Vietnam: Coal companies report rises in revenues but declining profits

As mining activities are seasonal and affected by the weather, revenue and profit of coal mining businesses have fluctuated continuously over the past 10 years.

• Vinacomin – Northern Coal Trading Joint Stock Company (TMB) saw an average growth rate of 9 per cent in revenue every year during the 2010-2020 period.

• Vinacomin – Coal Import Export Joint Stock Company (CLM) has reported a 17 per cent rise in revenue during the past 10 years, from VND1.6 trillion (US$69.4 million) to VND7.5 trillion.

• Ha Lam Coal (HLC), Vang Danh Coal (TVD), Ha Tu Coal (THT) and Mong Duong Coal (MDC) witnessed the same average revenue growth in the 2010-2020 period of 6-7 per cent.

Low profits
Despite earning trillions of dong in revenue, coal companies only achieved tens of billions of dong a year in profit, with some even suffering losses. Compared to 2010, the profits of coal companies were almost unchanged. Mong Duong Coal (MDC) had a profit of VND79 billion in 2010 – the highest in the group mentioned above. But by the end of 2020, this enterprise only reported VND27.8 billion in profit.

Coc Sau Coal (TC6) witnessed profit fall from VND67 billion in 2010 to only VND5.6 billion in 2020, the lowest level among the group, although its yearly average revenue is much higher than many other businesses in the industry.
The merger between Cao Son Coal (TCS) and Tay Nam Da Mai Coal (TND) also did not help Cao Son Coal improve its profit in 2020, hovering at more than VND54 billion.

Viet Bac Mining (MVB), which started the equitisation process in 2015, made a breakthrough in profit growth with VND55 billion in 2015, soaring to VND270 billion in 2020, a jump of 37 per cent.

Businesses in the coal mining industry have to confront specific risks such as the reserve of open-pit mines gradually drying up. Most mines are exploited deep underground, with some at even 300m below sea level. Underground coal mines have higher soil removal costs compared to open-pit mines, which leads to less competitive coal prices. Mining activities are seasonal and affected heavily by the weather. Due to the negative impact on the environment, taxes and fees for the coal industry are always high and tend to increase. However, if comparing coal stocks, it can be seen that there are still good stocks with low price-to-earnings (P/E) rates and high dividend payout ratios.

Leaders of Viet Nam National Coal and Minerals Group (Vinacomin or TKV) said that the coal industry was facing many difficulties due to the impact of the COVID-19 pandemic, which has caused millions of tonnes of coal residuals at the yards and warehouses of TKV. They said the coal demand for the economy in 2021 will not grow much, staying at the same level as in 2020. In addition, the mining conditions are increasingly difficult due to the rising depth underground, hampering the transportation process. — VNS