Malaysia Smelting Corp earnings set to rise

PETALING JAYA: The positive global outlook for the tin market, coupled with the deployment of strategic initiatives, is set to fuel tin miner and tin metal producer Malaysia Smelting Corp Bhd’s (MSC) earnings for its financial year 2024 (FY24).

Group chief executive officer Datuk Patrick Yong told StarBiz that while there are short-term uncertainties, the long-term outlook for tin remains positive.

Citing a few global developments, he said the ongoing closure of Myanmar’s Wa State tin mine continues to tighten the global tin supply.

This, he said, coupled with Indonesia’s potential ban on tin exports and licensing delays, geopolitical tensions in the Middle East and key tin-producing regions, such as the North Kivu province of the Democratic Republic of the Congo, can create logistical challenges and further disrupt the supply chain.

“At the same time, the demand for electronics products is recovering and this is expected to increase tin consumption.”

According to research and consulting firm, Gartner Inc, the improving demand for consumer electronics in the global information technology industry is expected to see an 8% growth in 2024, followed by another strong increase of 9.4% in 2025.

This surge in demand for consumer electronics will potentially translate to growth in tin demand, boosting the group’s earnings for 2024.

“In the long run, tin plays a critical role in the green energy transition, particularly in lithium-ion batteries for electric vehicles (EVs) and solder ribbons for solar panels.

“As environmental sustainability gains global momentum, the rising demand for EVs and solar energy would create a subsequent increase in tin demand, positioning the group to capitalise on this growing market.

“These aforementioned factors are expected to support tin prices in 2024,” Yong noted.

For the fourth quarter ended Dec 31, 2023 (4Q23), the company posted a lower net profit of RM9.4mil compared with RM25.8mil in the similar period in 2022.Revenue, however, rose to RM404.6mil against RM391.2mil in 4Q22.

For the full FY23, net profit stood at around RM85mil compared with RM98.3mil previously. Revenue for the period declined to RM1.4bil against RM1.5bil in FY22.

For FY23, the company declared a final single-tier dividend of seven sen per share amounting to RM29.4mil.

The dividend’s ex-date is June 13 and it is payable on June 28, based on the company’s filing with Bursa Malaysia.

Total dividend per share for FY23 amounted to 14 sen, representing a 69% payout based on its FY23 net profit as compared to previous years payout of between 23% to 30%.

For 2024, Yong said the company would implement cost-effective measures that would improve its operational efficiency and overall performance. Furthermore, he said MSC would continue to focus on ensuring the top submerged lance (TSL) furnace in its new smelter in Pulau Indah is in a stable state for smelting.

As part of its cost effective measures, he said MSC is in the midst of phasing out smelting activities at its Butterworth smelter.

With the closure of the Butterworth smelter by mid-2025, he said the company can eliminate the duplication of expenses by operating two plants in parallel. This would help MSC to achieve cost savings of approximately 30%, Yong said.

“We are also exploring solar energy at our subsidiary Rahman Hydraulic Tin Sdn Bhd’s (RHT) tin mine, which will lead to higher energy efficiency and lower energy costs, apart from adopting new mining methods and technologies to achieve higher mining output and efficiency,” Yong said.

The Pulau Indah plant currently smelters third-party tin ores. The TSL furnace has a smelting capacity of 40,000 tonnes of tin ore (expandable to 60,000 tonnes with oxygen enrichment).

“We are currently running at 60% to 70% utilisation rate, with production depending on the availability of tin ore. With higher utilisation of TSL furnaces, we expect to achieve higher economies of scale and smelting yield,” he added.

For RHT, Yong said it is in the midst of constructing new waste dump areas and tailing ponds on adjacent lands, adding that this would extend the lifespan of the RHT tin mine.

“We are exploring new techniques and technologies to optimise mining processes. Apart from that, RHT will continue its exploration efforts to enhance mining output. With the acquisition of Asas Baiduri Sdn Bhd (ABSB), MSC has access to the tin ore located within Asas Baiduri’s mining lease adjacent to RHT’s tin mine.

“RHT will explore this land and conduct geotechnical studies in the coming years. These initiatives are expected to increase our overall mining productivity from 10.3 tonnes per day (tpd) in 2023, to 12-13 tpd in a few years time,” he pointed out.

UOB Kay Hian in its latest research report said MSC is poised for significant growth in 2024 as the London Metal exchange (LME) tin prices have soared 43% year-to-date, mainly due to ongoing supply constraints.

“We expect 1Q24 core earnings to come in at RM27mil to RM29mil on the back of sequentially stronger 1Q24 average LME tin prices of US$26,195 per tonne (versus 4Q23’s average price of US$24,705 per tonne), similar cost structures and higher utilisation rate from TSL furnaces, “ it said.

The research house also added that it expects MSC to register full-year core earnings of RM1,653mil to RM1,827mil (54% to 60% year-on-year) on the back of higher LME tin prices and cost saving from the closing down of its Butterworth plant.

With the addition of a new mining area from ABSB, MSC is poised to surpass 12-13 tonnes per day, potentially boosting earnings by around 12% in the next two to three years. On the smelting side, the brokerage expects improved utilisation rates post-rebricking exercise in August 2023.

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Malaysia Smelting Corp , tin , metal , commodity


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