BUTTERWORTH (Jan 30): Steelmaker Astino Bhd (fundamental: 1; valuation: 1.8) expects its revenue to grow 10% annually, driven by foreign exports of multi-system agro-house fabricated units to Asean countries, particularly Indonesia, its largest export market.
Chairman and CEO Ng Back Teng told pressmen today that Indonesia, which contributed about 80% of Astino’s 15% export market, is experiencing a rise in demand for as its agri-based industry is still strong and that, coupled with its growing population, might offset Astino's expected reduced earnings in its financial year ending July 31, 2015 (FY15).
Ng said the group, which manufactures and sells metal roof sheets and other building-related products such as insect screen and scaffolding, is working hard to ensure their revenue stays resilient as it is expecting a drop of between 10% and 15% in income in FY15 that may overlap into its first two quarters of FY16.
“We hope to break even in this financial year and make as much as we did in the previous financial year (FY14). We are currently undergoing challenging times, what with the [upcoming] implementation of the goods and services tax (GST).
“The flood of cheaply-priced steel from China in the global market is also affecting our business but we expect the growth in the agrohouse industry in the Asean market to see us through this period,” he said after the group’s annual general meeting.
Ng said Indonesia’s agro-house industry contributed about RM51.7 million to the group’s revenue last year though it was well under the local market revenue generation of RM431.6 million.
The group also exported finished products including roofing materials and agro-house units to Singapore and Philippines.
On the impact of the weakened ringgit, Ng assured it would be minimal as while group is buying its raw materials in US dollars from suppliers in Taiwan and Korea, its export products are also US dollar-denominated.
Nevertheless, the group plans to dig deeper into the agro-house export market by expanding its plant in Sungai Bakap to cater to growing demand for the product, he said, adding that its current plant measured about three acres.
It was reported that the group would spend RM100 million for the expansion of this segment from end-2011.
“We hope the federal government’s plan to revive abandoned projects and build more affordable housing will increase the demand for roofing and building materials.
“The Malaysian market, where we hold between 30% and 40% share, is our main focus. Although we see a slowdown this year, we hope the federal projects will help our sales,” he said.
He added that the operation of its new plant in Bukit Beruntung in Selangor is suitably sited to cater to demand from government-backed projects in the central and southern region, such as the Mass Rapid Transit network.
He said the RM40 million plant (including working capital), will begin operation in March and will generate a monthly turnover of RM6 million in three years.
According to its first quarter ended Oct 31, 2014 (1QFY15), the group’s revenue was RM121.1 million, a marginal 0.7% increase from the previous corresponding quarter’s RM120.34 million.
But its net profit dropped 6.14% to RM5.69 million from 1QFY14’s RM6.07 million, as a result of a drop in profit margin and increased financial cost.