Masteel sinks into first quarterly loss in two years, sees tough times ahead

KUALA LUMPUR: Malaysia Steel Works (KL) Bhd (Masteel), which posted its first quarterly net loss in two years in the quarter just ended, expects challenging times this year even as it welcomes the recent introduced regulations to curb the use of substandard construction building materials.

Announcing its results for the first quarter (Q1) ended March 31, 2015, the steel bar and billet manufacturer told Bursa malaysia that its prospect for most part of the year was expected to be challenging due to factors such as the large overhang of cheap imported steel products.

These products, which were delivered in the first half of the year, would continue to weigh on local steel prices, it said.

The domestic demand for steel is further dampened by the implementation of the goods and services tax in April and the subsequent Hari Raya holiday.

Masteel said the rise in natural gas prices and the rapid weakening of the ringgit since a year ago had caused the costs of production to escalate.

To improve its financial position, Masteel said it was “diligently focusing” on the completion of its new 200,000MT per year premium steel bar rolling mill at Bukit Rajah, Klang. The company expects the new plant to generate a significant contribution to its bottom line once it is fully commissioned by 2016.

On a positive note, it highlighted the long-awaited gazette of the Construction Industry Development Board (CIDB) Act (Service of Notice) Regulations 2015, which came into effect on June 1, and a 5% import duty on all carbon steel bars and wire rods effective from June 11.

“These long anticipated enactments and policies will help to reduce the rampant import of substandard steel bars from China sourced at low prices,” it said.

Masteel recorded a net loss of RM10.71mil in the first quarter of FY15 compared to a net profit of RM7.28mil in the same period a year ago due to lower sales volume and margin.

Its revenue for the quarter also fell 4% to RM325.4mil from RM337.7mil a year ago.

Trading in Masteel shares has been suspended since May 12 due to the delay in submitting its annual audited accounts for the 2014 financial year, which it presented on June 19. However, the external auditors gave a qualified opinion on the accounts.
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