Press Metal in for solid earnings growth on strong aluminium prices

PETALING JAYA: Press Metal Aluminium Holdings Bhd is expected to chalk up solid double-digit earnings growth in the financial year ending Dec 31, 2024 (FY24) on the back of strong aluminium prices.

“With aluminium price at US$2,500 per tonne, we view that its risk-reward profile remains favourable as Press Metal is set to achieve a solid double-digit earnings growth in FY24, which we deem respectable as a FBM KLCI-constituent blue chip,” said Hong Leong Investment Bank Research (HLIB Research).

The research house expected Press Metal’s core earnings for the second quarter of 2024 (2Q24) to come in at RM480mil to RM500mil, up 15%-20% quarter-on-quarter (q-o-q) and 53%-60% year-on-year (y-o-y).

This will bring the first-half 2024 sum to between RM897mil and RM917mil, representing an increase of 48% to 51% y-o-y, accounting for 48% to 49% of HLIB Research’s FY24 forecasts.

The research house said the average London Metal Exchange aluminium price rose 15% q-o-q to US$2,523 per tonne, boosted by sanctions on Russian aluminium by the West, better-than-expected demand growth from China and continued supply constraints in China and Europe during the quarter.

“We also note that Press Metal had a better hedging position of 30% ratio at US$2,600 versus US$2,300 in FY23. However, the cost of aluminium production could have risen as alumina prices continued its uptrend in 2Q24,” HLIB Research said.

It shared that alumina prices continued its uptrend in 2Q24, gaining 14% q-o-q due to tightening supply induced by Alcoa’s suspension of its Kwinana site in Australia and also Rio Tinto’s force majeure declaration on its alumina supplies from Australia.

“We still expect decent q-o-q earnings growth, as higher alumina prices could aid contribution from its 25%-associate PT Bintan Alumina Indonesia,” it added.