Vicostone General Assembly of Shareholders (VCS): Fortunately, Q1 profit only halved, received the transfer of the unsaturated polyester resin factory.

On the morning of April 12, Vicostone Joint Stock Company (HNX: VCS) held its 2022 Annual General Meeting.

In 2022, Vicostone achieved sales of VND 5,660 billion, down 20% from 2021, and consolidated pre-tax profit reached VND 1,377 billion, down 34%. This is the first time since 2012 that Vicostone’s pre-tax profit has turned negative

Vicostone said that as a company whose revenue mainly comes from export activities, the company’s business results in 2022 will be heavily impacted by global macroeconomic factors such as political instability, inflation, China’s “zero-COVID” policy and logistics crisis from the end of 2021. ., particularly in the main markets of North America and Europe.

TWO SCENES FOR 2023

Regarding the 2023 business plan, Vicostone offers 2 scenarios. Under Scenario 1, the company expects revenue to increase by 4% to VND5,891 billion compared to 2022, but expects pre-tax profit to decrease by 3.8% to VND1,325 billion.

In Scenario 2, when economic, political and social factors adversely affect the company’s production and operations, Vicostone targets a 16.7% decline in sales to Dong 4,713 billion and a 23% decline in profit to Dong 1,060 billion.

Mr. Ho Xuan Nang – CEO – said that the economic situation as well as the construction market showed no signs of recovery, risks of economic instability in the US – Vicostone’s main market. 2023 is expected to be a particularly difficult year, not only Vicostone, the whole world and the industry will have to accept this situation.

“Achieving Scenario 2 is also positive in the context of 2023, when the market is unpredictable, input prices increase, output prices decrease, there are risks of dumping, risks of circumvention,” Mr. Nang said.

Did he also betray? In the first quarter, Vicostone’s revenue fell 38%, profit was halved, profit was about VND190 billion after tax . However, according to Mr. Nang, against the backdrop of unfavorable market conditions, this is still a lucky number. Although sales were down, it was still in the top flight and was down the market overall.

Selling price of Vicostone products has dropped 5%-8% for some distributors in USA in the last 2 months, the effect will have to wait a few months later.

“Early last year, the market outlook is optimistic, Q1 and Q2 are still very good, I hope this year will be the opposite, the next 2 quarters will be better” – expected Mr. Nang. According to him, Scenario 2 is in line with Q1 results, but the company will work hard to achieve Scenario 1.

POLYESTER PLASTIC PROJECT TRANSFER RECEIVED NO. NO

At the general meeting, the Vicostone shareholders Approved the policy of obtaining the transfer of the project “Investment in the construction of an unsaturated polyester resin factory”. resistant to UV radiation and weathering, used in the manufacture of quartz-based artificial stone and other composite materials” by parent company JSC Green Phoenix A&A.

In particular, to ensure objectivity, such content must not vote for shareholders associated with Vicostone’s interests, such as: B. Group leadership, Vicostone management and Vicostone internal shareholders.

The project has completed the Phase 1 investment and has been approved and commissioned by the Hoa Lac Hi-tech Park Management Board with acceptance results. At present, the project has been commissioned and operated stably.

In 2021 the factory will produce 18,773 tons and in 2022 15,600 tons. The actual capacity of the plant can reach 24,000 tons/year. Mr. Nang said that this year, 80% of the group’s capacity is expected to serve and the remaining 20% ​​of the capacity will be sold to outsiders. The project is profitable at an occupancy rate of 80%.

Mr. Nang explained the reason why this was not the case until this point, saying that the land allocation procedure is not clear as the land allocation has not yet been completed, so it is not possible to recognize ownership on the land. To date, the land handover procedures have been completed and are expected to be completed in the second and third quarters.

Pending legal procedures, the Board of Directors has consulted shareholders to authorize the Board to proceed with this activity. The transfer price will be awaiting reporting from the independent valuation entity, once the official figure is available the Board of Directors will inform shareholders.

In addition, shareholders also approved the cancellation of the plan to repurchase 4.8 million of its own shares to secure capital for the company’s manufacturing and commercial activities and long-term investments in key projects.

In terms of personnel, Mr. Pham Tri Dung was elected as a member of the Board of Directors in place of Ms. Nguyen Dieu Thuy Ngoc. Currently, Mr. Dung is also General Manager of Vicostone, having replaced Mr. Pham Anh Tuan on February 27, 2023.

DISCUSSION AT THE CONFERENCE

What is the outlook in other markets like Australia, Europe and Vietnam, will it support sales as the US market slows down?

Vicostone has been off the Australian market for 2 years and we consider this a blessing. The reason for this is that a silicosis-related case has arisen in the Australian market, which has caused a long legal battle and a competitor of Vicostone, Caesarstone, has been involved in many lawsuits. Associations in Australia have been fighting with the government to ban engineered stone products and we have stopped investing in the Australian market since 2020.

In 2022, the US market will account for 65% of Vicostone’s sales, the Canadian market will account for about 23%-30%, the European market will account for 10%, and the Vietnamese market will reach USD 12 million. In 2023, the Vietnamese market was quiet without much demand.

What is the expected cash dividend?

The dividend will be decided depending on the situation, but there is definitely another dividend, if the company reaches Scenario 2, the dividend ratio is expected to be around 20% – 30%.

Why doesn’t the State Securities Commission allow Vicostone to buy back its own stock?

In connection with a sharp fall in the share price last year, we feared that the share price would fall below the book value and have therefore asked the shareholders to buy back their own shares in order to protect the interests of the shareholders.

However, the Securities Commission sent an unauthorized letter because it did not identify each source of capital used to buy back shares. As the share price has recovered from the date of the purchase request to the receipt of a response, but has not fully recovered due to the general market conditions, we will propose to shareholders that the plan to repurchase their own shares be canceled.

If the committee doesn’t allow the purchase, we still have 300-400 billion to pay dividends to shareholders.

Will the transfer of a polyester resin production project help improve Vicostone’s profit margin?

The current transfer price cannot be shared by the Board of Directors, must wait for the official figure.

Regarding the initiative, if there is no such factory, this product accounts for about 40% of the cost of production, if it has to be imported, the company will be in a passive position. Also, imports face many problems related to customs, so not having to import products for production is a very favorable move, especially in the current context of anti-circumvention and anti-dumping.

In Asia, quartz stone consumption is very promising, is Vicostone strong in these markets?

Vicostone still sells products to India, Singapore, China,…but the quantity is small because the price of China-made products is less than half our price, so it can’t keep up. And if you sell at Chinese prices, you lose.

In addition, most of the projects in the Vietnamese market choose to use Chinese stone, although they are high-end housing projects. In the 3 years 2017 – 2019 we spend almost 50 billion a year on marketing, but the product does not go down well with the investor, selling odd jobs is not worth it.

What is Vicostone’s current capacity, how does it plan to operate?

The total capacity is about 6 lines with 3 million m2. In the current context, Vicostone is working at over 50% of capacity, mainly to ensure cost optimization and job security for employees. We didn’t have to lay anyone off last year.

Huyen Trang