Press Metal eyes stake in Indonesian company

Koon: We are still on expansion mode and have the intention to tap into the debt market to fund our growth.Our current net gearing is at a reasonable level.

KUCHING: Press Metal Aluminium Holdings Bhd (PMetal) plans to acquire a 25% stake in PT Bintan Alumina Indonesia (PT BAI),which is currently constructing a one-million tonne alumina refinery plant in Galang Batang, located in the Riau Islands province of Indonesia.

Upon completion, the plant will produce alumina, a raw material required by Pmetal’s smelting operations in Bintulu and Mukah, Sarawak.

PMetal is South-East Asia’s largest aluminium smelter with capacity of 760,000 tonnes and extrusion capacity of 210,000 tonnes per annum.

PMetal has entered into a memorandum of understanding (MoU) with PT BAI and its shareholders to negotiate the proposed PMetal’s capital injection into PT BAI via a subscription of 25% equity interest in the Indonesian company.

In a filing with Bursa Malaysia on Friday (May 31), PMetal said it intends to further negotiate on the details of the proposed share subscription with the parties concerned subsequent to the completion of the necessary due diligence on PT BAI in consultation with the relevant professional advisors.

If materalised,the deal would allow PMetal to secure long-term alumina supply.

PT BAI is principally involved in the production of non-ferrous metals.Currently, the company is in the midst of construction the one-million tonne alumina refinery plant with the necessary facilities,with plan for a second phase development for the plant. The proposed second phase project is subject to approval from the relevant regulatory authorities.

PT BAI shareholders are Global Aluminium International Pte Ltd (GAI) (99%) and PT MKU (1%).

The shareholders of GAI are Nanshan Aluminium Singapore Co Pte Ltd (95%) and Redstone (5%).

PMetal chief executive officer Tan Sri Paul Koon said the company is constantly on the lookout for suitable assets to strengthen its position as a globally integrated aluminium corporation.

“We are excited about a synergistic benefits of this opportunity (to acquire equity interest in PT BAI) to Press Metal as it allows us to secure a substantial portion of our long-term alumina needs.

“We are still in discussions and the final terms are yet to be determined.

“We are still on expansion mode and have the intention to tap into the debt market to fund our growth.Our current net gearing is at a reasonable level.

“The capital injection for this asset (PT BAI) is progressive in nature and therefore our gearing will continue to be manageable with out anticipated strong cashflow,” he added in a press release.

PMetal group’s net profit in first quarter ended March 31,2019 (Q1 2019) fell by 23.5% to RM115.1mil from RM150.5mil in Q1 2018 despite a 2.2% increase in revenue to RM2.17bil due partly to the prolonged high raw material (alumina) costs stemming from the partial shutdown of the world’s largest alumina refinery in Brazil - Alurnote.

The Alurnote alumina refinery was ordered to slash production by 50% due to environment dispute with Brazilian authorities after the metals maker admitted to make unlicensed emissions of untreated water during severe rains in February 2018.

The refinery’s supply disruption has caused the surge in alumina prices.

Koon expects global alumina supply to improve and prices to ease after the Brazilian refinery announced about two weeks ago (May 21) that it had secured all necessary approvals from the authorities and federal court to resume full production.

According to him, PMetal is encouraged by the demand for its value-added products (VAPs),and is confident that the company could achieve its 60% VAP target this year.

“We remain optimistic in the prospects of the aluminium industry.

“Thus, we will continue to actively seek both organic and inorganic growth opportunities to strengthen our position in the market,” Koon added in another press release issued in connection with the company’s latest quarterly results.

Meanwhile, PMetal said its new joint venture company - Shandong Sunstone & PMB Carbon Ltd Co - has achieved full production of pre-baked carbon anodes in Q1 2019.

Wholly owned subsidiary Press Metal; Bhd (PMB) teamed up with Sunstone Development Co Ltd to set up the joint venture company to manufacture the pre-baked carbon anodes in September 2016.