Construction, infrastructure sectors continue to recover in 2025

VIS Rating, a credit rating agency, Moody’s affiliate, has just released a report on the construction and infrastructure sectors.

Obvious improvement in construction sector

According to VIS Ratings, the construction sector recorded obvious improvement in financial results in 2024. Monitored construction companies achieved a total revenue growth rate of 15% and after-tax profit of 44% compared to the same period last year.

This recovery was mainly attributed to the growth in revenue and profit margin from construction activities, especially in the industrial and infrastructure construction segments. In addition, lower interest expenses and contributions from other business activities, including revenues from real estate projects and asset liquidation, also played an important role in improving business results.

2024 marked strong growth in public investment disbursement and foreign direct investment (FDI) inflows, reaching VND660 trillion (up 4% YoY) and 25.35 billion USD (up 9.4%), respectively. This created an important driving force for construction demand, while helping improve the industry’s average gross profit margin to 8.2%, compared to 7.4% in 2023.

The low interest rates and stability in total debt (up 3% YoY) have brought significant benefits to construction companies, helping reduce total interest expenses by 14%. As a result, debt repayment capacity has improved significantly, with the average debt/EBITDA ratio decreasing from 6 to 5.3 times, while the interest coverage ratio increased from 1.5 to 2.7 times. However, operating cash flow remains volatile.

“2024 marked a significant recovery for the construction industry in terms of revenue, profit and debt repayment capacity. We assess that growth drivers in the industrial and infrastructure construction segments will continue to be well maintained in 2025, along with an increase in civil real estate construction after project development activities expanded since the second half of 2024. Therefore, the business results of construction companies will continue to improve in 2025,” VIS Rating’s analysis team commented.

2024 saw a strong recovery in the construction industry in terms of revenue, profit and debt repayment capacity - photo: Ngan Giang

Infrastructure sector records growth

For the infrastructure sector, 2024 also recorded positive growth with the revenue growth rate of 19% over the same period and net profit increasing by 26%, thanks to increased demand for transportation across most modes of transport. Vibrant economic activities, strong recovery of the tourism industry along with improved inter-provincial transport systems have increased the total passenger and freight traffic volumes by 10% over the previous year, significantly higher than the 2% average rate during the 2018-2023 period.

Along with that, the financial situation of infrastructure enterprises continued to be stable when total debt only increased slightly by 3%, thanks to strong improvement in operating cash flow and equity mobilization through share issuance. The cash flow from business activities of the sector increased by 37% over the previous year, driven by improved profits and accelerated disbursement of public investment capital.

Thus, while debt levels remained stable in 2024, the credit rating agency expected that 2025 continues to be a year of strong growth for infrastructure operators.