Nam Kim Steel (NKG): The Phu My Project to Lead the New Cycle of the Steel Industry

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During the annual shareholders' meeting in 2024, the leadership of Nam Kim Steel Joint Stock Company (stock code NKG) announced that they had achieved 48% of this year's profit target and the company is focusing on boosting exports.

The annual shareholders' meeting of Nam Kim Steel Joint Stock Company (stock code NKG - HoSE trading floor) took place on April 26, 2024.

Reporting to the attending shareholders, Mr. Ho Minh Quang - Chairman of the Board of Directors (BOD) of Nam Kim Steel, stated that the Vietnamese galvanized steel industry has shown signs of recovery since the second quarter of 2023, but the growth rate for this year is expected to remain modest, especially amidst the Federal Reserve's (Fed) maintenance of high interest rates.

Domestically, purchasing power remains uncertain, while the real estate market needs time to absorb support policies. The company anticipates facing numerous challenges on the path to recovery this year.

Therefore, the key business strategy for the company this year will be to strengthen the market, seize opportunities to increase profits, and actively expand new partnerships, thereby achieving long-term strategic advantages, Chairman Ho Minh Quang said.

Based on market outlook analysis, Nam Kim Steel has planned its business targets for this year with a revenue target of 21,000 billion VND and pre-tax profit of 420 billion VND, representing increases of 13% and 137% respectively compared to 2023. The expected sales volume is around 1 million tons.

Sharing further insights on the steel industry prospects, Mr. Vo Hoang Vu - General Director of Nam Kim Steel, expects global economic recovery and investment and consumption activities in international markets to improve from next year onwards. Therefore, this is a favorable time for Nam Kim Steel to invest in expanding production capacity to anticipate this recovery.

Mr. Ho Minh Quang said, "Entering 2024, this is a pivotal year for Nam Kim Steel to delve deeper into the value chain of the galvanized steel industry through the new factory project in Phu My."

The Nam Kim Phu My Galvanized Steel Sheet Factory project has a total investment capital of 4,500 billion VND (Phase 1), including a zinc-coating production line of 350,000 tons/year, two aluminum-zinc alloy coating lines of 300,000 tons/year and 150,000 tons/year respectively, and a color coating line of 150,000 tons/year.

Chairman Ho Minh Quang disclosed that the project has obtained commencement permits and is expected to commence operations from the fourth quarter of 2025 or the first quarter of 2026, with production capacity gradually increasing and reaching 100% by 2027. When fully operational, Nam Kim Steel's total capacity will reach 1.6 million tons/year, compared to the current 1 million tons.

Different from current galvanized steel products, the products of the Nam Kim Phu My Factory are high-quality products, targeting premium segments that are less fiercely competitive, such as supporting industries, automotive industries, auxiliary mechanical industries, and household appliances.

To prepare resources for the construction of the factory, the BOD of Nam Kim Steel proposed and was approved by shareholders to offer a maximum of 131.6 million shares to existing shareholders to raise 1,580 billion VND.

Achieving 48% of the full-year profit target after only the first quarter of 2024

In the Discussion session, the issue most raised by shareholders was the specific business strategy for the year and the prospects for achieving business targets.

Responding to this issue, Mr. Vo Hoang Vu said that domestic demand is currently very low, businesses are hesitant to invest in building workshops, while demand for construction and renovation of houses among the population remains low.

In this context, Nam Kim Steel is focusing on exploring international markets, especially Europe and North America, which account for a total of 70% of export sales.

"With our quality advantage and established sales channels, we are still confident that the export channel can compensate for the domestic market," said the General Director of Nam Kim Steel.

At the same time, Mr. Vo Hoang Vu revealed that in the first quarter of 2024 alone, Nam Kim Steel sold 254,000 tons of products, generating revenue of 5,300 billion VND and post-tax profit of 150 billion VND. Thus, the company has achieved 25% of its revenue target and 48% of its full-year profit target.

It is expected that sales volume in the second quarter will increase by another 10%, about 275,000 tons, shared the General Director of Nam Kim Steel.

As reported by the Vietnam Economic Magazine earlier, Nam Kim Steel announced that it has ensured the volume of exports for the second quarter of 2024. Although selling prices may be lower than the first quarter of 2024, sales volume is expected to be better. Therefore, Nam Kim Steel has a basis to achieve the plan of 420 billion VND pre-tax profit this year.

It is noteworthy that the price difference between HRC in the EU and the US with the Asia-Pacific region is currently at the level of 200 - 250 USD/ton. This is considered a fairly attractive level to encourage importers to seek supply sources from the Asia-Pacific region.

Contact us today for more information or inquiries about our Zinmag steel solutions.

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