Vietnamese tire makers continue to face difficulties
The recent decline in natural rubber prices, which is usually seen as a positive trend for the tire industry due to reduced raw material costs, has not led to the expected growth of tire manufacturers in Vietnam. Instead, major companies have reduced their profits in the first quarter of the year, mainly due to increased costs and export problems, notes Asia News Network.
According to the results of the first three months of the year, Da Nang Rubber JSC (DRC) reported a 21.2% increase in sales to $46 million, but profit after tax fell by 80.8% to $360,000, and gross margin decreased from 16.6 to 11.1%. At the same time, Casumina's revenue decreased by 11% to $39 million, and pre-tax profit by 25.9% to $670,000.
The main reason for the decline in rubber prices was the high level of inventory in China, associated with a decrease in demand for cars, including electric ones, in the country. However, the reduction in raw material costs was not enough to compensate for the difficulties faced by Vietnamese tire companies, especially those that are heavily dependent on exports and are burdened with growing fixed costs.
Currently, exports account for 70% of DRC's revenue, with the main markets being the US and Brazil. Profit has been consistently decreasing since 2022, and the company is now trying to expand its presence in Europe, the Middle East, and Africa, but its profitability in these markets remains low. In addition, DRC faced additional costs associated with the launch of the third stage of its radial tire plant in the second quarter of last year. The amount of unpaid debt increased from $22 million in 2021 to $41 million by the end of the first quarter of 2025, which is equivalent to 55.9% of the company's equity capital.
Casumina also has low capital efficiency compared to the industry average. In 2024, the company's net profit was $2.8 million, but the return on assets was only 1.87%, which is significantly lower than the industry average of 5.59%.
In 2025, Casumina plans to receive revenue of $180 million, which is 5% less than in the previous year, and expects modest profit growth of 6% to $3.6 million. Given the continued uncertainties in export markets, the company is pinning its main hopes on high demand within Vietnam.
Experts note that although the scene on rubber may continue to decline, this does not guarantee a speedy recovery of profits in the Vietnamese tire industry, and trade barriers, increasing costs, and low operational efficiency remain the main obstacles that industry participants need to overcome in order to return to sustainable growth.
Photo: VNA/Viet Nam News