Source: StoxPlus


1.2 Supply Analysis

..., which enlarges the supply surplus situation of domestic market

Figure 14: Capacity vs. Domestic Demand – CLINKER (mn Tonnes), 2016 Figure 15: Capacity vs. Domestic Demand – CEMENT (mn Tonnes), 2016

Source: StoxPlus

21


Source: StoxPlus

NORTH

CENTRAL

SOUTH

SupplySection 1: Vietnam Cement Market Highlights 2016

1.1 Consumption

Even though there are more factories in the South, the ones in the North have bigger

capacity since they were built more recently thus owning better technology

Figure 16: Major Cement Manufacturers’ CEMENT Production Capacity (mn Tonnes), 2016

22

Content is removed for demo purposeSource: StoxPlus


1.1 Consumption

Supply cement in the North … while domestic consumption …

Figure 17: Production Capacity vs. Demand (mn Tonnes) in the North – CEMENT, 2016

SUPPLY SURPLUS TO REDUCE

23


Source: StoxPlus


1.1 Consumption

Supply in Central area … in 2016, …

Figure 18: Production Capacity vs. Demand (mn Tonnes) in the CENTRAL – CEMENT, 2016

SUPPLY SURPLUS TO ENLARGE

24


Source: StoxPlus


1.1 Consumption

Demand in the South …

Figure 19: Production Capacity vs. Demand (mn Tonnes) in the SOUTH – CEMENT, 2016

SUPPLY SURPLUS TO REDUCE

25

Content is removed for demo purposeNorthern Midlands & Mountainous:

Source: StoxPlus

Red River Delta:

North Central Coast:


1.2 Supply Analysis

A zoom in cement & clinker production capacity in each economy zone

Figure 20: Production Capacity in Vietnam – CLINKER & CEMENT, 2016

26



Contents

1.1 Consumption

1.2 Supply Analysis


27



1.3 Forecast Analysis - Methodology

Figure 21: Forecast of Domestic Production Capacity and Domestic Consumption in Vietnam

Our methodology to forecast – base case

• Based on our analysis of macroeconomics and historical cement demand from 2000, associated with impact of related factors such as the status

of infrastructure development and residential sector in recently, we project a 7% annual demand growth for cement until 2030. The

consumption of cement depends on the demand of concrete and construction sector, thus, we evaluate the growth of construction sector in

Master Plan of Government, also we check the export demand of major export destination to come up with this figure.

• In terms of supply side, StoxPlus observed and updated the status of Master Plan updated by Government, calculated the number of “delayed”

cement which officially announced. Additionally, a number of “mega” cement plant shall launch in the next following year also is taken into

account of forecasting.

Vietnam is expected to face with continuous supply surplus before …

Source: StoxPlus’s estimated

28


Source: StoxPlus’s estimated



Vietnam cement manufacturers …

Figure 22: Utilization rate of Cement industry in Vietnam, forecast 2018Even though the market can be cyclical depending on real

estate boom and burst, Vietnam cement is still expected to

enjoy healthy growth in the next decade.

29


Section 2: Competition Dynamics

Contents

2.1 Market shares

2.2 Cement Pricing

2.3 Industrial Performance of Listed Companies

30


VICEM remains its leading position with 36% market share in terms of sales volume in 2016

Source: StoxPlus


2.1 Market Share

Local others companies …

Figure 23: Production Capacity vs. Sales Volume (mn Tonnes) of Selected Cement Players, 2016

31


Zoom in efficiency rate of selected companies in each group of players…

Source: StoxPlus


2.1 Market Share

Figure 24: Production Capacity Share vs. Sales Volume Share of Selected Cement Players, 2016

32



Contents

2.1 Market shares

2.2 Cement Pricing


33


Cement price in 2016 witnessed the downtrend among 3 regions of Vietnam

Figure 25: Average price of cement in different regions in Vietnam 2016, US$ per ton

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Jan-0

9

Mar-

09

May-0

9

Jul-

09

Sep-0

9

Nov-0

9

Jan-1

0

Mar-

10

May-1

0

Jul-

10

Sep-1

0

Nov-1

0

Jan-1

1

Mar-

11

May-1

1

Jul-

11

Sep-1

1

Nov-1

1

Jan-1

2

Mar-

12

May-1

2

Jul-

12

Sep-1

2

Nov-1

2

Jan-1

3

Mar-

13

May-1

3

Jul-

13

Sep-1

3

Nov-1

3

Jan-1

4

Mar-

14

May-1

4

Jul-

14

Sep-1

4

Nov-1

4

Jan-1

5

Mar-

15

May-1

5

Jul-

15

Sep-1

5

Nov-1

5

Jan-1

6

Mar-

16

May-1

6

Jul-

16

Sep-1

6

Nov-1

6

North

Cement price started declined since the beginning of 2016, and witnessed a stable year afterward.


