News Room - Steel Industry

Posted on 08 Jun 2009

Lohakit sees drop from Q1 of 2009

SET-listed Lohakit Metal Plc (LHK) yesterday warned of worse results in the second quarter of 2009 than in the first three months, citing Thailand's lingering political uncertainties and poor consumer spending.

 

LHK, which processes stainless steel for both the local market and exports, posted an "unexpected loss" in the quarter to March - the last quarter of the company's fiscal year - on inventory loss and slumping demand, said managing director Prasarn Akarapongpisak.

 

"The downturn lowered stainless steel use in the automotive, electrical appliance and electronics sectors, which all are our key customers," he said.

 

"Car production, for example, slumped by 46% year-on-year while 40% fewer white goods were produced than in the same period of 2008."

 

The sluggish fourth-quarter income contributed to LHK posting a loss of 52.9 million baht last year, compared with a net profit of 80.3 million the year before. Total revenue also dipped 21% from 2.6 billion baht to 2 billion, he said.

 

"We expect the performance to be worse this quarter before it starts picking up in the the latter half of the year. The Songkran riots have taken a toll on our business last month while consumer spending has yet to show signs of improvement," said Mr Prasarn.

 

"We hope that revenue will be as good as last year while the company will be able to make some profit this year," he said, adding that the automotive sector was expected to perform better in the second half of the year.

 

In his view, the government should also speed up investment in infrastructure projects such as mass transit rail that consume stainless steel.

 

"In addition, accommodative monetary policy regarding the exchange rate is needed together with soft-loan extensions and guarantees for small and medium enterprises," he said.

 

LHK's imports of stainless steel and its local purchases from Thainox, the country's largest stainless steel maker, total 1,800 tonnes a month. About 35% of this is supplied to Thailand's home appliance industry, while about 30% goes to the automotive sector and 20% to electronics manufacturers.

 

Another 10% of output is exported to markets such as Hong Kong, Singapore,Vietnam and Indonesia. The remaining 5% supplies small clients.

 

LHK's customers include all local automakers - except Toyota, which is supplied by SET-listed Yarnapund Plc - white goods brands and integrated circuit (IC) and hard-disk drive (HDD) manufacturers.

 

Through its joint venture with Osaka-listed Mory Metal, LHK is penetrating the Indian market with the first shipments going this month.

 

Mory has switched some of its Asian orders from Japan to the Thai joint venture. This should enable LHK to increase exports by 5-10% this year.

 

LHK shares closed yesterday on the Stock Exchange of Thailand at 1.30 baht, up one satang, in thin trade worth 72,000 baht.