KUALA LUMPUR (Aug 7): Malaysia Smelting Corp Bhd (MSC) reported a net profit of RM894,000 for the second quarter ended June 30, 2020 (2QFY20), down 88% from RM7.48 million a year ago, no thanks to lower average tin prices and the temporary closure of operations as a result of containment measures imposed by the Government to curb the spread of the COVID-19 pandemic.

The average tin prices at the Kuala Lumpur Tin Market (KLTM) for 2QFY20 declined by 19% to US$15,848 per tonne from US$19,662 per tonne in 2QFY19, the company said in a statement

This resulted in its earnings per share dropping to 0.2 sen for 2QFY20 from 1.90 sen for 2QFY19.

Quarterly revenue shed 50% to RM144.65 million against RM289.08 million a year ago.

The poor quarterly performance dragged the group into a net loss of RM12.94 million in the six months ended June 30, 2020 (6MFY20) compared to a cumulative net profit of RM16.09 million last year. Revenue sank 41.33% to RM349.96 million from RM596.53 million for 6MY19.

As at June 30, total bank borrowings increased 28% to RM342 million, from RM266.2 million as at Dec 31, 2019, due to the drawdown of short-term trade borrowings for working capital.

Commenting on the group’s results, group chief executive officer Datuk Dr Patrick Yong said that the 2QFY20 financial results reflect the full impact of COVID-19 with temporary plant shutdowns for half of the quarter, further reducing the group’s production severely.

He added that the group’s performance was also impacted by the disruption to the tin industry’s supply and demand chain as governments imposed border controls and quarantine lockdowns.

Nonetheless, as governments around the world gradually reopen their economies, he said the group remains cautious on the developments and continues to focus on strengthening its core operations and capabilities to withstand external headwinds.

“Our rationalization efforts continued to gain momentum as we edge closer to the commencement of commercial production of refined tin at our new smelting facility in Pulau Indah, Port Klang in 3QFY20. The Pulau Indah plant houses the more advanced smelting technology using the Top Submerged Lance (TSL) furnace, resulting in significantly higher extractive yields with improved operational and cost efficiencies, while reducing our carbon footprint," Yong said.  

Until smooth operations are achieved at the Pulau Indah facility, the group will be operating two smelting plants concurrently resulting in duplication in expenses.

Nonetheless, the group expects financial performance to improve as it phases out production at its current smelter in Butterworth, Penang.

“As for our tin-mining activities, we continue our initiatives to increase overall mining productivity. At the Rahman Hydraulic Tin mine in Klian Intan, efforts are underway to boost the daily mining output, in addition to exploring new tin deposits. Meanwhile, we are also exploring potential joint venture mining arrangements to enhance our mining activities.” Yong said.

MSC's share price rebounded 59% from its low in March, but the stock is still down 15% from 85 sen on Jan 2 this year. It closed at 71.5 sen today, with a market capitalisation of RM286 million.