2.2 Cement Pricing

34


The cement price was stable compared to previous years because of the input material

price was stable, the cement factory basically stabilized the selling price

Figure 26: Average price of cement PCB30 in different regions in Vietnam 2016

Source: StoxPlus


2.2 Cement Pricing

Our methodology to collect regional historical price

• We use the historical prices of cement plants from reports of

Cement Association.

• Based on the location of the cement plants, we categorize the

historical prices into North / Central / South, and compute

the average price for the region.

35


Cement PCB 30 pricing by type of players and selected manufactures

Figure 27: Cement PCB30 price in VND per tonne by Players

Source: StoxPlus


2.2 Cement Pricing

36


Similar to PCB30, PCB40 also showed the highest price in the South, especially in South

East

Figure 28: Average price of cement PCB40 in different regions in Vietnam 2016

Source: StoxPlus


2.2 Cement Pricing

37


Cement PCB 40 pricing by type of player and selected manufacturers

Figure 29: Cement PCB40 historical price in US$ per tonne, 2016

Source: StoxPlus


2.2 Cement Pricing

38


…was the group had the highest price in the North

Figure 30: Overview of PCB30 price in the North in VND per ton, 2016

Source: StoxPlus

TYPE OF PLAYERS REGIONS

PREMIUM COMPANIES

PCB30

NORTH – PCB30Section 2: Competition Dynamics

2.2 Cement Pricing

39


In PCB 40, …

Figure 31: Overview of PCB40 price in the North in VND per ton, 2016

Source: StoxPlus


PREMIUM COMPANIES

PCB40

NORTH – PCB40Section 2: Competition Dynamics

2.2 Cement Pricing

40


Similar to the North, …

Figure 32: Overview of PCB30 price in CENTRAL in VND per ton, 2016

Source: StoxPlus


PREMIUM COMPANIES

PCB30

CENTRAL – PCB30Section 2: Competition Dynamics

2.2 Cement Pricing

41


…got the highest price, at …

Source: StoxPlus

CENTRAL – PCB40


PREMIUM COMPANIES

PCB40


2.2 Cement Pricing

Figure 33: Overview of PCB40 price in CENTRAL in VND per ton, 2016

42


..was being the price leader while .. presented price much under the average

Figure 34: Overview of PCB30 price in the South in VND per ton, 2016

Source: StoxPlus


PREMIUM COMPANIES

PCB30

SOUTH - PCB30Section 2: Competition Dynamics

2.2 Cement Pricing

43


There was a clear distinctly distributed in cement price in the South….

Source: StoxPlus

REGIONSPCB40

TYPE OF PLAYERS COMPANIES

PCB40

SOUTH – PCB40Section 2: Competition Dynamics

2.2 Cement Pricing

Figure 35: Overview of PCB40 price in the South in VND per ton, 2016

44



Contents

2.1 Market shares

2.2 Cement Pricing


45




Methodology

• Our analysis on listed cement companies’ financial performance is empowered by the most comprehensive and

insightful financial database for Vietnam – our FiinPro Platform.

• Particularly, there are 46 public cement companies in Vietnam (14 listed companies on HOSE & HNX, 10 and 22

companies registered on UPCOM and OTC, respectively). Of which, 5-year (2011 – 2016) historical data is available

for 17 cement companies including VICEM, Quang Ninh Construction & Cement, Yen Binh Cement, Song Da Yaly

Cement, La Hien Cement, VICEM But Son, Thai Binh Cement, Ha Tien 1 Cement, Can Tho Cement, Bim Son Cement,

Sai Son Cement, VICEM Hoang Mai Cement, Tien Trung Construction, Cement Trading, Gypsum & Cement, Bac

Giang Cement. The analysis hereafter is based on these 16 companies which accounted for approximately 40% of

cement domestic sales volume in 2016.

