Posted on 09 May 2016
Group managing director Datuk Soh Thian Lai said the move would include disposing off unutilised and unproductive assets.
YKGI, which owns manufacturing plants in Kuching and Selangor, has been hard hit by the depressed selling prices of steel products in recent years due to the influx of cheap imported China steel products. The company incurred a group pre-tax loss of RM19.8mil in financial year ended Dec 31, 2015, which had, however, narrowed from losses of RM32.1mil in FY2014.
“In 2016, YKGI aims to strengthen its financial position via capital raising,” said Soh in the company’s newly released 2015 annual report.
The group is principally involved in the manufacturing of pickled and oiled hot rolled coils, cold rolled coils, galvanised and coated steel products.
Its subsidiary businesses include sales and manufacturing of tubes and pipes, roofing products as well as provision of processing services such as shearing and slitting of metal products.
Soh said while the local steel industry continued to be hampered by the influx of cheap imported Chinese steel products which had depressed the domestic selling prices, this was further compounded by the global oversupply situation and sagging demand spurred by China, which had led to shrinking world steel prices. China is the world’s largest steel producer.
“In addition, the implementation of GST (Goods & Services tax) from April 1, 2015, the announcements on the electricity tariff hike and gas price increases have driven up operation costs of the steel industry.
“Under these challenging and sluggish market conditions, performance of domestic steel companies generally had declined.
Most companies saw reduced sales volume, experienced margin erosion which led to net losses,” said Soh.
In FY2015, YKGI group revenue slipped by 8.6% to RM491.6mil from RM537.7mil in FY2014.
Soh said as investments in the steel sector were mainly capital intensive and long term in nature, it was vital for the government to take a proactive role in implementing business friendly regional policies, including instituting appropriate trade measures where needed to facilitate a more level playing field and environment to enhance the ease of doing business.
The company was pleased that the authorities had taken several trade measures by imposing anti-dumping duties on imported steel products.
Early this year, the International Trade and Industry Ministry announced the affirmative preliminary determination of anti-dumping duty from 1.97% to 23.78% on the imports of cold rolled coils from China, Vietnam and Korea.
The ministry has also initiated an affirmative final determination of an anti-dumping duty from 5.68% to 52.1% on imports of pre-painted steel products from China and 16.45% against Vietnam.
Safeguard duty on hot rolled plates was in force last July, with reducing duty of 17.4% in Year 1 to 10.4% in Year 3.
YKGI acknowledges that these trade measures would help facilitate a more conducive trading environment and provide a more level playing field for the local steel industry to thrive and grow.
Soh said Malaysia is Asean’s fourth largest steel consuming country with a domestic consumption of more than 10 million tonnes last year and that demand was expected to grow at an annual average of 4% until 2018. The growth is driven by the government’s approved mega infrastructure projects.
However, he said the country’s growth in consumption last year was mostly served by imports as domestic output stagnated and total imports rose by 11% while exports surged by 31%.
Soh said YKGI went through a period of intensive consolidation since 2013 to mitigate the effects of the industry downturn and would continue a three-year business continuity plan that stressed on five key areas. These are: Focus on core manufactured coated products’ sales; strengthen balance sheet to improve cashflow; human resource right-sizing; plant operation improvement – to improve production yield, product quality and costs control, and cost-effective procurement and inventory management.
Soh said with the current changing dynamics, YKGI was focusing on offering high premium and value-added coated steel products to rationalise its excess capacity and be more competitive in the market.
He said as reliability of product delivery and quality were key factors and necessary to meet customers’ needs, the company had collaborated with its suppliers and clients in the early stages of product development. This is done via integrating research and development, manufacturing, sales and supply chain management.
Besides that, the focus is also on after-sales and strategic value chain management.
