KUALA LUMPUR (Aug 10): Malaysia Smelting Corp Bhd announced today a 73% year-on-year drop in its net profit for its second quarter ended June 30, 2018 (2QFY18) to RM2.46 million from RM9.02 million, despite chalking higher revenue, as its tin smelting operations continues to be impacted by inefficiencies at its aged plant in Butterworth, Penang.

The group said the problem resulted in lower recovery yield. While it is progressively moving its operations to its new plant in Pulau Indah, Selangor, its overheads have also risen as only one plant is generating revenue. Also a drag on its earnings this quarter is the strengthening of the ringgit against the greenback.

These factors resulted in a reduced earnings per share of 2.5 sen in 2QFY18, versus 9 sen in 2QFY17, its stock exchange filing showed. The group's revenue for the quarter, meanwhile, was up 6% to RM326.82 million from RM307.88 million a year ago, due to higher quantity of refined tin sold.

MSC said the impact from the operational inefficiencies at the aged Butterworth aged plant will be addressed once its new plant in Pulau Indah, Port Klang takes off in the medium term.

For the first half of the year (1HFY18), the group's net profit fell 68% y-o-y to RM7.04 million from RM21.64 million, due to the same reasons that impacted its quarterly income; cumulative revenue contracted 4% to RM683.77 million from RM714.49 million, due to lower average tin prices in ringgit terms.

“The increased overheads due to the start up and test run costs of our new smelter in Pulau Indah are expected to continue until next year. Upon the complete relocation of our smelting operations to the new plant, we expect to
significantly enhance our recovery yields and reduce our operational and manpower costs,” the group's chief executive Datuk Dr Patrick Yong said in a separate statement.

The new plant is expected to be operational in the medium term. Meanwhile, the group has also been undertaking efforts to increase its mining productivity under its tin mining segment, said Yong.

“Since mid July, we have achieved additional daily output and we expect this to increase further. The impact of this increased productivity will be apparent from the third quarter of 2018 onwards,” he said.

The group also intends to ride on the positive demand for tin on the back of new discoveries on tin usages. "We plan to establish a Research and Development (R&D) center in Pulau Indah for the study of new downstream applications of tin as part of our strategy to further capitalize on this growth," Yong added.

At market close today, shares in MSC fell one sen or 0.28% to RM3.61, bringing it a market capitalisation of RM359 million.