Methodology

http://fiinpro.com/

46




Listed cement companies remained its financial performance in 2016

Figure 36: Listed Cement Companies in Vietnam - PROFITABILITY Figure 37: xxx

EBITDA

Net Profit

Margin

47




Source: StoxPlus

Zoomed in D/E ratio of whole cement industry

Figure 38:

48




Source: StoxPlus

D/E ratios of selected cement facilities in Vietnam

Figure 39: Financial Leverage of Listed Cement Companies, 2011 - 2016

49




Source: StoxPlus

D/E ratios snapshot in 2016

Figure 40:

50




Source: StoxPlus

Cost structure

Figure 41: Cost Structure of Listed Cement Companies, 2016

2016

51


Section 3: Vietnam Cement Demand Analysis

Contents

3.1 Summary

3.2 Demand from Residential Construction

3.3 Demand from Non-Residential Construction

3.4 Demand from Infrastructure

3.5 Analysis of Selected Construction Hub

52


Summary


3.1 Summary

Source: StoxPlus, GSO

Demand

source

Cement

value in

2016

Growth trendImplications

for cement

Infrastructure

Non-

residential

Residential

Cement

Export

Figure 42: Estimated cement market size in 2016 by

end-use sector

53



Contents

3.1 Summary





54


In 2016, the residential market continued in its positive trend, following 2015’s signs of

resurgence.

Residential

Figure 43: Cement value from residential construction in Vietnam


StoxPlus methodology for estimation:

• According to our analysis, cement value accounts for 10 – 12% of

residential buildings’ construction value, depending on each

category (town house, condos or villas).

• In the course of this report, we estimated the cement value at

11% of residential construction.



2016

55


Demand for affordable housing continues to rise due to the limited supply, however,

banking system tents to tighten the real estate loans

Residential

Figure 45: Net leasable area ('000 sqm) of residential projects under

construction in

Source: StoxPlus

Figure 46: Net leasable area ('000 sqm) of residential projects under

construction in

Source: StoxPlus



56



Contents

3.1 Summary





57



• According to our analysis, cement value accounts for 10 – 12% of

residential buildings’ construction value. In the course of this

report, we estimated the cement value at 12% of non-residential

construction.

2011 2012 2013 2014 2015 2016f

Figure 47: Cement value from non-residential construction in Vietnam

Non- Residential

Took over the first place from residential, non-residential contributed the largest part

to cement value in 2016


3.3 Demand from Non-residential Construction

58


Industrial zones posed a healthy growth over the years across the country

Industrial

Figure 48: New industrial supply (Gross leasable area)

Source: StoxPlus, CBRE

Industrial Market in Ho Chi Minh City

Name Type Location Area Unit Status

Industrial Ha noi 340ha Under Construction

Industrial Ha noi 430ha Site Clearance

Industrial Ha noi 266ha Site Clearance

Industrial Ha noi 300ha Planning

Industrial Ha noi 100ha Planning

Industrial HCMC 231ha Under Construction

Industrial HCMC 173ha Under Construction

Industrial HCMC 1,000ha

Clearance &

Compensation

Industrial HCMC 200ha

Clearance &

Compensation

Figure 49: Future industrial project in selected cities

Industrial Market in Hanoi



59


There was a boom in shopping center supply in …

Shopping Center

Figure 50:


Figure 51:


'000 s

qm

Positive take-up in shopping center and retail podium segments



60


2012 2013 2014 2015 2016

Figure 52: Total Stock of Key destinations of Vietnam office market

Figure 54: Average rent of office market in selected cities,

US$/m2/month

OFFICE

2012 2013 2014 2015 2016

Figure 53: Growth of key destinations of Vietnamese office

Foreign investors’ increased optimism also triggered more merger and acquisitions, which

further increases demand for office space.



61



Contents

3.1 Summary





62


2011 2012 2013 2014 2015 2016f

US$bn

Demand from Infrastructure

Infrastructure

Figure 55: Cement value from infrastructure construction in Vietnam



• As observed by StoxPlus, cement consumption rate varies for

difference type of infrastructure projects. Particularly, the

cement value proportion over total investment value is as

followed:

− Roads & Bridges, Ports, Airports: 5 – 7%

− Other types: less than 3%

• Based on StoxPlus’s data on infrastructure and cement value

proportion above, we estimate cement value at 4% of

infrastructure construction value which is obtained from GSO.

Please refer to Figure 30 for more details.



