KUALA LUMPUR: Aluminium manufacturer Press Metal Bhd (PMB) will concentrate on its upstream segment against the backdrop of low commodity cycle.

Group chief executive officer Datuk Paul Koon said it will ramp up value-added products such as alloy wheels within the upstream sector instead of producing pure ingots in order to widen its profit margin.

“We are currently doing about 30% value-added products but we hope to ramp them up to about 50% to 60%. Some of our alloy wheels are going to Europe for car manufacturers such as Audi and BMW,” he said.

Koon said a big part of PMB’s revenue was generated from alloy wheels in Europe, the United States  and South Korea but there was also high usage of ingots in the aviation business while billets were used in the construction sector.

Speaking to reporters after the group’s annual general meeting, Koon pointed out that its low operating cost kept its business afloat despite the weak global aluminium price. He expects the impact of low commodity price on its sales and profit to be short-term.

According to him, phase three of the new smelter, which costs RM1 billion, will be in full swing in the first quarter next year with capacity of 760,000 tonnes output catering to the Southeast Asian market. The new smelter is housed under 80%-owned unit Press Metal Bintulu Sdn Bhd. 

“With our next phase, we have bigger economies of scale where we are doubling our output. This output is a reflection of the world demand. By 1Q16, the plant will have 300,000 tonnes output. The existing plant processes 440,000 tonnes of aluminium. The world demand is between 50 and 60 million tonnes.So our output can be absorbed as within the Southeast Asian region alone there is demand for about seven million tonnes which we can cater to. We have the advantage of being close to the market,” he said.

On May 17, PMB reported a fire at its Samalaju smelter in Bintulu which affected its  production output for about two weeks.

Koon said the temporary halt in operation had resulted in a loss of production of 60,000 tonnes to 80,000 tonnes of aluminium.

Asked about the loss of revenue, Koon said it would depend on the price of aluminium which was about US$2,000 (RM7,420) a tonne now.

However, he added that although there was “some” revenue loss, the overall loss was mitigated by ongoing delivery orders to customers.

In the first financial quarter ended March 31, 2015, PMB’s net profit jumped 53.8% to RM43.1 million on the back of a 17.7% revenue rise to RM1.05 billion compared with the corresponding period last year. However, its basic earnings per share dropped 34.7% to 3.58 units with a three sen dividend compared with five sen last year.

This article first appeared in The Edge Financial Daily, on June 19, 2015.