Hoa Sen (HSG) Q2 Net Profit Falls 42% as Short-Term Debt Surges to VND 8.2 Trillion

Overview

Hoa Sen Group (HSG) reported a 42% decline in Q2 net profit for fiscal year 2025-2026, despite a 6% increase in revenue. The profit drop was driven by a sharp rise in short-term debt and financial costs, with interest expenses surging 139% year-on-year. The company’s operating cash flow turned negative, highlighting growing financial pressure.

Key Facts

• Q2 net profit (Jan-Mar 2026): VND 118.6 billion, down 42% year-on-year.
• Q2 revenue: VND 8,967 billion, up 6% year-on-year.
• Short-term borrowings and finance leases: VND 8,267 billion as of March 31, 2026, up 87.7% from the start of the fiscal year (Oct 1, 2025).
• Interest costs in Q2: VND 108.2 billion, up 139% year-on-year.
• Inventory: VND 10,374 billion, with a provision for inventory write-downs of VND 195.5 billion.
• Six-month net profit (Oct 2025-Mar 2026): VND 181 billion, down 51% year-on-year.
• Operating cash flow for six months: negative VND 2,145 billion, compared to positive VND 2,057 billion in the prior-year period.

What Happened

Hoa Sen Group released its consolidated financial statements for the second quarter of fiscal year 2025-2026 (January 1 to March 31, 2026). The company reported a 42% drop in net profit to VND 118.6 billion, despite a 6% increase in revenue to VND 8,967 billion. Gross profit fell 2% as cost of goods sold rose faster than revenue.

The profit decline was largely attributed to a surge in financial costs. Interest expenses more than doubled to VND 108.2 billion, reflecting a massive increase in short-term borrowings. Short-term debt rose by VND 3,864 billion (87.7%) from the start of the fiscal year to VND 8,267 billion. The company also recorded a VND 195.5 billion provision for inventory write-downs.

Market Context

HSG shares closed at VND 15,000 on April 10, 2026, down 0.97% on light volume of 2.3 million shares. The stock trades on HOSE. The steel sector has faced headwinds from rising raw material costs and weak demand, while HSG’s high leverage and negative operating cash flow add to investor concerns.

Strategic Significance

The sharp increase in short-term debt and negative operating cash flow signal that HSG is funding inventory buildup through borrowing, which raises financial risk. The company’s inventory of VND 10.4 trillion exceeds its cash and equivalents of VND 963 billion by a wide margin. If steel prices decline, the inventory provision could increase further, pressuring earnings. The reliance on debt financing makes HSG vulnerable to rising interest rates and tighter credit conditions.

What to Watch

• Q3 fiscal 2026 earnings release (July 2026) for trends in profit and debt levels.
• Steel price movements and their impact on inventory provisions.
• Any debt restructuring or equity-raising plans to reduce leverage.
• Changes in short-term borrowing levels and interest coverage ratio.
• Operating cash flow trajectory in the coming quarters.