63


South East is ranked the first with total number of …

Infrastructure

Figure 56: Number of Vietnam infrastructure projects by economic

zone

Source: StoxPlus



64


The exposure of investment in development of transportation system

Infrastructure

Figure 57: Infrastructure projects’ investment value in Vietnam

Source: StoxPlus

Figure 58: Infrastructure projects’ investment value in Vietnam by

status

Source: StoxPlus



65



Contents

3.1 Summary





66


Da Nang was ranked first as one of the most attractive investment locations.

• According to the Vietnam Chamber of Commerce and Industry (VCCI), in 2015,

Da Nang was ranked first in the Provincial Competitiveness Index (PCI) and

gained status as one of the most attractive investment locations.

DA NANG

2010 2011 2012 2013 2014 2015

Figure 59: Total FDI flow into market in Da Nang

No. FDI Sectors

2015 4M/2016 Change

Investment

Capital %

Investment

Capital %(%)

(US$ mil) (US$ mil)

1 Real Estate

2 Manufacture

3 Education

4 Hospitality

5 Construction

6 Others

Figure 60: Accumulated FDI in Da Nang, break down by sector,

4M2016

Source: IPC Da Nang

Source: IPC Da Nang

In first 4 months of 2016, real estate remained the main FDI source …



67


Da Nang is a pioneer in the Vietnamese condotel market.

DA NANG

Figure 61: Condotel in Da Nang Summary

Figure 62: Number of Condotel in selected cities, 2016

Source: Savills

Source: IPC Da Nang

Da Nang is a pioneer in the Vietnamese condotel market, with biggest number of

condotel unit in 2016



Project type Projects Units

Active projects

Fully sold projects

Future projects

Total

68


Section 4: Foreign interest on the sector

Contents

4.1 Significant M&A in the Sector

69


M&A Transactions in Vietnam Cement Sector

Figure 63: M&A Transactions in Vietnam Cement Industry

Source: StoxPlus

Section 4: Interest from Foreign Players


69

2011BTA Holdings – 51% COSEVCO

SCG (Thailand) – 99% Buu Long Cement

2012Vissai – 100% Do Luong

Semen Indonesia – 70% Thang Long

2013 - 2014VIETTEL – 100% Ha Long

VIETTEL – 70% Cam Pha

2015Kusto – 51% Song Gianh

2016SCCC – 65% LafargeHolcim

2017SCG – 100% VCM

70


Selected M&A Transactions in Vietnam Cement Sector

Figure 64: Selected M&A Valuation Review by Comparable Transaction Method

Source: StoxPlus

EV Debt EV/EBITDA Note

SEMENT

INDONESIA-

THANG

LONG

VIETTEL –

CAM PHA

AVERAGE



71


Average M&A valuation in Vietnam cement industry stays at …

Figure 65: Valuation per tonne of M&A Transaction in Vietnam Cement

Source: StoxPlus

GOOD TIMING FOR M&A IN VIETNAM



72


Cement companies are trading at low EBITDA multiple of 5.79x on Vietnam stock market

Figure 66: Valuation of Cement Companies in Stock Market

Source: StoxPlus, Fiinpro

Review is conducted on 08/16 listed cement companies in Vietnam. 08 listed companies are not put in the sample due to their huge losses which make

them inappropriate for valuation review.

Listed cement companies do not attract financial investors’ interest, resulting in low EBITDA multiple due to

Highly geared

Supply surplus of Vietnam cement until 2022

Ticker Name ExchangeAverage trading

volume in 6M (share)Beta EV/Sales EV/EBIT EV/EBITDA EPS (VND)

BCC Bim Son Cement HNX

BTS VICEM ButSon HNX

HCC Hoa Cam Concrete HNX

HOM VICEM Hoang Mai cement HNX

HT1 Ha Tien 1 Cement HOSE

HVX Vicem Hai Van HOSE

TBX Thai Binh Cement HNX

CLH La Hien Cement HNX

AVERAGE



73


Section 4: Macroeconomics

Contents

4.1 Macroeconomics in Vietnam

4.2 Driving forces

4.3 Regulatory Framework

74




Figure 67: Vietnam GDP Growth and CPI


Growth has been robust with low inflation. Economic growth strongly depends on export

activities, which was contributed by FDI.

Figure 68: Foreign Direct Investment in Vietnam (US$bn)

Source: StoxPlus, MPI

• Vietnam's GDP expanded 6.2 % YoY in Dec 2016, following 6.7

% in the previous year. Real GDP Growth YoY data in Vietnam

is updated yearly, available from Dec 2005 to Dec 2016, with

an average rate of 6.2 %.

