News Room - Steel Industry

AYS Ventures Bhd, principally a trading and manufacturing firm, is diversifying its business with the plan to build a warehouse facility that would deliver recurring income to the company from 2018.

AYS ED Sam Oh Yung Sim said the company has allocated an initial capital of RM25 million to build the warehouse in the Pulau Indah free zone area, near Port Klang.

“The warehouse will provide rental income for the company’s growth. We will rent out the (warehouse) space for other companies as well to store steel-related products,” he told The Malaysian Reserve last Friday.

Oh said the warehouse is expected to be completed end of 2017, and it is also expected to handle steel equipment required for the company’s operation.

“It will be used as a public warehouse and our company will be the anchor customer. The storage is mainly for the steel products that we import and maybe some other importers may use it as storage in the free zone.

“We would have to handle cargo related to steel products and we need cranes and heavy handling equipment to operate in the warehouse,” he said.

AYS acquired the 10-acre (4.05ha) piece of land that would be the location of the warehouse from Infinity FZ Sdn Bhd (IFZSB) in October last year, after entering into a share sales agreement to acquire 100,000 ordinary shares of RM1 each, which represent the entire interest of IFZSB.

“The first phase of our plan is to build a warehouse on about half of the land space, which would have a 160,000 sq ft built-up area,” Oh said, adding that the company has plans to generate more income from the warehouse.

“By 2018, we would know how much of our products can be stored inside the warehouse, and how much rental we can secure from customers,” he said.

As a steel products manufacturer and distributor, AYS is also supplying its steel beam to truck manufacturers for fabrication purposes to build the chassis for the truck and coach bus building businesses.

Oh said the company is focused on customers and its business areas are evenly involved not only in the construction sector, but also oil and gas, engineering fabrication and palm oil millings.

He said that AYS would grow positively as its exports contribute between 10% and 15% monthly from major markets in Singapore and throughout the South-East Asian region.

“We are basically in the downstream part of the supply chain. We are very flexible and are not confined to one product. We also are not committed to any production facility,” he said.

About 90% of AYS products are imported materials such as steel beams, steel plates and steel frames.

“Whoever can give us good quality and better pricing, we would choose that supplier. When the price is down, we would have a lower cost to maintain the market pricing as much as possible. Subsequently, we can have positive income,” he said.

AYS achieved a double-digit growth last year in terms of products (volume) and its revenue recorded a single-digit growth due to the slump in steel price, which slid between 20% and 30%.

“We have a broad customer base in various sectors. There is still demand for steel. Our sales strategy is always changing according to market needs.

“That’s the beauty of being a downstream business. We can sell what we produce and we can also sell based on the demand from the market,” he said.

The oversupply situation still persists, but since many steel mills are suffering from heavy losses, the price of steel has stabilised.

“We see a bit of uptrend. The industry is going through regularisation, as domestic demand is still quite constant. We can have different strategies on how to maintain our revenue and profit,” Oh said.

According to the statistics from the Malaysian Iron and Steel Industry Federation, the Malaysian economy is expected to grow between 4% and 4.5%.

Construction growth is forecast at 7.9% in 2016 and the construction sector remains the highest in growth.

“We think the construction sector is related to our business, in terms of demand. Although the price has slumped with the global fluctuation, the demand in Malaysia is still there and we have plans to improve our profitability,” Oh said.