Masteel expects higher steel sales this year

-A +A

KUALA LUMPUR (Feb 27): Malaysia Steel Works (KL) Bhd (Masteel) expects steel bar sales to increase in 2015, which would enhance the Group’s financial performance for the current financial year ending 31 December 2015 (FY2015), according to its managing director and chief executive officer Datuk Seri Tai Hean Leng.

In a statement today, Tai said demand for steel bars was expected to be underpinned by the robust domestic construction industry, stemming from substantial investments into development projects from both the public and private sectors.

“Our optimistic sales outlook of steel bars in 2015 is anchored by the expected sturdy growth in the domestic construction industry.

“This is especially true given the Government’s unchanged allocation of RM48.5 billion for major infrastructure projects, such as new highways and the Mass Rapid Transit lines under the revised national budget.

Tai said that furthermore, Masteel’s (fundamental score: 0.75; valuation score: 1.20) new rolling mill was targeted to come on-stream in mid-2015, immediately boosting its overall steel bar production capacity to 550,000 MT per year, from 450,000 MT per year currently.

He said the anticipated sales growth, expanded production capacity, and declining prices of our key raw material of scrap metal, should translate into better financial performance for the Group in FY2015.

Tai said Masteel had invested RM100 million into a new rolling mill in Bukit Raja.

He said with its ongoing focus on improving operational efficiency, the new rolling mill was expected to eventually increase the Group’s overall production capacity to 650,000 MT per annum by 2016.

For the fourth quarter ended Dec 31, 2014, Masteel’s net profit rose 24.5% to RM4. 5 million from RM3.6 million a year earlier, on the back of an 11.4% increase in revenue to RM392. 2 million from RM352 million previously.

Masteel attributed its performance to to higher sales of steel bars and enhanced manufacturing efficiency.

Teh company said that for FY2014, its revenue rose 5.6% to RM1.5 billion from RM1.4 billion previously.

Meanwhile, group net profit was 41.5% lower at RM15.8 million in FY2014 from RM27.0 million a year ago.

Masteel said The lower profit was primarily due to a one-off deferred tax adjustment of RM8.9 million in the third quarter of FY2014.

On Masteel’s proposed Iskandar Malaysia Commuter rail project via its joint-venture company Metropolitan Commuter Network Sdn Bhd, the Group remains positive of realizing the project.

Masteel had, in January 2015, submitted an updated project proposal to the Ministry of Transport for its review. Additionally, the Group is in the midst of discussions with several potential investors to secure project funding.

“We continue to hold productive discussions on the commuter rail project with various key stakeholders, and all parties are committed towards its eventual success,” concluded Dato’ Sri Tai.

(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.)