KUALA LUMPUR (Nov 12): Sino Hua-An International Bhd's net profit dropped 80% to RM6.71 million in the third quarter ended Sep 30, 2018 (3QFY18) from RM34.15 million a year ago, as the group was affected by lower average selling prices of its main product metallurgical coke or metcoke, while the price of the raw material used to produce it — coal — rose.

Earnings per share dropped year-on-year (y-o-y) to 0.6 sen from 3.04 sen. Revenue fell 11% y-o-y to RM238.83 million from RM269.3 million.

In a filing today, the group said the average selling price of metcoke declined about 8% to RMB1,889 in 3QFY18 from RMB2,043 a year ago, while sales volume only grew a marginal 4% in the same period. Meanwhile, the average coal price has increased by about 5% from RMB1,263 per tonne.

"With such pricing dynamics of the metallurgical coke and coal, the group recorded a lower gross profit of approximately RM13.8 million in the current quarter under review compared to approximately RM41.9 million in the preceding year corresponding quarter," the group said.

It noted that while the overall contribution from by-products had increased about 25% y-o-y, such improvement was insufficient to negate the effects of the decline in selling prices of the main product, metcoke.

For the cumulative nine months, net profit fell 73% y-o-y to RM14.79 million from RM55.12 million, despite revenue rising 21% to RM744.68 million from RM615.01.

Looking ahead, the group said China's environmental protection policy is expected to continue to cause some imbalance to the short-term supply and demand of steel and coke industry, which may inherently result in further price volatility in the months to come.

However, it remains cautiously optimistic about the coke industry and will continue to be vigilant to relevant consequential circumstances that may have perceivable effect on the metcoke business.

Shares of Sino Hua-An closed down 0.5 sen or 1.96% to 25 sen, with 3.38 million shares done. The group has a market capitalisation of RM280.58 million.