Posted on 28 Aug 2017
Choo Bee Metal Industries Bhd’s net profit for the second quarter ended June 30, 2017 (2QFY17) fell by 36.7% to RM6.31 million or 5.79 sen per share from RM9.95 million or 9.14 sen per share in the corresponding quarter a year ago, mainly due to higher raw material prices lowering profit margins as well as foreign exchange (FX) losses.
The flat steel product manufacturer’s revenue nonetheless grew by 5.64% to RM102.2 million compared with RM96.8 million previously, mainly attributable to higher contribution from the manufacturing segment.
A note filed with Bursa said manufacturing operations contributed revenue of RM37.9 million in 2QFY17, which increased by 33% or RM9.3 million, from RM28.6 million in the previous corresponding quarter, mainly on higher average selling prices and metric tonne sales volume.
The trading operations’ revenue on the other hand eased by 6% to RM64.3 million in the quarter under review compared with RM68.2 million in 2QFY16, due to weaker metric tonne sales volume, on the back of dealers exercising a cautious stand on stocking inventory amid a softer market demand.
For the first half of financial year ending Dec 31, 2017 (FY17), Choo Bee’s net profit, however, jumped 39.5% to RM17.9 million or 16.39 sen per share from RM12.8 million or 11.75 sen per share in the corresponding period a year ago. The improved half-year earnings were mainly due to wider profit margins as a result of higher average selling prices.
The group’s revenue on the other hand edged higher by 1.03% to RM199.6 million in the first six month of FY17 from RM197.5 million in the same period in FY16, mainly due to higher average selling prices which negated the lower metric tonne sales volume.
For Choo Bee’s prospects in FY17, Choo Bee noted that speculative buying activities in China’s future markets have led to flat strip products to pick up prices prior to earlier moderation.
“The pick-up in prices will augur well for tubular products and manufacturers where they are expected to raise their selling prices for finished products in tandem with the rise in iron ore prices. However, global demand ex-China remains soft, and as such, sustainability of this price increase remains uncertain,” a note filed with Bursa said.
It added that the outlook for domestic steel industry hinges on the growth and performance of the infrastructural and construction sector.
With the construction sector expected to maintain its robust performance with a targeted double-digit growth rate of 10.3% and through new construction works valued at RM138 billion in 2017, this could boost demand for steel products and generate a positive outlook for the local steel industry.
As of closing today, Choo Bee slipped by 2.2% to RM2.23 with some 170,800 shares changed hands, giving it a market capitalization of RM242.9 million.
