KUALA LUMPUR (June 29): Steel production company Hiap Teck Venture Bhd’s net profit for the third quarter ended April 30, 2022 (3QFY22) slipped 51.14% to RM32.21 million from RM65.92 million in the same period last year mainly due to higher cost of inventories despite increase in sales volumes for its steel products.

Hiap Teck also attributed a lower share of profit from a joint venture (JV) entity at RM3.32 million from RM19.81 million previously, and lower profit margin for the group’s downstream operating subsidiaries as a result of the higher costs of inventories.

Earnings per share dropped to 1.85 sen from 4.79 sen previously, its bourse filing showed.

Quarterly revenue, however, jumped 38.62% to RM456.95 million from RM329.64 million a year prior, mainly contributed by both higher sales volumes and average selling prices for steel.

Hiap Teck said its trading division achieved a 51% increase in revenue to RM240.94 million as compared to RM159.78 million, whilst the manufacturing division reported a 25% increase in revenue to RM215.89 million, from RM172.13 million.

On a quarterly basis, Hiap Teck’s net profit was up 14.06% from RM28.24 million in 2QFY22, while revenue increased 37.14% from RM333.2 million.

For the cumulative nine-month period, Hiap Teck's net profit rose 27.78% to RM131.54 million from RM102.94 million a year prior in tandem with turnover which grew 30.49% to RM1.2 billion from RM917.11 million.

Looking ahead, Hiap Teck said its second 200,000 tonnes per annum coke oven plant parked at its JV entity level is targeted for completion next month (July 2022).

The steelmaker said it is “vigilant of the downward trend of steel prices” and will continue to focus on prudent procurement strategies and inventory management.

Citing the World Steel Association (WSA), Hiap Teck sees steel demand growth slowing in 2022 amid the Russia-Ukraine conflict, and as demand in China — the world’s top producer and consumer of steel — was seen to be flat despite the government's stimulus focused on infrastructure.

The WSA sees consumption rising just 0.4% in the year to 1.84 billion tonnes, a slower pace than last year’s 2.7% increase, before rebounding to 2.2% in 2023, it said.

However, global supply chain disruption led by China’s zero-Covid policy, the Russia-Ukraine conflict, and the expected pick-up in construction and industrial activities as economies reopen could keep steel selling prices elevated, it added.

Hiap Teck's share price finished unchanged at 29.5 sen, giving the group a market capitalisation of RM515.6 million. Year-to-date, the counter has retreated by 41%.