KUALA LUMPUR (Nov 23): Malaysia Steel Works (KL) Bhd's (Masteel) net profit for the third quarter surged by more than 30 times to RM38.67 million from RM1.24 million a year ago, thanks to higher selling prices of steel bar and increased sales volume.

The sharp rise in earnings was also due to improving market conditions and robust demand from the domestic construction industry, the group said in a stock exchange filing.

Revenue for the three months ended Sept 30, 2017 grew 45.7% to RM401.45 million from RM275.45 million a year ago.

The group said its new steel rolling mill, which commenced operations in the second half of 2016, also contributed towards the additional sales volume and profit margin improvement. The new mill, which is Masteel's third facility, manufactures premium-grade steel bars and has an annual capacity of 250,000 tonnes.

Cumulative nine-month net profit jumped by 272.7% to RM63.34 million from RM17.0 million a year earlier, while revenue rose 20.8% to RM1.04 billion from RM861.81 million.

"We are benefitting from improved market conditions, led by stabilising international steel bar prices and reduction in capacity by various steel mills in China," said Masteel managing director and chief executive officer Datuk Seri Tai Hean Leng. "This has contributed to better selling prices and stronger sales."

Tai said in the meantime, the group is also leveraging on its new rolling mill in Bukit Raja, Klang, to produce premium-grade steel bars that fetch better margins.

"Overall, we would continue to benefit from strong demand for steel bars on the back of a vibrant construction industry, driven by numerous public infrastructure and transport projects. We are operating at optimal capacity utilisation and are set for strong performance for the rest of the year," he said.

Still, Masteel noted that the demand and prices of steel bars are expected to be dampened by the seasonal weather phenomenon and year-end holidays. It added, however, that the subsequent rebound of demand could be stronger in the ensuing months as the rollout of major public infrastructure projects are expected to intensify.

"As such, prices are expected to recover in line with demand. The performance of the company will be closely linked to the convergence of the above mentioned factors," the group said.

Masteel has appointed Ng Siew Peng as its executive director. Peng was hired by Masteel in 2012 to be its assistant finance manager and was subsequently promoted to the position of corporate manager in 2016.

Masteel also proposed to issue up to 106.81 million bonus shares to its shareholders. The exercise will see the disbursement of the shares on the basis of one bonus share for every three existing shares held on an entitlement date to be determined later.

"In addition, the proposed bonus issue will enable the company to fully utilise its remaining reserves held under [its] share premium account whilst potentially improving the liquidity and marketability of Masteel shares," said the group.

The planned issuance, it said, will be wholly capitalised from the group's share premium and retained earnings account at 50 sen per bonus share, being the reference to the par value of Masteel shares.

While it does not expect the exercise to materially impact its earnings for the financial year ending Dec 31, 2017, Masteel acknowledged there will be a corresponding dilution in its earnings per share as a result of the increase in the number of shares issued.

Masteel expects to complete the bonus issuance by the first quarter of 2018.

Shares in Masteel closed 2.3% or three sen higher at RM1.32 today, valuing the group at RM414.95 million.