This article first appeared in The Edge Financial Daily on June 16, 2017
PETALING JAYA: Press Metal Bhd, the region’s largest aluminium smelting firm, expects to achieve a stronger financial performance this year on the back of improving prices and increased output.
“We believe the price of aluminium this year will be higher than last year, and we are positive about the production output, which is going to be more,” said chief executive officer Datuk Paul Koon Poh Keong.
Coupled with the rise in the value of the US dollar, the group is optimistic about delivering a better growth in its bottom line and top line for the year ending Dec 31, 2017 (FY17).
“If the US dollar strengthens it will definitely help us. We are comfortable with this kind of range (RM4.25 to RM4.26 against the dollar) and of course if it is at RM4.4 it will be very good for us. But we cannot expect it to be at that level all the time,” Koon told reporters after the group’s annual general meeting yesterday.
With regard to the aluminium price, Koon said it is expected to be well above the average of US$1,700 per tonne seen in FY16.
“This year it would be in the range of US$1,800 (RM7,668) to US$1,900 because we have another six months to go,” he said.
The increase in aluminium price is primarily due to the Chinese government’s move to cut its production capacity amid environmental concerns.
“They (Chinese government) are serious about curbing emission for their own benefit,” said Koon. “When the Chinese government is serious about controlling the aluminium industry’s expansion and reduce capacity, we can see the market reacting to it,” he added.
As such, while demand for aluminium is expected to grow at a healthy pace, the supply growth will face more challenges, said Koon.
“[The group’s earnings] will grow this year on these positive indications with the benefit of full production from our three smelter lines [in Sarawak] — Mukah smelter, Samalaju Phase 1 and Phase 2 — of 760,000 tonnes capacity, and higher value-added products output along with better currency exchange rate,” he added.
On expansion plans, Koon said Press Metal is continually exploring new market segments, both domestically and internationally.
“The expansion is in the pipeline, we are mindful of doing it at the right time and doing it with careful financial planning,” he said.
Press Metal’s net profit jumped 56.6% to RM148.05 million for the first quarter of FY17 from RM94.56 million a year earlier. Revenue grew 56.7% to RM2.02 billion from RM1.29 billion.
The group has declared a first interim dividend of 1.5 sen per share for FY17, payable on June 21.
Press Metal’s share price fell five sen or 1.82% to close at RM2.69 yesterday, with a market capitalisation of RM10.19 billion. Year to date, the counter has gone up by 69.18%.