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Gemadept Sees Fivefold Pretax Profit Gain as Vietnam Rates Fall

Gemadept Corp. (GMD), Vietnam’s biggest listed freight company by market value, expects a fivefold rise in pretax profit this year as falling interest rates and a global economic recovery drive demand for its services.

Profit will probably rise to at least 150 billion dong ($7.2 million), from 30.6 billion dong in 2011, General Director Do Van Minh said in a telephone interview today from Ho Chi Minh City. He didn’t provide a net income estimate.

Gemadept may benefit from the Vietnamese government’s push to reduce borrowing costs to spur growth in the economy that Prime Minister Nguyen Tan Dung has targeted at 6 percent this year. Shipping volume at Gemadept, based in Ho Chi Minh City, and competitors slumped last year as manufacturers curbed production amid higher interest rates, Minh said in September.

“Our company’s profit will increase from last year thanks to the economic outlook in the world and in Vietnam,” Minh said in today’s interview. “Falling interest rates in the country will boost production, companies will have more freight demand and Gemadept will enjoy more orders.”

Gemadept climbed as much as 2 percent and was trading 1.6 percent higher at 24,800 dong as of 1:30 p.m. in Ho Chi Minh City trading. The stock has advanced 39 percent this year, compared with a 27 percent gain for the country’s benchmark index.

The company made a provision of 103 billion dong for stock losses last year, Minh said. Gemadept probably won’t need to make such an allowance in 2012 because of the market’s strong performance, he said.

Key Rate Cut

Vietnam’s central bank reduced its key refinance rate this month, the first cut since 2009, to spur economic growth that slowed last year. The economy expanded 5.9 percent in 2011 and 6.8 percent in 2010.

Inflation eased in March for a seventh month, with consumer prices rising 14.15 percent, the slowest pace in a year.

“The effect of lower interest rates will have some lag, so the freight market may not improve until the third or fourth quarter,” Minh said. “We will expand our port and logistics businesses to preempt higher demand when the economy picks up.”

Vietnam’s first-quarter exports increased an estimated 28 percent from a year earlier to $24.5 billion, according to a posting on the government’s website on March 25.

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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