Amalgamated Industrial Steel expects narrower loss this year

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SHAH ALAM: Amalgamated Industrial Steel Bhd (AISB) has expressed relief that Malaysia is imposing provisional anti-dumping duties on imports of hot rolled coils (HRCs) from China, Indonesia and South Korea, saying it will help narrow its losses for the current financial year ending Dec 31, 2014 (FY14).

This could potentially allow the loss-making steel pipe maker to make a turnaround in FY15.

It was commenting on the recent move by the Ministry of International Trade and Industry (Miti) to impose provisional anti-dumping duties on imports of HRCs from China, Indonesia and South Korea for a maximum of 120 days starting Oct 17.

The provisional anti-dumping duties range from 3.15% to 29.37%.

“With the recent announcement by Miti, I believe it would help narrow our losses this year, and [make a] turnaround next year,” its chief financial officer Jack Soo Eng Choon told reporters after the group’s extraordinary general meeting yesterday.

Soo also noted that the move would increase prices of imported HRCs to above RM2,200 per tonne, which is what AISB is currently paying to procure HRCs from Megasteel Sdn Bhd, subsidiary of Lion Corp Bhd.

“It (anti-dumping duties) would improve our [profit] margin as well as induce steel prices to go up. We have been suffering with a margin of below 2.5% in recent years when a reasonable margin should be around 8%,” he added.

AISB has been in a loss situation since FY09, but reported a significantly lower loss of RM458,000 in FY13 after recognising a one-off fair value adjustment of RM4.5 million.

The group had undergone a consolidation strategy last year, by consolidating all its operations into a 10-acre (4.04ha) plot of land, while leaving another 11.5 acres vacant to become investment property, which subsequently was revalued at RM58.6 million.

“Though the land has higher value, the board has not decided how to utilise it. By leasing the land, we can have another cash flow generator in the group. The land is on prime location, therefore it will be priced at a premium rate,” said Soo.

For FY15, Soo said it will be an “interesting” year for AISB as the group will look into diversifying into other businesses, but he did not elaborate.

“We are still in the inception stage, especially in the matter of optimising our competitive advantage,” he said.

Earlier at the EGM which lasted two hours, shareholders approved two resolutions, including the move to reduce the group’s shares par value to 10 sen from 50 sen.

“The par value reduction will put us in more favourable situation with issuing new shares to raise funds, as the price of newly- issued shares have to be above par value,” said Soo.

AISB shares have been trading below 50 sen for the past three years, and the company had previously aborted a proposed rights issue after failing to obtain shareholders’ approval.

“Without a specific business plan, the shareholders were not willing to support us,” Soo recalled.

On future fundraising, he said the board is still considering various funding channels including bank borrowings.

“Our borrowings are only over RM50 million. It is still low compared with our peers that have borrowings of hundreds of millions of ringgit,” he said.

Based on AISB 2QFY14 financial report, its total current liabilities amounted to almost RM53 million as at June 30, 2014 while current assets stood at RM62 million. Its current ratio is at a healthy 1.2 times.

This article first appeared in The Edge Financial Daily, on October 21, 2014.