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Company Quarterly Earnings Update – DHC VN – Q4 2024
Summary of Q4/2024 results and outlook of Dong Hai Ben Tre JSC (DHC VN)
- Net revenue was VND3,431bn (+5.3% y/y). Weak kraft paper demand in China spurred heightened competition from FDI kraft paper manufacturers selling locally. Nonetheless, DHC sustained full capacity utilization at its kraft paper mills and increased cardboard box utilization to 76.0% from 60.0% in 2023. Vietnam’s domestic kraft paper market expanded 14% y/y, propelled by strong retail sales (+8.3% y/y) and exports (+14.3% y/y). DHC, strategically positioned in the Mekong Delta—a key agricultural export hub—has capitalized on these tailwinds, boosting its kraft paper average selling price (ASP) by 4.7% y/y to partially offset elevated input costs.
- The gross profit margin contracted from 15.5% to 12.2%, driven by an 18.6% y/y surge in Old Corrugated Container (OCC) prices, exacerbated by higher shipping costs amid Red Sea geopolitical tensions. SG&A expenses remained steady at approximately 2% of net revenue. Net profit declined 21.7% y/y to VND242bn, yielding a net margin of 7.1%, as elevated input costs outweighed ASP gains.
- Vietnam’s kraft paper industry is set for a recovery in 2025, supported by easing external pressures from China, continued growth of Vietnam demand, and declining OCC costs. As China’s kraft paper sector recover, FDI kraft paper manufacturers are expected to ramp up exports to China, reducing domestic oversupply and improving pricing power for local producers. Meanwhile, domestic kraft paper consumption remains solid. Additionally, OCC prices peaked in 2024 and are set for a gradual decline in 2025, driven by stable recycling supply, and lower freight costs (World container index down 50% from its 2024 peak).
- For 2025, net revenue is projected to be driven by higher cardboard box utilization (88%) and ASP increases across both product lines. Growth will be supported by strong domestic demand, agriculture export expansion. Declining OCC costs from lower shipping expenses are expected to improve the gross margin, while stable operating costs should support net profit growth.
- Regarding the Giao Long 3 project, DHC received the investment license for the Giao Long 3 project in 2024. The next steps include obtaining a construction permit with construction set to commence in 2025. The Giao Long 3 paper mill will focus on kraftliner and testliner
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