Gloomy profit outlook for logistics firms: top broker SSI

Hai Phong port in Hai Phong city, northern Vietnam. Photo courtesy of the port

Gloomy profit outlook for logistics firms: top broker SSI

By Huong Dung

Fri, February 3, 2023 | 9:42 am GTM+7

Vietnamese container shipping and logistics companies expect a gloomy profit outlook this year due to weak demand and increased supply, said Saigon Securities Inc.

In its report, SSI said consumer demand will remain weak in 2023 amid high inflation. As clearing inventory takes at least two quarters, transportation demand is expected to recover from the second half of the year in preparation for the year-end peak shopping season.

“China’s reopening and resumption of international flights is a significant positive factor for the industry,” it noted.

According to the broker, port companies can expect a better outlook thanks to stable service prices despite weak volume growth. Oil and gas transport companies that engage in the charter market can benefit from stable tanker demand in the short-to-medium term, while those operating in the spot market may experience strong volatility in freight rates. The bulk shipping segment could also benefit from the reopening of China.

SSI also stated that logistics companies are implementing a range of new projects, which are expected to consolidate their networks. “However, competition is likely to become more intense in the industry and financial burden can be a challenge to businesses amid high interest rates,” it noted.

Merger & acquisition activities in the industry are likely to be vibrant in 2023, the broker predicted. By 2025, the Vietnam National Shipping Lines Corporation (Vinalines) plans to divest from Hai Phong Port, Port Quy Nhon, Can Tho Port, Cam Ranh Port, Da Nang Port, and Vinaship. Meanwhile, the Commission for the Management of State Capital at Enterprises (CMSC) will reduce the state ownership rate in Vinalines to 65%.

The Vietnam Container Shipping JSC plans to buy a 49% stake in Vinaship, and a wharf in the Hai Phong port cluster. Gemadept intends to divest from Nam Hai Dinh Vu port, and sell its 24% stake in Gemalink Port to strategic investors, according to the report.

The Vietnamese logistics market’s compound annual growth rate in the period 2022-2027 is forecast to reach 5.5% thanks to the strong recovery of the whole economy after the Covid-19 pandemic, with a growth rate of 8.02% in 2022.

The country currently has about 30,000 enterprises operating in the field of logistics, with more than 5,000 engaging in international logistics services, according to SSI.

https://theinvestor.vn/gloomy-profit-outlook-for-logistics-firms-top-broker-ssi-d3553.html