CSC Steel profit up in Q2 to RM12.6m on lower expenses

Posted on 27 August 2019

Source: The Star Online
CSC Steel Holdings Bhd's net profit rose by 21.1% to RM12.60mil in the second quarter ended June 30, 2019 from RM10.40mil a year ago as it managed to reduce its expenses while there was a slight increase in margin for coated steel products.

It said on Monday profit before tax rose by 19.1% to RM16.10mil compared with RM13.51mil a year ago mainly due to the lower marketing and administrative expenses as well as marginally increase in margin for coated steel products.

CSC Steel's revenue increased by 0.4% to RM343.75mil from RM342.53mil. Earnings per share were 3.41 sen compared with 2.82 sen.

The additional revenue generated from higher colled roll/pickled and oil steel sales volume was offset by the decrease in sales revenue of galvanised steel and pre-painted galvanised steel products as a result of lower sales volume and selling prices in all its key products.

For the first half, its net profit fell by 18% to RM17.21mil from RM21mil a year ago while profit before tax fell to RM21.93mil from RM27.09mil. Its revenue fell by 2.2% to RM674.94mil from RM690.25mil.

“The decrease in revenue was mainly attributed to the decline in export sales for galvanised steel although the salesvolume for other steel products had increased.

“The group’s profit before tax had reduced by RM5.1mil mainly due to the price adjustment for maintaining market share in an intensely competitive steel market,” it said.

CSC Steel said since the end of April 2019, iron ore price has been moving upward rapidly in the last five years, approaching US$120/MT at the end of June 2019.

“The high production cost has caused the profit margins of steel mills to remain under pressure and has pushed some of the steel mills into the red.

“Moreover, the finished steel prices are not rising fast enough to spare steel mills from becoming

squeezed in the tight supply of raw materials.

“Although the elevated iron ore prices are not expected to persist next year, but market speculation would still be the main factor for iron ore to remain at high level in the second half of this year,” it said.

CSC Steel said the Chinese government has recently begun to intervene the iron ore prices, however, it remains to be seen whether the said intervention will effectively stabilise the iron ore prices.

“The challenges of high raw material costs and the influx of cheap import are still the main factors affecting the group’s business performance. As such, the group has adopted the strategy of high volume with low margin to solidify the market share and to effectively compete with the cheap imported steel products,” it said.

The company said the sales volume for the 2nd quarter increased by 3.8% as compared to the 1st quarter.

Going forward, apart from the rise in iron ore price, there are various potential influencing factors that may affect Malaysia steel industry such as Malaysia’s new steel policy and government’s revival of some mega infrastructure projects.

“However, the prospect of the construction section in the second half year of 2019 is expected to remain sluggish as certain construction contracts will only be released in early 2020. Barring any unforeseen circumstances, the group is cautiously optimistic to achieve positive results in 2019,” it said.

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