This article first appeared in The Edge Financial Daily, on May 16, 2016.
GEORGE TOWN: Malaysia Smelting Corp Bhd (MSC) expects to inch back into the black for the current financial year ending Dec 31, 2016 (FY16) if tin prices and the ringgit do not weaken.
“We believe we can be profit-
making for FY16, but with a qualification that tin prices do not drop, and that the [ringgit] remains where it is now, or improves,” said chief executive officer Chua Cheong Yong.
“We have our internal tin price [assumption] which is not far from the prevailing market price,” he told The Edge Financial Daily.
As for the ringgit, Chua said a weak ringgit against the US dollar is generally good for operations as the company sells in the world market in dollars.
“But on an accounting perspective, we have various financial instruments that need to be marked to market, so if the ringgit weakens that would impact our bottom line,” he said.
Higher cost pressures and weakening tin prices led the group to report a net loss of RM9.9 million for FY14 and RM4.8 million for FY15, on the back of a revenue of RM1.91 billion and RM1.46 billion respectively.
MSC, which is 55.3% owned by Singapore’s Straits Trading Co Ltd, managed to record a net profit of RM24.94 million for its the first quarter ended March 31 (1QFY16), compared to a net loss of RM2.89 million for 1QFY15. Revenue rose 7% to RM408.4 million from RM381.64 million.
MSC’s core operations comprise its international tin smelting business at Butterworth, Penang and its tin mining operations at the Rahman Hydraulic Tin Mine in Perak.
The Butterworth facility has a production capacity of around 40,000 tonnes of refined tin a year, and converts primary, secondary and often complex tin bearing ores into high-purity tin metal for industry application.
In 2015, the facility produced 30,209 tonnes of refined tin metal, with South Korea, Japan and Taiwan being its largest export markets.
MSC is currently the world’s second largest refined tin producer after the Yunnan Tin Company in China.
As for its tin mining operations, Rahman Hydraulic is at present Malaysia’s largest operating open-pit hard rock tin mine.
“At the moment the smelting plant is our largest profit contributor [it accounted for 81% of 1QFY16 net profit]. An increase in tin prices does boost our smelting division, but it is a more volume driven division.
“On the other hand, tin prices have a direct impact on our mining division, so profit contribution from our mining division tends to go up when tin prices increase,” said Chua.