This article first appeared in The Edge Financial Daily, on November 26, 2015.

KUALA LUMPUR: Loss-making Malaysia Steel Works (KL) Bhd (Masteel) expects to turn itself around in the next financial year ending Dec 31, 2016 (FY16), with additional revenue contribution of up to RM200 million per year from its newly commissioned rolling mill in Bukit Raja, Selangor.

In a statement yesterday, the integrated steelmaker said it commenced operations of its Bukit Raja rolling mill in October, and targets to produce an additional 150,000 tonnes of steel bars next year.

Together with the existing production capacity of 450,000 tonnes from its Petaling Jaya mill, Masteel’s total steel bar capacity in 2016 is expected to reach 600,000 tonnes.

“We are optimistic that commencement of our new rolling mill will allow the group to achieve better economies of scale, thus enabling us to produce competitively, which would contribute positively to our bottom line in the coming months,” Masteel managing director and chief executive officer Datuk Seri Tai Hean Leng said in the statement.

The group saw its net loss widening nearly four times to RM24.14 million for the third quarter ended Sept 30, 2015 (3QFY15) from RM6.1 million a year ago, mainly due to foreign exchange (forex) losses amounting to RM18.7 million.

Revenue fell 16.8% to RM301.44 million from RM362.1 million.

For the cumulative nine months period (9MFY15), Masteel slipped into the red with net loss of RM49 million compared with a net profit of RM11.28 million in 9MFY14, while revenue dropped 18% to RM869.03 million from RM1.06 billion.

“While 3QFY15 was a challenging time for us due to the unfavourable forex and competition, we, however, see the conditions improving going forward as the ringgit continues to rebound, reflecting our country’s strong and stable economic fundamentals.

“More importantly, we saw a recovery in our top line in 3QFY15 on strengthened demand for steel bars,” said Tai.

“Going forward, we are optimistic of resilient sales of steel bars for Klang Valley-based steel millers such as Masteel. Demand would continue to be spurred by the strong line-up of major infrastructure projects coming on stream, especially in Greater Klang Valley.

“We also expect to see an increasing supply of scrap metal from regional countries such as China, Japan and South Korea in the coming years. With the supply of scrap metal expected to exceed demand, prices would likely come under pressure, thus translating into lower cost of production for our operations in the long run,” he added.

In a separate filing with Bursa Malaysia yesterday, Masteel said it has recently presented to the senior management at Railway Assets Corp the company’s town planning scheme for a piece of land in Kempas, Johor, to build a proposed commuter train depot and other assets as required by the transport ministry.

Masteel said the presentation is a follow-up to its joint venture (JV) with KUB Malaysia Bhd to pursue a rail transit network project in Iskandar Malaysia.

To recap, Masteel had on Jan 19, 2011, entered into a heads of JV agreement with KUB, where both parties had agreed to combine their capabilities and resources to cooperate and collaborate with each other via the JV company Metropolitan Commuter Network Sdn Bhd to pursue the rail transit network project.

Masteel is to hold a 60% stake in Metropolitan Commuter Network and KUB the remaining 40%.