Perwaja to fully settle debts in five years

It’s paying in instalments the outstanding RM250mil

KUALA LUMPUR: Perwaja Holdings Bhd, which is en route for listing on the Bursa Malaysia main board on Aug 20, expects to fully settle its outstanding debts of RM250mil within five years.

Chief executive officer Henry Pheng said the group had signed an agreement with the Finance Ministry to make scheduled instalments for the remaining debts starting early this year.

Perwaja was saddled with about RM800mil debts when Kinsteel Bhd bought 51% stake in Perwaja Steel Sdn Bhd and its Gurun assets from Maju Holdings Sdn Bhd in 2005.

“The turnaround in Perwaja is now progressing well with gearing ratio at about 0.6 to 0.7, which is among the lowest in the local steel milling industry,” Pheng told reporters after the launch of Perwaja's prospectus by Second Finance Minister Tan Sri Nor Mohamed Yakcop yesterday.

From left: Perwaja's Tan Sri Abu Sahid Mohamed, Finance Minister Tan Sri Nor Mohamed Yakcop and Perwaja's MD Tan Sri Pheng Yin Huah at the launch of Perwaja's prospectus on Monday.

Perwaja is an integrated upstream steel player and its subsidiary Perwaja Steel is involved in producing direct reduced iron (DRI) and semi-finished long steel products such as billets, beam blanks and blooms.

It is one of the four DRI producers with hot briquetted iron plants in South-East Asia and exports 30% of its total production to Vietnam, Thailand, China, Indonesia, the Philippines and South Korea.

Pheng said the group planned to ride on the record steel prices and take advantage of its sound cost structure to remain competitive.

He said Perwaja's listing was timely as “it allows us to tap into the capital market and ride on the myriad opportunities presented by the global construction boom.”

The group was poised to be one of the largest listed steel millers in Malaysia upon its listing with a market capitalisation about RM1.6bil, he added.

Pheng who is also chief executive officer of Kinsteel, the single largest shareholder in Perwaja, said post-listing, Kinsteel's stake would be diluted to 37% from 51% currently.

“However, we have the option to convert our irredeemable convertible unsecured loan stock (Iculs) to increase our shareholding back to 51%,” he said adding to date, there were no plans to convert its Iculs.

Earlier, chairman Tan Sri Abu Sahid Mohamed said Perwaja would ramp up its DRI and steel making production capacity to cater for the shortage of upstream products in the market.

“We will increase our DRI output to two million tonnes in 2009 from 1.2 million in 2007 via an upgraded partial combustion process,” he said. DRI is an important material for producing quality steel and commands high demand locally and abroad.

Abu Sahid also said Perwaja would reduced its dependency on third parties for its oxygen supply via setting up a gas plant, which would produce about 5,000 cu m of oxygen and about 3,000 cu m of nitrogen hourly.

“The plant is expected to be commissioned by early 2009,” he said.

Meanwhile, on steel prices, Pheng said the domestic steel bar price was trading between RM3,500 and RM3,700 per tonne while the international steel price was about US$1,200 per tonne.

On Nor Mohamed's statement that the windfall tax would not be imposed on steel millers, he said: “I am happy because 95% of our raw materials are imported.

“Our cost is increasing although the 100% hike in gas prices is not as high as the 300% price rise in coal and coking coal experienced by many steel players locally and abroad.”

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