Posted on 16 Dec 2016
Steel pipe maker Hiap Teck Venture Bhd, which returned to the black in the third and fourth quarters of financial year 2016, has gone into the red again in its first quarter ended Oct 31.
Nevertheless, the company had narrowed its losses to RM958,000 from a net loss of RM37.22mil in the corresponding quarter, a year ago, on improved margins and lower share of loss of its 55%-owned jointly controlled entity, Eastern Steel Sdn Bhd.
In its filings with Bursa Malaysia, it said revenue dropped by 12% to RM279.12mil from RM317.37mil, a year ago, on lower sales volume from the trading division.
Loss per share was 0.07 sen from loss per share of 5.22 sen.
The company explained that Eastern Steel’s losses were due to unrealised foreign exchange loss arising from US dollar denominating shareholders’ loan and higher costs related to its trial production in the first quarter of financial year 2016.
Despite the weak results, executive director Foo Kok Siew said the group was counting on better performance next year, amid an upward trend seen in steel prices.
Speaking after Hiap Teck’s AGM yesterday, Foo said the focus in 2017 would be to revive and turnaround Eastern Steel, a joint venture with Shougang Group of China.
“The catalyst for better earnings growth will be our margins and we expect this to improve with the recovery seen in steel prices.
“We will focus on higher margin products to see a turnaround in Eastern Steel,” he noted.
In June 2016, Hiap Teck via Eastern Steel inked a memorandum of understanding with Chinese steel products producer Ansteel Group Corp’s unit Angang Group Hong Kong Co Ltd to explore, discuss and negotiate areas of cooperation between their units.
This included Eastern Steel’s production resumption, future expansion of its production capacity and product range, according to reports.
Foo explained that Hiap Teck’s wholly-owned subsidiaries had always been profitable and that on a group level, earnings growth was dragged mainly by Eastern Steel, which had stopped production in October to minimise losses.
On a timeline to revive Eastern Steel, Foo said it hoped for this to take place in the first half of next year, after the cooperation agreement and approvals were resolved.
“The only factor that is uncertain for the company is the foreign exchange.
“Should the US dollar strengthen further, then we are likely to see more translation losses,” Foo said, adding that weakening of the ringgit had impacted the market condition.
However, with the construction sector expected to be stable due to infrastructure projects in the pipeline, Foo remained optimistic of the company’s performance.
While raw materials account for 80% of the cost of its goods, Foo was unperturbed about rising prices because the company could source for cheaper products abroad.
