KUALA LUMPUR (Aug 17): CSC Steel Holdings Bhd announced today a 28% year-on-year decline in net profit in its second quarter ended June 30, 2018 (2QFY18), after being hit by higher transportation costs and a significant drop in sales of higher margin products.

The company said in an exchange filing today it turned in a net profit of RM10.4 million or 2.82 sen per share for 2QFY18, versus RM14.44 million or 3.91 sen per share in 2QFY17.

This was despite a 7% y-o-y increase in quarterly revenue to RM342.53 million from RM320.54 million, on higher sales of its steel products albeit at marginally lower selling prices, save for steel scraps, the prices of which had risen.

For the first half of the year (1HFY18), net profit slumped 32% y-o-y to RM20.99 million from RM30.95 million, despite a 9% rise in revenue to RM690.25 million from RM630.39 million.

CSC said it faced substantially higher production costs in 1HFY18, due to higher raw material prices of hot rolled steel and zinc, as well as increased transportation costs. At the same time, it recorded a substantial drop in sales volume of galvanized steel and pre-painted galvanized steel, which are products with higher margins.

On prospects for the rest of the year, the steel maker said it is cautiously optimistic on achieving profitability.

“The imposition of the 25% tariff on steel under Section 232 by the United States and the latest 25% tariff under the Provisional Safeguard Measure by the European Commission are likely to affect the global steel supply and demand dynamics. We expect the steel market to face micro price fluctuations until year-end, due to trade measure issues and price factor in iron ore and coking coal.

“[The] domestic steel market has returned to its normal operations after the Hari Raya festivities, but the local galvanised steel manufacturers’ market share is facing threat from the influx of low-priced steel imports,” it said.

"The Ministry of International Trade and Industry has been made aware of the situation and is now taking appropriate action including initiating anti-dumping investigation on imports of galvanised steel from China and Vietnam to minimize the harm to local manufacturers," it added.

Shares in CSC closed unchanged at RM1.32 today, valuing it at RM487.49 million.