According to a newly released report by Vietnam Investment Credit Rating JSC (VIS Rating), the credit profile of the construction industry has improved slightly in the first three months of the year, mainly due to the strong increase in construction demand from public investment projects and real estate projects with legal procedures removed. Notably, Decree 175/2024/ND-CP and recent instructions from the Government are contributing to shortening the time for approval and issuance of new construction permits, facilitating project implementation.
In particular, the orientation of promoting social housing has opened up great opportunities for large enterprises in the industry such as Coteccons Construction Joint Stock Company (CTD), Hoa Binh Construction Group Joint Stock Company (HBC) and Newtecons Construction Investment Joint Stock Company.
According to VIS Rating, the value of unfulfilled contracts of many large contractors continued to increase sharply. CTD reached VND37,000 billion (up 6% compared to the previous quarter), while VCG (Vietnam Construction and Import-Export Corporation) estimated about VND30,000 billion (up 7%).
However, the biggest challenge facing the industry today comes from rising input costs. In the first five months of the year, construction sand prices increased by 30%, cement by 8% and steel by nearly 2%. This has caused the industry’s EBITDA margin to drop from 9.8% to 9%, directly affecting profitability and debt repayment.
Another bright spot is that access to capital is improving significantly. Industry-wide credit increased by 3.56% as of April 2025, much higher than the 0.7% growth rate in the same period last year. Short-term debt increased by 7%, accounting for nearly 70% of total debt – reflecting increased working capital needs as construction activities ramp up.
The average interest rate has dropped to 5.8% per year, creating more liquidity for businesses. However, cash flow from operations remains negative, while retained earnings are not enough to cover the increasing capital needs.
According to the report, large construction companies maintain a clear advantage in debt servicing and collection. Their interest coverage ratio is 3.5 times – significantly higher than the 2.1 times of small and medium-sized enterprises. In addition, large companies have a faster receivable turnover, helping them maintain liquidity in a high-cost and highly competitive environment.
Although the industry’s total revenue is expected to increase by 15% this year, the planned profit will decrease by 4% due to narrowing profit margins. The financial leverage ratio (debt/EBITDA) remains at 4.9 times – reflecting potential risks if the output market fluctuates.
VIS Rating forecasts that construction activities will accelerate in the second half of the year as public investment disbursement plans are accelerated and the real estate market shows signs of recovery. However, high input costs and fierce competition will continue to be the main barriers to improving the industry's credit profile.
Businesses are advised to focus on improving cash flow management capacity, controlling costs and expanding capital mobilization channels to increase resilience to fluctuations.
Source: https://doanhnghiepvn.vn/kinh-te/bat-dong-san/hai-rao-can-lon-cua-nganh-xay-dung-trong-cai-thien-ho-so-tin-nhiem/20250701025738200
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