28.09.2020, 22:59

Rubber Group wants to M&A of Vinachem’s tire companies

M&A of tire companies to close the value chain of rubber products


In the recent meeting with the State Capital Management Committee in Enterprises (CMSC), the leader of Vietnam Rubber Industry Group (HoSE: GVR) said that they are focusing on restructuring the business, increasing the scale of the rubber industry.


This group will consider investing in tire and tube factories in the form of merger and acquisition (M&A) of branded companies operating in Vietnam under the Vietnam National Chemical Group. Nam (Vinachem). GVR said that these brands will help close the value chain of rubber products and will be the core for developing tire and tube products in the future.


Currently, GVR is focusing on 5 main activities: planting and processing rubber latex; processing rubber wood; rubber industrial products; industrial park investment on rubber land; High-tech agriculture.


In the natural rubber segment, GVR is managing more than 400000 ha of rubber with an average yield of 156 tons /ha in 2019. However, this business has been on a downward trend in recent years due to low selling price. The impact of the Covid-19 epidemic further made the demand for rubber in the market decline, the exploiting output decreased, the wood liquidation price was low


Therefore, expanding the tire business to close the value chain of rubber products can be more effective. In fact, the group has started to penetrate this segment while having an association and placing an order with Casumina to produce VRG brand tires since 2017.


How do Vinachem tire companies do business?


Vinachem is a multidisciplinary conglomerate related to chemical products. With the tire segment alone, Vinachem is a major player in the industry with 4 member units doing business, namely Da Nang Rubber (HoSE: DRC), Sao Vang Rubber (HoSE: SRC), and Southern Rubber Industry ( Casumina, HoSE: CSM) and Inoue Rubber Vietnam Company Limited.


According to a 2019 report, bicycle tires sold 9.4 million units, motorcycle tires with 648 million units and car tires of nearly 343 million units.



Rubber Group wants to M&A of Vinachem’s tire companies


For each unit, Da Nang Rubber is a company with a slightly higher production scale with the output of tires and tubes of all kinds accounting for about one third of the whole group. In which, automobile and tube tires are the key product when bringing in revenue of nearly 3450 billion VND in 2019 accounting for 84% of total revenue.


Reporting semi-annual business results, Da Nang Rubber recorded net revenue down 17% to 1592 billion. Profit before tax collected VND 107 billion, down 3% as compared to the same period in 2019 and fulfilled 38% of the year plan.





According to a report by Bao Viet Securities (BVSC), the management of Da Nang Rubber said that export performance had improved after being hit hard in the second quarter by Covid-19. Specifically, export sales in July and August are both estimated at over $ 6 million, higher than the average of $ 4.4 million /month in the second quarter.


In addition, the full-steel radial tire factory with a capacity of 600000 tires /year came into operation, doubling the capacity of this product. This plant producing radial tires will officially finish depreciation in phase 1 by the end of 2020 BVSC estimates depreciation expense will decrease by about 149 billion, paving the way for businesses to recover strongly after the crisis.


With Casumina and Sao Vang Rubber, after a difficult period in 2017-2018 business results have improved again in 2019 and early 2020. Specifically, Casumina’s semi-annual profit before tax is close to 40 billion VND, 4 times higher than the same period and fulfilling 27% of the year plan.


Meanwhile, Casumina recorded an output of 1814 million pieces for motorcycle tubes, 373 million pieces for bicycle tubes, 329 million pieces for motorcycle tires, 246 million for bicycle tires, and all kinds of car tires nearly 2 million units. Notably when Casumina is affiliated to produce VRG brand tires for the Rubber Group.





Meanwhile, the semi-annual profit before tax of Sao Vang Rubber is more than 33 billion dong, up 88% over the same period in 2019 and exceeding 58% of the year plan.


Last year, Sao Vang Rubber consumed a total of more than 15.9 million pieces of all kinds of tires and tubes. In which the largest consumption volume is motorcycle tubes with 677 million units, bicycle tubes with 427 million units, bicycle tires 324 million units, motorcycle tires 1.1 million units, car tires reaching 286364 units.





How many shares does Vinachem own?


In early 2018 the Prime Minister issued a Project on restructuring Vinachem for the period 2017-2020. Accordingly, this group has to divest all 3 tire tattoo companies to below 51%, the immediate orientation is to reduce the rate of 36%.


At Da Nang Rubber, Vinachem once filed an auction of 17.2 million shares with a starting price of 25170 VND /share in May 2019. However, this auction was canceled because no investors registered to participate. Vinachem is still the parent company holding nearly 60 million DRC shares, equivalent to 5051% of charter capital.


In contrast, at Sao Vang Rubber, Vinachem also held an auction of 4.2 million shares with the starting price of 46452 VND /share and attracted 4 investors to buy all shares. After divesting, Vinachem still holds 36% of charter capital.


According to the annual report of 2019 Casumina is in the process of implementing the divestment policy of the Government of Vietnam down to 36%. Currently the state capital in the company is still 51%. Notably, Saigon VRG Investment (a member unit of GVR) has continuously bought more CSM shares in July 2019 to increase its holdings to over 8% of charter capital.


With Inoue Rubber Vietnam, this is a joint venture between Vinachem (accounting for 24% of capital) with foreign partners, Japan Inoue Rubber and Bridgestone Corporation. This joint venture to manufacture tires is located in Vinh Phuc and supplies famous car manufacturers such as Honda Vietnam, Yamaha Vietnam.





Source: ndh.vn – Translated by fintel.vn