Exporters expecting bigger profit from weaker dong

LookAtVietnam – Export companies are delighted by the new decision by the State Bank of Vietnam to adjust the dong/dollar rate. The weaker dong means bigger profits.

Ben Tre Seafood Import-Export Company (ABT) calculated that the company will make 800 dong in profit for every dollar’s worth of exports. They expect to operate well in the last months of 2009 and have no plans to borrow more money, with 150 billion dong worth of deposits still in the bank.

 

Mekong Seafood Company (AAM) also reported that it will benefit from the dollar price increase. Meanwhile, AAM does not have to worry about the basic interest rate increase from seven to eight percent, because it still has money in the bank and also has no plans to borrow money.

 

Saigon Garment Company (GMC) Chairman Le Quang Hung said that the weaker dong may mean one or two billion dong more in profit by the end of 2009.

 

Meanwhile, importers and producers who must import materials for domestic production complain about the dollar price increases. Steel producers remarked that they face big difficulties with the weaker dong, including higher imported materials prices and higher production costs. Low domestic demand also means they cannot raise prices.

 

Still, many importers and producers threaten to raise prices to ensure profits.

                                                                       
Toyota Vietnam has announced new prices in VND immediately following the SBV adjustment. While prices in dollars remain unchanged, price levels in VND have increased by 16-84 million dong.

 

According to Nguyen Ngoc Anh, Chairman of SMC Investment and Trade Company, the prices of steel products has increased, but are nothing compared with the dollar price increases. Anh anticipates decreases in the company’s turnover and profit.

 

Hoa Sen Group has said that its products have increased by 2.5 percent already and will increase further with the dong/dollar rate adjustment.

 

Regarding bank loan interest rates, expected to increase once the basic interest rate rises to eight percent per annum, Anh noted that his company is prepared.

 

“Of course, when the lending interest rate becomes higher, expenses will increase and profits will decrease,” admitted Anh. “However, I don’t think this is a serious problem.”

 

Business analysts have observed that when the basic interest rate increases by one percent, businesses’ capital costs will increase by 1.5 percent per annum.

 

Meanwhile, business leaders are less concerned about the higher lending interest rate, but more about fears that they cannot borrow capital.

In related news, commercial banks disbursed 415,886 billion dong by November 26, under the interest rate subsidy program, a part of the demand stimulus package initiated by the Government, according to the latest SBV report.

VietNamNet/VnMedia

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This entry was posted on November 30, 2009 at 11:13 pm and is filed under Business, News. You can follow any responses to this entry through the RSS 2.0 feed.