• However, annual economic growth was only 6.21%, lower than

the 6.68% in 2015 and the 6.3-6.5% target set by the

Government in the September regular meeting.

• FDI capital increase significantly: By the end of 2016, Vietnam

has attracted $ 24.4 billion FDI, up 7.1% over the same period

last year. Disbursed FDI reached $ 15.8 billion, up 9% over last

year.

0%

5%

10%

15%

20%

25%

30%

GDP Growth CPI

75




Figure 69: Vietnam State Deficits, 2006 - 2015

Source: StoxPlus from General Statistics Office of Vietnam

Figure 70

Source: StoxPlus from General Statistics Office of Vietnam

With persistently high deficits, public debt has risen sharply and the risk of debt distress

has climbed.

Source: MOF

• Vietnam’s fiscal position has deteriorated in recent years due

to both cyclical and structural factors. However, the single

most important reason is the rapid increase of recurrent

expenditures. Other important reasons include falling oil

prices, diminishing foreign grants, and the increasing debt

service burden.

• Vietnam’s public debt will likely continue rising as the

government increasingly relies on borrowing to fuel economic

growth and to finance its budget deficit.

Implication for cement market:

76




Figure 71: Trend of Coal 3B and Electricity in Vietnam, 2014 - 2017

With stable electric price and coal price stays low, cement industry is in good stage to

growth

• Even though electric price slightly increased in 2014, the

Government are keeping the price stable in these following

years. Nonetheless, according to Ministry of Industry and

Trading, the price of electricity will increase during the year

2017, associated with the higher price in Coal 6a.

Implication for cement market:

77



Contents


4.2 Driving forces


78



4.2 Driving Forces

Figure 72: FDI in Vietnam construction industry


The Construction Sector experienced a dramatic leap in 2015, driven by the housing

segment & civil engineering segment

Figure 73: Construction value by source of funding in 2015


79


Domestically, Vietnam cement consumption grew synchronically with construction

industry

Construction

Figure 75:


Figure 74: Growth of Vietnam construction sector


GSO’s definition on construction value by segment:

• Construction sector is segmented into a fourfold classification

including (i) residential, (ii) non-residential, (iii) civil-

engineering, and (iv) specialized.

i. residential: condos, houses and villas;

ii. non-residential: institutional buildings such as hospital,

school, industrial (warehouse, plant), hotel & resorts,

offices;

iii. civil-engineering: infrastructures (road & bridge,

railway, utility works such as water, electricity).

iv. Specialized: site preparation, drainage, installment of

electrical systems and other works.


4.2 Driving Forces

80


Methodology

• Our analysis on listed cement companies’ financial performance is empowered by the most comprehensive and

insightful financial database for Vietnam – our FiinPro Flatform. The sample for the analysis includes 117 public

companies in HOSE, HNX, UPCOM and OTC.

• A construction may be involved in many business lines including residential construction, non-residential

construction and civil construction. We categorize construction companies into three main groups of players

including Residential, Non-residential and Civil construction (Infrastructure) based on their key business line which

contributes the highest proportion to the company’s total net sales.

• The analysis hereafter takes into account consolidated financial data for construction companies’ all business lines.

Methodology


4.2 Driving Forces

http://fiinpro.com/

81


Source: StoxPlus

Figure 76: Vietnam Residential Market size Growth

Residential segment posted a robust growth since 2015 and the trend remained in 2016

2012 2013 2014 2015 2016


4.2 Driving Forces

82


Listed residential construction companies’ performance moved synchronically with average

sector


Source: StoxPlus

Figure 77: Net Profit After Tax Margin of Residential Segment Figure 78: ROA & ROE of Residential Segment

Figure 79: EBITDA of Residential Segment

Residential


2011 2012 2013 2014 2015 2016


4.2 Driving Forces

83


Source: StoxPlus

Non-Residential

Figure 80: Vietnam Non-Residential Market Growth

The market segment for offices and retail space for lease in Vietnam is expected to

become fiercely competitive as supply increases, but still suffered the negative growth

2012 2013 2014 2015 2016


4.2 Driving Forces

84


Listed companies in non-residential segment have improved the profitability, however, gap

remained compared to average figure of construction sector


Source: StoxPlus

Figure 81: Net Profit After Tax Margin of Non-Residential Segment Figure 82: ROA & ROE of Non-Residential Segment

