Posted on 18 Sep 2015
Sahaviriya Steel Industries Plc (SSI), a SET-listed maker of hot-rolled steel, is at risk of entering the rehabilitation sector early next year if it fails to return its shareholders' equity to positive territory, say analysts.
In a filing to the SET late on Wednesday, SSI said it posted consolidated net losses for the second quarter and first half of 3.24 billion and 6.26 billion baht, respectively, with negative shareholders' equity of 1.78 billion.
Analysts estimate Tisco Bank lent 4 billion baht to SSI, while Siam Commercial Bank (SCB) and Krungthai Bank (KTB) loaned 20 billion each.
But SSI has fallen into liquidity problems caused by its subsidiary SSI UK Ltd, which operates the Teesside plant.
After SSI acquired the assets, it needed additional funds to upgrade technology and equipment.
The company also said in the filing that its consolidated current liabilities exceeded its current assets by 52.8 billion baht and that it had cumulative losses of 34 billion.
It is in the process of rescheduling principal and interest repayments due between Sept 30 and Dec 30.
President Win Viriyapraphaikit could not be reached for comment.
At the same time for its hot-rolled steel business in Thailand, the selling price rose by 11% in the second quarter, but the company still bore a high price for slab, its main raw material, resulting in a low margin of 6.5%.
Asia Plus said in the best-case scenario, even if the company successfully mobilises funds through a new private placement of 16 billion shares, which has already gained shareholder approval, SSI will still be unable to turn its equity net worth positive.
"Also, if SSI wants to seek a partner to help revive it financially, it may not be easy to do so since its net debt is very high at 52.7 billion baht, with most repayments due in one year," it said.
"If the company cannot return its equity net worth to positive status this year, it will have to enter rehabilitation early next year."
SSI's financial problems have begun to worry its creditors.Tisco Bank is poised to set aside additional provisions this month to cover increasing risk related to the recent syndicated loan worth 44 billion baht offered to SSI.
The move came after SSI's equity net worth plunged into negative territory, said Oranuch Apisaksirikul, chief executive of Tisco Financial Group, the holding company of Tisco Bank.
Analysts forecast both SCB and KTB will also have to set aside additional provisions for SSI before the third quarter ends.
SSI shares closed yesterday on the SET at 11 satang, unchanged, in trade worth 6.1 million baht.
