Construction material industry sees expanding Thai acquisition
Thang Long Cement Plant
The latest deal took place in March when Thai SCG Cement-Building Material Company purchased 100 percent shares worth US$156 million from shareholders of Vietnam Construction Material Company (VCM). The plant has the capacity of 3.1 million tons a year in the central region.
Counting payment of VCM net debt and costs spent on improving the effectiveness of purchased properties, the total amount which SCG has invested in the Vietnamese firm reaches $440 million. The deal increases SCG capacity to 10.5 million tons in ASEAN block in addition to 23 million tons in Thailand.
Previously, the Thai firm bought 85 percent shares of Prime Group at the price of $240 million making it the largest glazed tile maker in the world in 2012. Three years later, SCG continued buying the remaining of 15 percent share.
In 2011, SCG purchased Buu Long Cement Company in Dong Nai province and invested $5.5 million to raise capacity to 200,000 tons cement a year.
SCG subsidiaries have acquired 20 percent stock of Thieu Nien Tien Phong (Pioneer Teenager) Plastics Company and 17 percent share of Binh Minh Plastic Firm.
The Thai company's representative said that they had invested hundreds of millions of US dollar in Vietnam in many different projects and intended to increase the investment to $1 billion this year.
Thai Siam City Cement Company (SCCC) has spent about hundred of million of dollar to own 65 percent legal capital of Holcim Vietnam under LafargeHolcim Group.
Firms selling shares to Thai companies said that the merger helped them optimize production amid the local situation which supply exceeds demand.
With the geographical advantage of locating near Vietnam, acquisitions and takeovers in Vietnam has been more profitable for Thai companies than building new plants and they have effectively operated, says chairman of Vietnam Cement Industry Corporation’s member council Luong Quang Khai.
According to the Ministry of Construction, the designed capacity of Vietnam’s cement industry reached 88 million tons a year by the end of 2016 and will exceed 100 millions tons if including under-implementation projects which are expected to complete in 2018.
Meantime, consumption now touches 60 million tons while exports hit 15 million tons. The remaining of about 10 million tons is spare.
Foreign invested enterprises such as Chinfon, Nghi Son, Thang Long and Holcim are holding 30 percent of the market share with stable consumption in Vietnam and exporting back to their local markets. Vietnamese firms who are weak in all aspects have undergone increasing competitiveness.
Vietnam Cement Association said that the burden of many types of taxes and fees together with the oversupply had made local firms weaker; forcing them to withdraw, opening opportunities for foreign companies to prevent from going bankruptcy and causing a burden for the economy.
Chairman of the association Nguyen Quang Cung says that local cement consumption is forecast to reach 82 million tons before 2020 and the volume in excess will be 36-47 million tons.
The forecast consumption volume in 2020 is 93 million tons and 25-36 million tons will be redundant. Therefore it is necessary to change the cement industry plan; encourage investors to apply new technologies, replace old and outdated production lines and license new projects basing on demand.
Cement firms should have reasonable production projects to prevent from raising more pressure on local consumption.
The Ministry of Construction needs to work with relevant ministries and localities to boost the use of cement products such as unbaked bricks in public works including cement roads, remove unnecessary cement projects from the plan and do not put into operation new production lines from next year.