Figure 83: EBITDA of Non-Residential Segment

Non-Residential


AVERAGE GAP

OF …

2011 2012 2013 2014 2015 2016


4.2 Driving Forces

85


Source: StoxPlus

Figure 84: Vietnam Civil Construction Market Growth

Civil Construction

Similar to non-residential segment, civil construction in Vietnam suffered a negative

growth in 2016

2012 2013 2014 2015 2016


4.2 Driving Forces

86


Listed companies in civil construction segment posted a stable profitability with positive

net profit margin over the period 2011 – 2016


Source: StoxPlus

Figure 85: Net Profit After Tax Margin of Civil Construction Segment

Figure 87: EBITDA of Civil Construction Segment

Civil Construction


Figure 86: ROA & ROE of Civil Construction Segment

2011 2012 2013 2014 2015 2016

PREMIUM OF …COMPARED TO

AVERAGE SECTOR


4.2 Driving Forces

87



Contents


4.2 Driving forces


88




There are more barriers for new players to enter into cement market

• The applied of the Waste Heat Recovery Power Generation (WHRPG)

system is a leveraging system referred to heat exhaust gas furnace

to generate electricity remains a constraint to the new entry

players as:

• The projects have come into operation or under

construction with capacity of 2,500 tons

• Clinker every day will be forced to complete the investment

of the WHRPG system the slowest December 31, 2014; And

all cement projects with a capacity of 2,500 tons clinker per

day must be equipped with WHRPG, except for cement

production line use industrial waste and other waste such as

fuel.

Decision No. 1488 / QD-TTG established stricter conditions for new

entrants by establishing different technical requirements:

- Capacity: minimum 2,500 tons of clinker per day

- Thermal energy consumption: Less than or equal to 730 Kcal/kg clinker

- Power: Less than or equal to 90kWh/ton of cement

- Emission dust concentration: less than or equal to 30 mg / Nm³. -

Emission of exhaust gas shall be applied to meet the electricity

consumption of at least 20%.

Investors are also required to have strong financial positions, with a

minimum charter capital of at least 20% of the project's total investment.

89


Vietnam cement is facing the new tax export tariff – …

• After announced Decree No. 100/2016 / ND-CP on detailing and

guiding the implementation of a number of articles of the Law

amending and supplementing a number of articles of the Law on

Value Added Tax, the Law on Special Consumption Tax and the Law

Tax Administration and Decree No. 122/2016 / ND-CP on export

tariffs, preferential import tariffs, list of commodities and absolute

tariffs, mixed taxes and tariffs outside tariff quotas Effective from

July 1 to September 1, 2007, exports of cement are facing difficult.

Implication on Cement market:

According to the VNCA, the price of clinker and cement will change as

following:

Clinker:

Cement:

Whole market:



90


Augmented in natural resource severance tax of limestone, has made the material cost

of cement company increased significantly

• In 2016, Government announced the Resolution on promulgating the

severance tax of natural resources in order to improve the efficiency of

using natural resource in manufacturing process.

• The new tax rate calculation will be adjusted as stated in Circular

152/2015/TT-BTC regarding the Guidance on severance tax from Ministry

of Finance:

• The basis for calculation of severance tax is the taxable extraction

quantity of natural resources, unit price, and tax rate as below:

Severance tax payable in the period

= Taxable extraction quantity of natural resources * Unit price * Tax rate

Implication on cement market:

