Goldsmith companies told to stop making bullion gold

In the last few months, only SJC has been allowed to import material gold. Meanwhile, non-SJC goldsmith companies have just been told to stop making bullion gold.

Non-SJC goldsmith companies have stopped making bullion gold as requested by the State Bank. Meanwhile, the new comers on the market, i.e. the gold brands which were “given birth” recently, anticipate big losses, because they have to stop production when they still need to earn money to pay for amortization.

A representative from Sacombank-SBJ and PNJ have confirmed that their bullion production lines have been left idle for the last month. Ton The Vinh Quyen, Business Director of Sacombank-SBJ, said the company now does not make bullion gold for the company’s business or to fulfill the orders placed by commercial banks any more, though the company has materials.

“We are strictly following the instruction by the State Bank to stop producing bullion gold,” Quyen said, adding that the central bank’s legal document on stopping making bullion gold came one month before.

The State Bank is drafting a new decree on gold market management, setting up very high requirements on the gold companies that make bullion gold. Experts have pointed out that with the tentative regulations, only the Saigon Jewelry Company SJC can meet the requirements to be able to continue making bullion gold.

The draft decree says that the companies making bullion gold must 1) have the chartered capital higher than 500 billion dong 2) hold the market share of more than 25 percent in the last three consecutive years and 3) the infrastructure conditions can meet the standardized quality.

If the draft decree gets approval, even the big guys such as PNJ, Bao Tin Minh Chau and Doji would meet the requirements for making gold transactions, but would not meet the requirements to make bullion gold under their own brands. Therefore, the profit growth of the goldsmith companies would fall significantly in the time to come.

It seems that “misfortunes never come alone.” Bullion gold export is also believed to decrease sharply in the next year. The new circular No 111 by the Ministry of Finance, which took valid in August 2011, stipulates that bullion gold exports and jewelry gold with the gold content higher than 80 percent will be taxed 10 percent. Prior to that, only the gold with the gold content of 99 percent were imposed the export tariff of 10 percent.

Ban Viet Securities’ analysts believe that with the new tax policy, bullion gold export would not bring profits to goldsmith companies any more.

After analyzing the business performance of PNJ, the analysts think that PNJ would stop exporting bullion gold, which means that the 2012’s turnover of the company would decrease by 5 trillion dong and the gross profit would decrease by 24.5 billion dong.

Also according to Ban Viet, in the first 10 months of 2011, PNJ got the revenue of 15,950 billion dong, up by 42.9 percent over the same period of the last year, and the pre-tax profit of 275 billion dong, up by 19 percent. A cautious estimate shows that PNJ would obtain the pre-tax profit of 303 billion dong in 2011. The noteworthy thing is that in the first 10 months of the year, bullion gold exports brought the revenue of 4966 billion dong and the gross profit of 24.5 billion dong

Local newspapers have quoted their sources as saying that non-SJC gold would be converted into SJC gold at par, when SJC officially becomes the national gold brand. Prior to that, the State Bank affirmed that non-SJC gold will still be in circulation on the market after the new decree on the gold market management takes effect.

Source: Lao dong, TBKTVN

Tags: vietnam gold, Vietnam gold market, Vietnam gold prices