Masteel dips into the red in 1QFY15 on lower sales volume, margin

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KUALA LUMPUR (July 2): Malaysia Steel Works (KL) Bhd (Masteel), whose external auditors had issued a qualified opinion on the assessment of the company's numbers for the financial year ended Dec 31, 2014 (FY14), swung to a first-quarter net loss on lower sales volume and margin.

It reported a net loss of RM10.71 million or 4.53 sen loss per share for the three months ended March 31, 2015 (1QFY15) compared with a net profit of RM7.28 million or 3.28 sen earnings per share a year ago.

Revenue for the quarter was down 4% at RM325.4 million, from RM337.68 million in 1QFY14.

Masteel also announced that a final dividend of 1.3% per share of 50 sen each has been proposed for FY14, which will be subject to the shareholders' approval at the forthcoming annual general meeting.

In a filing with Bursa Malaysia today, Masteel (fundamental: 0.35; valuation: 1.4) expects the remainder of its financial year ending Dec 31, 2015 (FY15) to be challenging due to the large overhang of cheap imported steel products delivered in 1HFY15 which will weigh on local steel prices.

Besides that, the group also cited the goods and services tax (GST) implementation and the Hari Raya holidays dampening domestic demand for steel, while the rise in natural gas prices and the weakening of the ringgit have increased its cost of production.

“To improve the company's financial position, the company is diligently focusing on the completion of its new 200,000 tonnes per year premium steel bar rolling mill at Bukit Rajah, Klang, and expects the new plant to generate significant contribution to the bottom line of the company once it is fully commissioned by 2016,” it said.

On June 19, 2015, Nexia SSY Chartered Accountants had raised concerns on Masteel's sales transactions involving an oustanding amount of some RM287 million. Nexia said it was concerned about the transactions with the customers involved.

Masteel shares have been suspended since May 12, 2015. It last traded at 62 sen.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)