Product Old tax New Tax

rate

Difference

Limestone for

cement

production



91


Appendices

Contents

Appendix 1 Listed Cement Companies’ Factsheet

Appendix 2 Profiling of selected cement companies

92


Appendices

Appendix 1: Listed Cement Companies’ Factsheet

BIM SON CEMENT PX1 PX1 PX1 PX1 BCC

VND Millions 2011 2012 2013 2014 2015 2016

Sales

Cost of Sales

Gross Profit

GP Margin %

Overhead Expenses

Sales & Marketing

S&M %

Administration

Admin %

EBIT

EBIT Margin %

Depreciation

EBITDA

EBITDA Margin %

Financial Expense

Interest Expense

Profit/(Loss) before tax

Net Profit/(Loss) after tax

Net Profit Margin %

Cash Flow From Operation

CFO/Sales

Current Assets

Accounts receivable

Inventory

Non-Current Assets

Total Assets

Current Liabilities

Borrowings

Non-Current Liabilities

Borrowings

Total Liabilities

Net Assets

Debt/ Total Assets

93


Appendices


HA TIEN CEMENT PX1 PX1 PX1 PX1 HT1

VND Millions 2011 2012 2013 2014 2015 2016

Sales

Cost of Sales

Gross Profit

GP Margin %

Overhead Expenses

Sales & Marketing

S&M %

Administration

Admin %

EBIT

EBIT Margin %

Depreciation

EBITDA

EBITDA Margin %

Financial Expense

Interest Expense



Net Profit Margin %


CFO/Sales

Current Assets

Accounts receivable

Inventory

Non-Current Assets

Total Assets

Current Liabilities

Borrowings


Borrowings

Total Liabilities

Net Assets

Debt/ Total Assets

94


Appendices


CEMEENT MATERIALS & TRANSPORT PX1 PX1 PX1 PX1 VTV

VND Millions 2011 2012 2013 2014 2015 2016

Sales

Cost of Sales

Gross Profit

GP Margin %

Overhead Expenses

Sales & Marketing

S&M %

Administration

Admin %

EBIT

EBIT Margin %

Depreciation

EBITDA

EBITDA Margin %

Financial Expense

Interest Expense



Net Profit Margin %


CFO/Sales

Current Assets

Accounts receivable

Inventory

Non-Current Assets

Total Assets

Current Liabilities

Borrowings


Borrowings

Total Liabilities

Net Assets

Debt/ Total Assets

95


Appendices


BUT SON CEMENT PX1 PX1 PX1 PX1 BTS

VND Millions 2011 2012 2013 2014 2015 2016

Sales

Cost of Sales

Gross Profit

GP Margin %

Overhead Expenses

Sales & Marketing

S&M %

Administration

Admin %

EBIT

EBIT Margin %

Depreciation

EBITDA

EBITDA Margin %

Financial Expense

Interest Expense



Net Profit Margin %


CFO/Sales

Current Assets

Accounts receivable

Inventory

Non-Current Assets

Total Assets

Current Liabilities

Borrowings


Borrowings

Total Liabilities

Net Assets

Debt/ Total Assets

96


Appendices


QUANG NINH CONSTRUCTION & CEMENTPX1 PX1 PX1 PX1 QNC

VND Millions 2011 2012 2013 2014 2015 2016

Sales

Cost of Sales

Gross Profit

GP Margin %

Overhead Expenses

Sales & Marketing

S&M %

Administration

Admin %

EBIT

EBIT Margin %

Depreciation

EBITDA

EBITDA Margin %

Financial Expense

Interest Expense



Net Profit Margin %


CFO/Sales

Current Assets

Accounts receivable

Inventory

Non-Current Assets

Total Assets

Current Liabilities

Borrowings


Borrowings

Total Liabilities

Net Assets

Debt/ Total Assets

97


Appendices


VICEM HAI VAN PX1 PX1 PX1 PX1 HVX

VND Millions 2011 2012 2013 2014 2015 2016

Sales

Cost of Sales

Gross Profit

GP Margin %

Overhead Expenses

Sales & Marketing

S&M %

Administration

Admin %

EBIT

EBIT Margin %

Depreciation

EBITDA

EBITDA Margin %

Financial Expense

Interest Expense



Net Profit Margin %


CFO/Sales

Current Assets

Accounts receivable

Inventory

Non-Current Assets

Total Assets

Current Liabilities

Borrowings


Borrowings

Total Liabilities

Net Assets

Debt/ Total Assets

98


Appendices


GYPSUM & CEMENT PX1 PX1 PX1 PX1 TXM

VND Millions 2011 2012 2013 2014 2015 2016

Sales

Cost of Sales

Gross Profit

GP Margin %

Overhead Expenses

Sales & Marketing

S&M %

Administration

Admin %

EBIT

EBIT Margin %

Depreciation

EBITDA

EBITDA Margin %

Financial Expense

Interest Expense



Net Profit Margin %


CFO/Sales

Current Assets

Accounts receivable

Inventory

Non-Current Assets

Total Assets

Current Liabilities

Borrowings


Borrowings

Total Liabilities

Net Assets

Debt/ Total Assets

99


Appendices


DA NANG MATERIALS & CEMENT PX1 PX1 PX1 PX1 DXV

VND Millions 2011 2012 2013 2014 2015 2016

Sales

Cost of Sales

Gross Profit

GP Margin %

Overhead Expenses

Sales & Marketing

S&M %

Administration

Admin %

EBIT

EBIT Margin %

Depreciation

EBITDA

EBITDA Margin %

Financial Expense

Interest Expense



Net Profit Margin %


CFO/Sales

Current Assets

Accounts receivable

Inventory

Non-Current Assets

Total Assets

Current Liabilities

Borrowings


Borrowings

Total Liabilities

Net Assets

Debt/ Total Assets

100


Appendices

Contents

Appendix 1 Listed Cement Companies’ Factsheet

Appendix 2 Profiling of selected cement companies

101


• Registered name: Hai Phong Cement Company

• Head office: Minh Duc Commune, Minh Tan Ward, Thuy Nguyen

District, Hai Phong City

• Company type: One member Company Limited

• Year of establishment: 1899

• Principal businesses:

