KUALA LUMPUR: Prestar Resources Bhd’s net profit in the third quarter jumped 132% to RM5.2mil from RM2.2mil a year ago on higher steel prices and positive contributions from its steel pipes, guardrails and racking division.
The steel products and equipment maker announced on Wednesday profit before tax (PBT) rose two-fold to RM6.5mil from RM2.1mil a year ago.
Its revenue increased by 7.5% to RM125.9mil from RM117.1mil a year ago due to higher demand for steel pipes and related products from local and overseas market and also higher steel prices which helped to boost the sales margin.
Group managing director Datuk Toh Yew Peng said economic activities picked up after the government eased the Movement Control Order (MCO) restrictions and this had a positive impact on the company’s financial performance.
“Demand for Prestar’s products namely steel pipes, hollow sections, guardrails and racking picked up in the third quarter as the manufacturing and construction sectors reopened, ” he added.
For the nine months, its profit before tax surged by 3,419% to RM8.3mil from RM230,000 partly due to the recognition of a property disposal gain in earlier quarter and strong performance recorded in the just ended quarter..
However, its revenue contracted by 20.3% to RM272.93mil from RM342.39mil a year ago due to the temporary slowdown in the company’s sales in April and May due to the stringent movement controls.
Underpinning Prestar’s prospects is the rebound in the economy, where in the third quarter ended 30 September 2020, gross domestic product (GDP) contracted at a smaller pace of 2.7% compared with the 17.1% plunge in the second quarter.
According to the Statistics Department, on a quarter-on-quarter seasonally-adjusted basis, the economy turned around to register an expansion of 18.2% (2Q 2020: -16.5%).
For 2020, the government expects GDP to contract between 3.5% and 5.5% and rebound next year and expand by 6.5% and 7.5%. It expects the construction sector to rebound by 13.9% in 2021, boosted by civil engineering.
Hence, driving the construction sector’s growth will be the acceleration and revival of major infrastructure projects, coupled with affordable housing projects. The civil engineering subsector will continue to be the main driver of the construction sector.
Among the major infrastructure projects are the Mass Rapid Transit 2 (MRT2), Light Rail Transit 3 (LRT3), West Coast Expressway (WCE) and Bayan Lepas LRT as well as Pan Borneo and Coastal highways in Sarawak.
The government plans to speed up the Pan Borneo Highway, with Phase One of the project in Sarawak estimated to be completed in 2023.
“The Sarawak portion of the highway was only 53% completed, while progress was currently at 34% in Sabah. Prestar sees the decision to speed up the construction of the highway augurs well for the Company as it supplies guardrails and accessories for the Pan Borneo Highway project, ” said Toh.
Prestar is also seeing increasing demand for its steel pipe supplied to original equipment manufacturers (OEM) of automotive, furniture and equipment manufacturing from both local and overseas.
The MCO had also spurred the growth in e-commerce activities and Prestar is benefiting from the increasing demand for its racking products from third party logistics (3PL) companies.
Coupled with the improvement in sales margin as a result of the upward uptrend in steel prices, Toh said the board is cautiously optimistic that the company’s performance for FY2020 will remain positive and satisfactory.
Global finished steel demand is forecast to rebound by 3.8% in 2021, according to the World Steel Association and this will also benefit Prestar.
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