Rubber recovery boosts profits

The world rubber price closed at 208.5 yen per kilo on November 11, 4.98% higher than 198.6 yen in the previous session, reported tradingeconomics.com website. The price increased by 17.27% against the price in the previous week, 16.68% month-on-month and 33.48% year-on-year.

The world rubber price reached its highest level at 526.4 yen per kilo in February 2011, and then dropped to its lowest level at 146.4 yen in January 2016.

The Bao Viet Securities Company (BVSC)’s analytical division reported world rubber prices at the end of September 2016 rose by 32%, compared to earlier this year.

Recovery of global rubber price pushed revenue of local firms up. - photo support.gov.vn

On the local market, rubber prices also displayed positive fluctuations against expectations, as the average price at the end of September increased by 15% to VND30 million per tonne against the price in the first half of this year.

Rubber prices were expected to increase in the future due to support from a surge in oil prices, it said.

In addition, El Nino and La Nina, which are a natural part of the global climate system, would cause negative impacts on rubber output for the short term, resulting in rubber prices rising, BVSC said. Meanwhile, demand for natural rubber in China was expected to increase in the coming months due to the production of cars and car tires.

Therefore, positive developments in rubber prices would help local rubber enterprises exceed their targets in production and business for this year, it said.

The BIDV Securities Company (BSC) also said global rubber prices saw positive fluctuations and local enterprises expected rubber prices to increase by 17% in the fourth quarter of 2016, in comparison with the same period last year.

BSC anticipates a recovery in rubber prices, while lower production costs would assure that rubber production remains profitable in 2016. Rubber companies are expected to overcome difficulties and remain stable in their output of rubber in the fourth quarter of 2016.

Two large natural rubber processors, Phuoc Hoa Rubber Company and Dong Phu Rubber Company, reported profits in September, as well as in the first nine months of this year, exceeding their yearly plans.

The net profit of Phuoc Hoa Rubber Company in the third quarter reached VND131 billion, being 31% higher than its yearly plan, while Dong PhuRubber Company’s net profit stood at VND85.5 billion in the first nine months of 2016, 50.7% higher than its yearly plan for 2016.

Meanwhile, Tay Ninh Rubber Company and Hoa Binh Rubber Company had net profits of VND29.8 billion and VND3 billion, respectively. The net profit tripled for Tay Ninh Rubber Company and rose by 77% for Hoa Binh Rubber Company, against their yearly plans.

However, in the third quarter, Thong Nhat Rubber Company saw a reduction of 78% year-on-year in their net profit, to VND1.7 billion, due to the company not having revenues from the liquidation of rubber trees.

In particular, Quang Nam Rubber Company, during the quarter, reported a loss of VND17 billion, reflecting its investing in Vien Dong Seafood Company, resulting in its largest loss since the first quarter of 2013.

Hoang Anh Gia Lai was one of the local enterprises investing in the rubber business in 2011, when rubber prices were at their highest, but later there were many difficulties in the global rubber market, including reductions in world rubber prices. The difficulties affected on the rubber business of Hoang Anh Gia Lai, reported dantri.com.vn online newspaper.

But, the recovery in rubber prices on domestic and world markets resulted in net revenues at Hoang Anh Gia Lai reaching VND35.5 billion in the third quarter of 2016, a year-on-year increase of VND5 billion.

Further, the increase in rubber prices offers an opportunity for Hoang Anh Gia Lai to recover production and sales of rubber in the future.