Gross profit margin surged, Gelex reported a profit of nearly VND 900 billion PBT in 9 months
The good improvement in gross profit margin from 15.38% in the first 9 months of 2018 to 18.38% in the first 9 months of 2019, which helped Gelex get a high source of gross profit.
Vietnam Electrical Equipment Joint Stock Corporation (Gelex-Ticker Symbol: GEX) had announced its consolidated financial statements for the third quarter of 2019.
Gross profit margin grew thanks to investment in technology improvement
Gelex’s financial statements showed that net revenue the third quarter reached more than VND 3,900 billion, a slight increase of 2% over the same period. In 9 months, Gelex achieved more than VND 11 trillion in revenue, up by 9.5%.
All segments and most of the member units in GELEX had growth in revenue and gross profit in the third quarter. Regarding revenue, although the growth was not high, the gross profit in the third quarter of 2019 reached VND 736.6 billion, up surprisingly nearly 17% and 9 months reached VND 2,023 billion, up by 31% over the same period in 2018. The good improvement in gross profit margin from 15.38% in the first 9 months of 2018 to 18.38% in the first 9 months of 2019, which helped Gelex get a high source of gross profit.
The improved gross profit as above came from the effort of Gelex’s member units in equipment investment, technology improvement and production optimization along with raw materials saving, which gradually increased gross profit margin.
Electrical equipment has been still a key business segment
Another notable highlight in Gelex’s Q3/2019 financial statements was the significant improvement in the gross profit of the electrical equipment segment.
Financial statements showed that, in the third quarter of 2019, the electrical equipment segment brought Gelex VND 3,215 billion in net revenue out of a total of VND 3,902 billion in the third quarter, accounting for 82% of total revenue. Gross profit from the electrical equipment segment also reached VND 535.6 billion out of a total of VND 737 billion, accounting for 73% of the total.
In the electrical equipment segment, Gelex affirmed that researching, developing and perfecting the electrical equipment product ecosystem, making in-depth investment and enhancing production capacity was one of the key tasks of the group.
In 2019, Gelex conducted expansion projects to improve the production capacity of Cadivi Dong Nai Company Limited; implemented a project to produce super-heated aluminum cables, a project to improve the production capacity of 500 km medium voltage underground cables; conducted construction of PVC granulating factory and Bac Ninh electric wire and cable factory project. Gelex also completed the purchase of shares in Dong Anh Electrical Equipment Manufacture Joint Stock Company, expanded its transmission transformer products, contributing to the completion of the electrical equipment product suite.
Simultaneously, Gelex optimized production to reduce costs, increase business efficiency, and merged two units in the same production segment, VIHEM, into HEM.
Regarding the event that Song Da water was polluted with oil, the financial statement showed that Gelex currently held 60.46% of capital in Viwasupco. Then, Viwasupco completed the repair and was allowed by the Hanoi People’s Committee to supply water for drinking and living again. According to information disclosure, VCW would not collect water bills for a month. This event could cause Gelex’s water revenue to decline in the next quarter. However, the revenue and profit of the water segment have accounted for a small proportion in the Corporation’s structure.
9 months profit before tax was nearly VND 900 billion, completing 65% of the year plan
The financial statements of the third quarter of 2019 also showed that Gelex achieved nearly VND 900 billion of EBT in 9 months, completing 65% of the plan assigned by the General Meeting of Shareholders. Profit after tax in Q3/2019 reached VND 252 billion, down by 41% compared to the same period in 2018 in which the profit of parent company shareholders reached more than VND 184 billion. Accumulated 9 months of 2019 reached VND 712.5 billion, equivalent to a decrease of 27%.
The decline in profit after tax in the context of increased revenue and gross profit margin was due to:
Firstly, in 2018, Gelex divested some investments and income from abnormal financial activities. If this abnormal factor was excluded, profit after tax in the first 9 months of 2019 grew by double digits, reaching 21.3%.
Sencondly, in 2019, the company increased spending on marketing activities to promote sales, attended many domestic and foreign exhibitions.
In addition, financial expenses, mainly interest expenses, increased from VND 336 billion in 9 months of 2018 to VND 450 billion in 9 months of this year. During the period, the company increased bank loans and issued more bonds compared to the beginning of the year, pushed short-term debt from VND 3,742 billion at the beginning of the year to VND 5,103 billion at the end of September and pushed long-term debt from VND 2,132 billion to VND 3,487 billion. Most of the bonds issued are to finance the company’s new projects.