This article first appeared in The Edge Financial Daily on December 18, 2018

SHAH ALAM: Steelmaker Hiap Teck Venture Bhd, which turned around in the financial year ended July 31, 2018 (FY18), is expecting even better earnings in FY19, mainly driven by its joint venture (JV) company, Eastern Steel Sdn Bhd (ESSB), after the latter resumed its plant operation in July this year.

Hiap Teck Venture returned to the black in FY18 with a net profit of RM27.95 million. The company has been in the red for the past three years and posted net losses of RM77.09 million in FY15, RM41.56 million in FY16 and RM102.98 million in FY17 respectively The losses were mainly dragged down by ESSB, the 35%- owned JV company that produces steel slabs in Kemaman, Terengganu.

“The company’s earnings for the past three years [were] dragged down by ESSB. Today we have resumed the operations of ESSB, as long as it started making profit, our earnings growth in 2018 and 2019 will be very strong,” its executive director Foo Kok Siew (pic), told the press after its annual general meeting yesterday.

For its first quarter for FY19, Hiap Teck recognised RM4.26 million losses from ESSB. As a result, the company’s net profit came in lower at RM10.3 million compared with RM16.03 million a year ago.

Hiap Teck is also looking at strengthening its export markets to boost its earnings. Foo said the move to expand export markets is to mitigate any slowdown in local demand for steel products given the weaker economic growth.

The company is exporting its steel products to countries like the Philippines, Indonesia, Taiwan and Thailand. Foo noted the export market helps the company to deliver higher margin and he sees more room to increase sales for the export market. According to Foo, the sales from export stands at 15% of its total group revenue.

On the Selangor pipe replacement exercise front, Foo expects the company to be a beneficiary if Selangor proceeds with this exercise.

“We are the largest steel pipe maker, should the government proceed [with] the pipe-replacement exercise, there is enough capacity for us to take it, and we are in Selangor, so we will be the main beneficiary,” Foo said.

Foo added that the company has the total production capacity of steel pipe of 550,000 tonnes per annum. At this junction, the factory is running at about half of the capacity.