This article first appeared in The Edge Financial Daily on August 21, 2019

KUALA LUMPUR: A softer metal price led to a 36% drop in Press Metal Aluminium Holdings Bhd’s net profit for the second quarter ended June 30, 2019 (2QFY19) to RM102.89 million, from RM160.6 million a year ago.

This lowered its earnings per share to 2.56 sen, from 4.15 sen previously. Revenue for the quarter came in 12.5% lower at RM2.13 billion, compared with RM2.44 billion for the corresponding period last year.

Nevertheless, Press Metal’s board of directors approved a second interim single-tier dividend of 1.25 sen per share, amounting to RM50.44 million, in respect of FY19, payable on Sept 24.

Its cumulative net profit for the first half of the year (1HFY19) stood at RM217.99 million, down 30% from RM311.08 million for the same period last year. Revenue, meanwhile, contracted 5.7% to RM4.3 billion, from RM4.56 billion for 1HFY18.

Press Metal said while it had been operating in a challenging macro environment exacerbated by ongoing trade tensions, its low-cost model had ensured the group remains profitable.

“With alumina prices dropping to approximately US$300  (RM1,254) per tonne in August 2019 from the year high of US$417, we expect margins to improve in the later part of 2019.

“Aluminium, the emerging metal of choice with its green characteristics, has the potential to further replace traditional materials. The long-term prospects are promising as we foresee wider application across multiple industries,” Press Metal said in a filing with Bursa Malaysia.

In a separate statement, group chief executive officer Tan Sri Paul Koon said the group remains positive about its upcoming Phase 3 smelter plant in Samalaju which, assuming a full power drawdown, will increase total production capacity by 42%.

“We expect positive financial contributions from this expansion commencing in 4Q20 (the fourth quarter of 2020). In addition, we expect our investment in PT Bintan Alumina Indonesia to further boost our earnings once the refinery is completed by end-2020.

“Subsequent to the memorandum of understanding, we are now in the final stage of ironing out the terms of our investment. With our strong operating cash flow of more than RM1 billion per year and the tranched-out nature of these investments, we are comfortable that our gearing ratio will be manageable during this expansion phase,” Koon added.

Press Metal shares finished one sen or 0.21% up at RM4.81 yesterday, with a market capitalisation of RM19.41 billion.