VICEM – HAI PHONG

Facilities

Company Profiling Targeted market

Products/ Sales strategies

Source: StoxPlus

Name Facilities LocationCapacity

Clinker Cement

Appendices

Appendix 4: Profiling of selected cement companies

102


• Registered name: Vicem Hoang Thach Cement Company Limited

• Head office: Minh Tan Commune, Kinh Mon District, Hai Duong

Province

• Company type: Company Limited



VICEM – HOANG THACH

Facilities


Products/ Sales strategies

Source: StoxPlus


Clinker Cement

Appendices


103


• Registered name: Vicem Tam Diep One Member Company Limited.

• Head office: No. 27 Chi Lang street, Quang Son Ward, Tam Diep

Town, Ninh Binh Province.

• Company type: One Member Company Limited



VICEM – TAM DIEP

Facilities


Products/ Sale strategies

Source: StoxPlus


Clinker Cement

Appendices


104


• Registered name: Ha Tien Cement Joint Stock Company

• Head office: No. 218, Provincial road 11, Binh An Commune, Kien

Luong District, Kien Giang Province

• Company type: Joint Stock Company



VICEM – HA TIEN

Facilities



Source: StoxPlus, Euromonitor

Source: StoxPlus


Clinker Cement

Appendices


105


• Registered name: Holcim (Vietnam) Ltd.

• Head office: 9th Floor, Fideco Building, No. 81-85 Ham Nghi Street,

District 1, Ho Chi Minh City.

• Company type: Joint venture company



HOLCIM (VIETNAM) LTD

Facilities



Source: StoxPlus


Clinker Cement

Appendices


106


• Registered name: Song Gianh Cement Co., Ltd

• Head office: Tien Hoa Ward, Tuyen Hoa District, Quang Binh

Province.

• Company type: Joint-stock company



SONG GIANH CEMENT CO., LTD

Facilities



Source: StoxPlus

Source: StoxPlus


Clinker Cement

Appendices


107


• Registered name: Thang Long Cement Joint Stock Company

• Head office: De E Hamlet, Le Loi Commune, Hoanh Bo District,

Quang Ninh Province.



• Principal businesses

THANG LONG CEMENT JOINT STOCK COMPANY

Facilities



Source: StoxPlus

Source: StoxPlus


Clinker Cement

Appendices


108


• Registered name: Vinakansai Cement Company Limited

• Head office: Lot C7, Gian Khau Industrial Zone, Gia Tan Ward, Gia

Vien District, Ninh Binh Province.

• Company type: Company Limited



VINAKANSAI CEMENT COMPANY LIMITED

Facilities



Source: StoxPlus

Source: StoxPlus


Clinker Cement

Appendices


109


• Registered name: Cong Thanh Cement Joint Stock Company

• Head office: Tam Son Commune, Tinh Gia Ward, Thanh Hoa

Province




CONG THANH CEMENT JOINT STOCK COMPANY

Facilities



Source: StoxPlus

Source: StoxPlus


Clinker Cement

Appendices


110


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‹#›

Contact us at StoxPlus

Hai Khieu

Associate, Biinform

+84 (0) 43562 69 62 (ext. 108)

+84 (0) 966 510 388

[email protected]

Head Office

5th Floor, Anh Minh Building

36 Hoang Cau Street

Hanoi, Vietnam

+ 84 (4) 3562 6962

Ho Chi Minh City Branch

2nd Floor, 63D Vo Van Tan

Ward 06, District 03

Ho Chi Minh City, Vietnam

+84 (8) 3823 3485

Lan Nguyen

Managing Director, Biinform

+84 (0) 43562 69 62 (ext. 109)

+84 (0) 964 946 760

[email protected]

Vietnam Cement Market Report 2017

Data & Analytics

Transcript of Vietnam Cement Market Report 2017