Posted on 30 May 2015
Local steel millers, which have been hard hit by the imports of cheap steel products from China, will continue to face a tough operating environment unless the authorities' come up fast with effective measures to curb imports.
According to YKGI Holdings Bhd chairman Lim Pang Kiam, the company was "ruthlessly and relentlessly" affected by the influx of cheap steel imports from China, and that this over-supply situation had led to depressed steel prices.
He said consequential to this, YKGI was unable to find profitability from a cross section of steel products manufactured and traded.
For the financial year ended Dec 31, 2014, YKGI group incurred a loss of RM26.6mil from a profit of RM500,000 a year earlier as revenue dropped to RM537.7mil from RM560mil.
YKGI, which is Malaysia's top three flat steel producers, has manufacturing facilities in Demak Laut Industrial Park here and in Selangor.
Reviewing the company's 2014 operation, Lim said the delayed effort by the government to curb the rampant imports of steel and steel-related products from China had depressed the average selling prices of its products, slashing the gross profit margin to 2.37% from 9.1% in 2013.
"The government's policy on steel import is crucial to uphold the local production, and our profitability inevitably hinges on this. No doubt the government has initiated steps to investigate and study the possibility of imposing anti-dumping duty on several types of steel products imported from certain countries.
"It is our hope that these initiatives will gather pace so that more stringent guidelines may be imposed soon. We are constantly in cooperation with the government to address the problem of excessive imports and to prevent Malaysia as a dumping ground for the foreign millers operating in excess capacity," he added in the company's newly released 2014 annual report.
Lim said in the lack of a wholesome and effective measures to curb these cheap imports, YKGI was anticipating another difficult year ahead in view of the tough operating environment.
The situation, he pointed out, had been made worse by the volatile foreign exchange rate and the weak ringgit, which has made import of raw materials more costly.
"We are also wary of the possibility of electricity tariff increase and the possible hike in the minimium wage policy in the near future," he added.
YKGI group managing director Datuk Soh Thian Lai,w ho welcomes the government's initiative in promoting "Buy made-in-Malaysia steel products", said if all the government-linked companies and government-owned projects promote the use of local steel propducts, the demand for these products would increase by at least two to three million tonnes a year.
He said to turn around the group's financial performance, YKGI would focus on five key areas, including financial restructuring to strengthen balance sheet and cash flow stability.
The other areas are :
? operation re-engineering to have effective and efficient operations for output optimisation;
? cost-effective procurement and best practice inventory management;
? market positioning and products value proposition to enhance better selling price and higher profit margin,and
? human capital development to achieve higher productivity.
