M&A war and homegrown plastic industry competition

Foreigners Nawaplastic Industries (a subsidiary of SCG, Thailand) are extending their arms in the Vietnamese market through a series of mergers and acquisitions (M & A).

On November 2, 2016, Vietinbank Securities Joint Stock Company (VietinBankSc), Hochiminh Stock Exchange Ho Chi Minh City (HOSE), Dong A Plastic Group Joint Stock Co (DAG) co-organized the workshop “Vietnam Construction Plastics – The Story of Competition at Home”.

At the workshop, Dang Tran Hai Dang, deputy director of the Research Center, said that the market share of construction plastics accounted for only 18.2% of the total, but the growth rate of construction plastics was relatively high (15-20% /year). The major issue of the industry is the fierce competition.

M & A war and homegrown plastic industry competition

At present, there are 180 enterprises operating in 02 segments as construction plastic pipes and building materials asphalt. Plate of plastic pipe with turnover of about VND12.3 trillion with 02 big enterprises namely Tien Phong Tien Plastic and Binh Minh Plastic. As for the plastic building materials including Plastic Profile, Composite Aluminum and door panels, East Asia Plastics is the dominant market share.

As for plastic pipe, with the disadvantage of being bulky and difficult to transport, domestic enterprises do not face direct competition with imported products. Instead, foreign businesses enter the Vietnamese market via the M & A channel. At present, in the plastic pipe market, domestic companies have jointly developed, of which NTP accounts for 60% of the North market and BMP accounts for 50% of the South market. Therefore, foreign companies are involved in mergers and acquisitions. This big business is understandable. Room blocks for plastic business unlimited can be up to 100% and so the insertion of plastic enterprises is not impossible.

Foreign investors are Nawaplastic Industries (a subsidiary of SCG, Thailand) extending its arm into the Vietnamese market through a series of mergers and acquisitions (M & A), SCG is holding in its hands. The market share was not small for the two big plastic pipes, more than 20% of BMP shares and 23.84% of NTP shares. In addition, Korean and Chinese enterprises are also studying and preparing for market penetration. Under the pressure of competition is too large, Vietnam plastic construction companies need to push investment to overcome the major competitors in the region.

With plastic construction materials, unlike plastic pipes, plastic construction companies have to compete on the home market, including competition with alternative products and compete with foreign enterprises on the market. According to Mr. Dang, the system of plastic with the main materials is plastic profile and aluminum composite must compete with the traditional wooden door and aluminum doors. However, plastic doors with high durability, low cost, easy to transfer are gradually being preferred to the mid-market real estate market with a market share of 35% and tends to increase.

Another problem is that Vietnamese businesses are competing with imported products (especially from Chinese enterprises) at home. Imports of China with diversified models, therefore, make up a large market share in Vietnam, especially in the profile market (imports account for 60%).

However, according to Mr. Dang, Vietnam’s plastic products, which are still in good condition, have a good price, high price, high warranty, and the love of the Vietnamese consumers themselves. Therefore, if Vietnam plastic enterprises invest in production, the trend of Vietnam plastic products will be highly competitive and market share will increase. In fact, composite aluminum products, ceiling panels, decorative braces, domestic goods are occupied nearly 100% market share.

Construction plastics industry has strong potential in the future

Mr. Dang said that the plastics industry has strong potential in the future.

Firstly, according to the plastics industry development plan, the plastic industry structure will be restructured, plastic resins and packaging will be expanded, the market share will increase from 18% (2015) to 25% (2020) 27%.

Secondly, the real estate market growth, the demand for housing and infrastructure development is favorable conditions for the construction plastics industry. From 2016 to 2020, demand for windows / doors is expected to increase by an average of 42.8 million square meters per year. With the current market share of plastic door systems at 35%, it is expected that demand for plastic doors will increase by an average of 14.9 million square meters.

Third, increase market share with alternative products, imported products. Plastic door products with high durability, low cost, easy to transfer are gradually being preferred to the mid-range real estate market and tend to increase compared to alternative products.

Hai Thanh
According to Young Intellectuals