Company Quarterly Earnings Update – VSC VN – 2019 Q2

Summary of the H1/2019 results of Vietnam Container Ship. (VSC VN) 

H1/2019 results: highlights
  • VSC’s revenue rose by 12.7% to VND 897bn in H1/2019. Port operations, which usually contribute about 70% to total sales, expanded by 10% yoy thanks to the mixed impact of higher prices for port services and more add-on services at ports. Container volume via VSC’s two ports was down 5.2% yoy. In the first half of 2019, VSC had to transfer more container volume to other ports as the company could not arrange the necessary capacities. If adding the transferred volume, total volume would have gone up by 1.0% yoy.
  • The increase of transferred container volume to other ports has adversely affected VSC’s financial results. Also, the crowded situation at VSC’s ports caused higher operating costs. As a result, VSC’s gross margin declined in H1/2019 to 22.8% from 31.8% in the same period of last year. Net profit was down by 44.5% to VND 83.5bn due to the significantly lower gross margin, as well as extraordinary expenses from unexpected commissions to clients and the one-off corporate income tax of VND 20.0bn (some of VSC’s subsidiaries benefited from favorable income taxes from 2013-2017, but these favorable tax amounts were not accepted by tax authorities based on current checking. These subsidies already paid normal taxes from 2018).
  • The container volume via ports in Hai Phong city declined by 0.8% yoy in H1/2019. This is disappointing compared to previous years (CAGR of 11% from 2010-2018). We think that the container volume via Hai Phong city will resume its solid growth in the medium- to longer-term. VSC has encountered an unexpectedly complicated vessel schedule in the first half of 2019. We expect that situation will gradually improve in the second half of this year. Due to the challenging environment in 2019, net profit should decline by 27.8% yoy in this year, before rising by 36.4% in 2020.

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