Quick take: CSC Steel shares fall after its first quarterly loss in 4 years

KUALA LUMPUR: Shares in CSC Steel Holdings Bhd fell 8% after the company posted its first quarterly loss since 2014, weighed down by high raw material costs.

The counter shed nine sen, or 7.69% to RM1.08 with 401,900 shares done.

CSC recorded a net loss of RM2.08mil for the fourth quarter ended Dec 31, 2018, compared with a net profit of RM14.82mil in the year-ago fourth quarter.

Its revenue for the quarter fell 3.2% to RM355.50mil, from RM367.19mil previously, due to lower sales volume for galvanised steel and pre-painted galvanised steel products, accompanied by a 1.6% lower key products average selling price during the quarter.

CSC Steel's net profit for the full year ended Dec 31, 2018 fell 63.4% to RM21.89mil, from RM59.81mil in the previous year. Full-year revenue  rose 4.5% year-on-year to RM1.38bil, from RM1.32bil.

AmInvestment Bank Research said CSC Steel’s FY18 net profit disappointed, missing the house forecast and consensus estimates by a whopping 25% and 29% respectively.

The variance against our forecast came largely from more severe-than-expected erosion in margins.

“We slash our FY19–20F net profit forecasts by 50% and 52% respectively, as we expect intense competition in the local flat steel market to persist over the medium term in the absence of substantive measures introduced by the government to curb the influx of cheap imports.

“However, we keep our fair value unchanged at RM1.09 as we change our valuation methodology to 0.5x book value (consistent with its historical average during the last flat steel downcycle in 2012–2015), from a P/E-based one previously,” AmInvestment said.

The research house said it remained cautious on the prospects of the local flat steel producers amidst steep competition from cheap imports in the market.

“Pending further anti-dumping investigation, and subject to the outcome, and the imposition of more safeguard measures by the Ministry of International Trade and Industry (Miti), the local flat steel players will continue face margin compression as they are unable to adequately raise prices to pass on the higher production cost including input HRC, transportation and electricity,” it said.

Stock on the Move , CSC Steel