Mr. Le Phuoc Vu: ‘I feel secure when Hoa Sen has a new direction’

During the annual meeting on the morning of March 7, Mr. Le Phuoc Vu – Chairman of the Board of Directors of Hoa Sen Group – spent half an hour answering shareholders about the ability to maintain the leading position in the steel sheet industry and ambitions with the distribution of construction materials.

Mr. Vu believes that steel sheets are still the mainstay in the short term. The company sold production lines invested 20 years ago to replace them with new production technology. Capacity is therefore stable around 1.8-2 million tons per year. Of this number, about 1.1 million tons are consumed domestically, the remaining is exported. Estimated annual steel sheet revenue ranges from 30,000 to 40,000 billion VND and profit from 1,000 billion VND, depending on raw material prices.

“Our output is 2-3 times higher than the business behind us, so we may still lead the market in the next few years. However, the growth potential has reached the ceiling,” Mr. Vu said.

The head of Hoa Sen said that if a few more production lines were installed for factories in Ho Chi Minh City, Gia Lai and Nghe An, the total capacity could increase to 2.5-3 million tons per year. However, he said pouring more money into steel sheets is “not a wise decision” because of trade defense trends, excess world supply and thin profit margins.

This reality is not new, according to Mr. Vu. The company anticipated the difficulties of the steel industry and realized that it could lag behind, or even be wiped out, if it did not change soon. The company opened a new construction materials and furniture distribution segment in 2020 and officially established a subsidiary (Hoa Sen Home) at the beginning of this year after a long period of testing and refining the business model.

The supermarket chain distributing construction materials and furniture currently has more than 143 stores. Last year’s revenue reached 16,000 billion VND and profit was ahead of estimate. This year, this chain is focusing its efforts on opening about 20 new stores and building many warehouses across the country. Products in this chain are enough to meet 90% of the needs of completing a house. The revenue scale in the coming years can reach several billion USD and the profit margin is superior to that of the steel sheet business.

Mr. Vu said his experience shows that to be successful, there must be two factors, including doing things differently and being ahead of others. According to him, Hoa Sen Home satisfies both, so now it only needs to focus its efforts on expanding as quickly as possible.

“Over the past few years, I have had a huge burden of responsibility to shareholders. Now I feel secure when I have found a direction and can confirm that this is the future of the group,” Mr. Vu repeatedly emphasized this message in the morning meeting of March 7.

Hoa Sen Home currently has a charter capital of 1,000 billion VND, almost entirely owned by Hoa Sen. This company plans to increase capital to 3,300 billion VND this year through offering to existing shareholders and issuing incentives to employees. After that, the company plans to offer an initial public offering (IPO) and list on the stock exchange.

In the near future, Hoa Sen Home will no longer be a subsidiary of Hoa Sen. This enterprise will split, gradually reduce ownership and only act as a financial investor. Existing shareholders of Hoa Sen are encouraged to buy shares, becoming new shareholders of the first construction materials distribution chain in the country.

Hoa Sen this year sets business targets according to two options. They expect net revenue and profit after tax in the conservative scenario to reach VND 35,000 billion and VND 500 billion, respectively.

Management said that the increase in working capital loan interest rates, leading to financial costs that could be twice as high as the previous year, is the main reason forcing the company to build a cautious business plan. If the market is favorable and interest rates cool down in the second half of the year, the company expects revenue to reach 37,000 billion VND and profit of 600 billion VND.