Hiap Teck Reports a Sixfold Increase in Fourth-quarter Net Profit Due to Increasing Steel Prices and Profit Sharing

0 0

Hiap Teck Venture Bhd’s fourth-quarter net profit increased nearly sixfold to RM60.48 million from RM10.29 million a year ago, boosted by higher steel prices and a bigger share of revenues from a joint venture business.

Eastern Steel Sdn Bhd, the JV firm, delivered a profit to the group of RM49.45 million in the quarter, up from RM10.20 million in the preceding year’s corresponding quarter, Hiap Teck said in a filing with Bursa Malaysia.

Eastern Steel, an integrated iron and steel mill, is 35% owned by Hiap Teck and 35% by China’s Shougang Group.

“The JV entity’s significantly improved performance can be attributed to higher steel prices, cost savings from the 55MW power plant completed in October 2019, the completion of its first 100,000-tonne coke oven plant in June 2021, and the reversal of an additional RM66.15 million in impairment loss provided in previous years,” Hiap Teck explained.

However, the business said that revenue declined 21.59 percent to RM164.83 million in the May-July quarter, from RM210.22 million in the preceding May-July quarter, due to reduced operational periods following the imposition of the complete movement control order.

The group’s trade division reported sales of RM100.05 million, down 21 percent from RM126.44 million in the preceding year’s equivalent quarter, while the manufacturing division reported revenue of RM64.31 million, down 23 percent from RM83.13 million.

Quarter-on-quarter, however, net profit fell 8.25 percent to RM65.93 million from RM65.93 million in the third quarter, while revenue fell 50% to RM329.64 million, due to fewer sales in both the trading and production divisions as a result of the adoption of lockdown measures.

Hiap Teck’s net profit for the full financial year (FY21) increased by a huge RM163.43 million to RM163.43 million from RM4.29 million in FY20. Revenue increased 15.98 percent year on year to RM1.08 billion from RM932.87 million.

“Despite these obstacles, the group achieved its biggest profit ever in FY21, with a profit after tax of RM163.5 million. Management is also optimistic about the company’s success in the coming quarter, citing the group’s extended operating period, which began on Aug 16, 2021, the sustained strength of steel prices, and the projected rebound from the economy’s reopening,” the group stated.

Meanwhile, it stated that Eastern Steel’s continuous investment in plant and equipment to improve cost efficiency will result in increased group contributions.

Following the completion of the first 100,000 tonnes of its planned 400,000-tonne coke oven plant in June, the group said that the second 100,000 tonnes of its JV entity will be completed in October, with the remaining 200,000 tonnes scheduled to be completed by the second quarter of 2022.

“The coke oven plant will greatly lower the JV entity’s manufacturing expenses and increase its profitability,” the statement continued.

Additionally, Eastern Steel sees exciting potential as China continues to pursue carbon emission reduction objectives and manufacturing limits, increasing its need on imports for general purpose commodities.

Hiap Teck’s shares closed Wednesday at 58 sen, up 2.5 sen or 4.5 percent, for a market capitalisation of RM1 billion.

Published by Zack Baharum

Leave A Reply

Your email address will not be published.