This article first appeared in The Edge Financial Daily on February 26, 2020

KUALA LUMPUR: An impairment suffered by Southern Steel Bhd in its second quarter ended Dec 31, 2019 (2QFY20) resulted in the group posting its biggest ever quarterly loss of RM334.96 million.

This compares with a net loss of RM44.41 million in the year-ago quarter, and also marks the group’s fifth consecutive quarterly loss.

The steel group said in a filing that the impairment loss of RM258 million recognised in the quarter was on its plant and equipment, including spares relating to the group’s hot rolled coil investment, after taking into consideration the award by a tribunal on two arbitration proceedings last November relating to a 2011 contract.

Excluding this impairment loss, the group said its operating loss before tax would have been RM77 million, still higher than the corresponding quarter due to lower sales volume and compressed margin arising from a lower selling price.

Meanwhile, quarterly revenue contracted 27.2% to RM589.40 million, from RM809.51 million in 2QFY18, Southern Stell said in its stock exchange filing.

For the first half of FY20, Southern Steel registered a net loss of RM380.54 million on a lower revenue of RM1.24 billion. This compares with a net loss of RM42.63 million it recorded in the corresponding period last year on a revenue of RM1.74 billion.

The group said it expects better operating performance for the coming quarters with firmer selling prices and continuous cost saving measures, barring unforeseen circumstances.

It noted that despite the bottom out of selling prices, the market remains volatile.

Shares in Southern Steel were unchanged at 75 sen at yesterday’s close, bringing a market capitalisation of RM447.24 million.