Posted on November 25, 2011, Friday
STRATEGIC PLAYER: Image captures one of Press Metal’s range of products. The group is currently banking on its Phase-2 aluminium smelter expansion programme to meet the growing demand of aluminium in Asia.
KUCHING: Long established aluminium company Press Metal Bhd (Press Metal) is banking on its Phase-2 smelter expansion programme for a solidified growth going forward.
A leading player within the Asean aluminium industry, Press Metal should see its growth sustained as the commissioning of the Phase 2 would expand the firm’s capacity, said an analyst at AmResearch Sdn Bhd (AmResearch).
“The imminent commissioning of Phase 2 should solidify Press Metal’s deepening progression as an integrated aluminium producer within Asean – with a tripling of capacity to 360,000
tonnes.
“We draw comfort from the fact that progress at Phase 2 of Press Metal’s aluminium smelter expansion programme is proceeding smoothly. Phase 2A is to be completed by third quarter of 2012 and Phase 2B by second quarter of 2013,” highlighted the analyst.
To recap, the Phase-2 expansion programme, situated at the new Samalaju Industrial Park (Samalaju), has been operated by Press Metal’s wholly-owned subsidiary, Press Metal Bintulu Sdn Bhd.
Following the successful roll out of Press Metal’s smelter in Mukah, Sarawak, the expansion project in Samalaju was catered to meet the growing demand of aluminum raw material in Asia.
This would be in adherence to the group’s aim of becoming an integrated aluminium giant within the Asean region. Its Phase-2 expansion programme had been financed through internally generated funds and bank borrowings.
The research house had thus placed an optimistic outlook for the group as it believed the company had a strong track record in securing partnerships with other leading players.
“From a strategic standpoint, we also do not preclude the possibility of Japan’s Sumitomo investing in Phase 2, after the latter bought a 20 per cent stake in Press Metal’s Mukah smelter last September,” said the analyst.
The group however recorded a rather bearish ninth month financial year 2011 (9MFY11) net profit of RM65 million with third quarter of financial year 2011 earnings falling 13 per cent quarter-on-quarter (q-o-q) at RM20 million.
“We attribute this to renewed fears from global macro headwinds, which in turn had affected demand for base metals,” pointed out the analyst.
Spot London Metal Exchange prices fell circa 7.7 per cent (q-o-q) in the third quarter this year US$2,398 per tonne. On a ninth month basis, however, aluminium prices were still up 18 per cent year-on-year at US$2,498 per tonne against AmResearch’s FY11F forecast of US$2,400 per tonne.
As a consequence, the group’s earnings before interest and tax manufacturing margins fell slightly to 8.2 per cent in 3QFY11 from 9.1 per cent in 2QFY11.
“Taking cue from this, we have trimmed our FY11F to FY13F net profit forecasts by 11.2 per cent, nine per cent and 6.1 per cent respectively. This mainly takes into account our more conservative margin assumptions for Press Metal’s core aluminium operations due to the more volatile global market conditions,” observed the analyst.
Nevertheless, the group’s 9MFY11 core earnings still moved on a strong trajectory, surging at 48 per cent year-on-year on the back of higher demand and pricing trend for aluminium products and full-year impact from its Mukah smelter.
More importantly, analyst opined that the company’s sequential earnings momentum should improve in 4QFY11 with the maiden supply of power from Bakun Dam.
Source: http://www.theborneopost.com/2011/11/25/press-metal-riding-on-expansion-programme/
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