'Test' of business endurance

As the prices of sand, stone, steel, and cement all increase sharply, the Vietnamese construction industry is witnessing a strong differentiation between businesses. Profits no longer come from revenue alone, but from the ability to control costs – a factor that is becoming a real “test” of management endurance and financial potential in the entire industry.

At the construction site of Ho Chi Minh City Ring Road 3, the section through Vinhomes Grand Park Urban Area, Thu Duc City, under construction package 03. Illustrative photo: Quoc Khanh/VNA

Material prices "pull" businesses into challenges

In the construction industry, raw material costs often account for the largest proportion of the cost structure. Any fluctuations in input prices can quickly erode a company’s profit margin.

According to the thematic report "Construction Industry Update June 2025 - Breakthrough in the era of public investment and urbanization" published by Agribank Securities Joint Stock Company (Agriseco) on June 12, 2025, the wave of increasing material prices is creating unprecedented pressure on businesses with weak financial capacity and cash flow coordination.

Statistics from the report show that the price of construction sand has exceeded VND450,000/m³ in 2024, about VND20,000/m³ higher than the same period. Asphalt is also approaching the threshold of VND18,000/kg, while the price of steel - a material that accounts for 70% of the total cost of materials - is fluctuating around VND12,000-13,500/kg. Although lower than the peak in 2022, according to Agriseco, the risk of price increase is present when China begins to tighten production.

“The prices of sand, stone, and asphalt tend to increase sharply, while steel and cement are still under pressure from oversupply from the Chinese market,” the report said. This imbalance makes it difficult for businesses to fully control their cost structure, leading to a silent but persistent erosion of profit margins.

Businesses differentiate according to resilience

Enterprises constructing infrastructure projects such as CIENCO4 Group Joint Stock Company (stock code: C4G), Deo Ca Transport Infrastructure Investment Joint Stock Company (stock code: HHV), FECON Joint Stock Company (stock code: FCN), Licogi 16 Joint Stock Company (stock code: LCG) ... are suffering heavy impacts from fluctuations in input costs. This group of enterprises is affected by the characteristics of long-term contracts, prices are fixed from the beginning while material costs are constantly increasing.

Agriseco commented: "Enterprises with a large proportion of infrastructure projects will be more clearly affected". The first quarter of 2025 recorded a sharp decline in profits from many big names: Vinaconex Corporation (stock code: VCG) decreased by 68.8%, Coteccons Construction Joint Stock Company (stock code: CTD) decreased by 45.5% compared to the same period last year due to a decrease in gross profit margin when input prices increased faster than revenue.

In reality, although many businesses still maintain a 20-30% increase in the remaining contract volume (backlog) compared to the previous year, the potential profit value is no longer proportional if material costs continue to escalate.

In contrast to the infrastructure group, civil construction enterprises have shown better “resistance” in an environment of escalating costs. With short project life cycles, flexible progress and the ability to renegotiate prices with investors, civil contractors have the conditions to proactively adjust their business strategies.

Agriseco assessed that the trend of increasing material prices is even more beneficial for civil contractors because the fast capital turnover helps them adapt better and can transfer part of the increased costs to investors.

In fact, in the first quarter of 2025, business groups such as Dat Phuong Group Joint Stock Company (stock code: DPG), LIZEN Joint Stock Company (stock code: LCG), Deo Ca Transport Infrastructure Investment Joint Stock Company recorded positive profit growth. This clearly reflects the ability to adapt to input prices, along with an effective cost control strategy.

“Enterprises with a healthy financial structure, high equity ratio, fast cash flow turnover and large backlog will be less affected by material price fluctuations,” the report emphasized.

Previously, in 2024, the whole industry recorded a slight increase in gross profit margin from 12% to 14%. However, the medium-term outlook is overshadowed by many risks. According to Agriseco, pressure from the progress of public investment disbursement that has not met expectations along with rising material costs is gradually narrowing business profit margins.

In addition, after the period of tightening bond market management in 2022-2023, construction enterprises will also have more difficulty accessing capital. The quick ratio will decrease, the bad debt provision ratio will exceed 10% of total receivables, reflecting the liquidity pressure simmering under the shell of revenue growth.

In that context, businesses that are weak in cost management, heavily dependent on debt, or lack a mechanism to hedge against material price risks will easily "fall" off the profit track.

On the contrary, units that know how to flexibly choose projects, have a good financial foundation, strong cash flow and close profits at the right time will take advantage of opportunities from low interest rates, recovering real estate demand and improved FDI capital flows in the second half of 2025.

In reality, despite facing many challenges, many businesses still see great opportunities in 2025, thanks to the push from public investment, real estate recovery and increased construction demand.

Mr. Le Viet Hai, Chairman of the Board of Directors of Hoa Binh Construction Group Joint Stock Company, said: “All four segments of urban housing, resort real estate, infrastructure and industry have the potential to develop well in 2025.” International consulting organizations even forecast that the growth of the construction industry this year could double that of 2024.

Sharing this expectation, Mr. Pham Viet Khoa, Chairman of the Board of Directors of FECON Joint Stock Company, emphasized that the enterprise will take advantage of public investment momentum to expand the fields of transport infrastructure, urban areas and energy, setting a revenue target of VND 5,000 billion and after-tax profit of VND 200 billion.

Vietnam Construction and Import-Export Joint Stock Corporation (Vinaconex) also plans to grow with consolidated revenue of VND15,500 billion, after-tax profit of VND1,200 billion, while preparing resources to participate in new fields such as urban railways, wind power, and nuclear power.

Experts say that in the context of volatile material prices and high cost pressure, the Vietnamese construction industry is entering a period of strong screening. Enterprises with good financial foundations, effective management and flexible adaptability will be the ones to stand firm and break through in the 2025 race.

According to VNA

Source: https://doanhnghiepvn.vn/doanh-nhan/-phep-thu-suc-ben-doanh-nghiep/20250701082631800