17 Aug 2009
Review of performance
The Group achieved revenue and profit before tax for the current quarter of RM161.6 million and RM12.5 million respectively. This represents a significant reduction of RM274.1 million or 62.9% lower in revenue than that of its corresponding quarter.
As a result of the revenue contraction, profit before tax of RM55.0 million in the corresponding quarter was reduced by RM42.4 million or 77.2% to RM12.5 million.
The significant drop in revenue is due to both sale volume contraction and lower selling prices of our steel products due to the world economic downturn arising from the world financial crisis. As a result the Group registered a significantly lower profit before tax for the quarter under review.
Variation of results against preceding quarter
The Group’s revenue has decreased by 6.7%, from RM173.2 million in the preceding quarter to
RM161.6 million in this quarter. The decrease in revenue is generally due to lower selling prices of our steel products.
Despite the decrease in revenue, Group’s profit before tax increase by 68.1% from RM7.5 million in the preceding quarter to RM12.5 million this quarter due to lower raw material cost and recovery of doubtful debts of RM2.4 million.
Current year prospects
Steel market sentiment has improved and steel prices have staged an unexpected strong rebound since May 2009. This is largely due to steel mills having reduced their production volume effectively to sustain and increase steel prices.
In addition, strong steel demand in China has also helped in stabilizing the global steel market.
The Ministry of International Trade and Industry (MITI) has just issued a new steel policy which aims to enhance the competitiveness of local industry and encourage the manufacture of more competitive products for international market. With improved market sentiment and increasing steel prices, the timing for the implementation of this new policy seems to be going smoothly as there were little opposing voices heard so far. However, industry players need more time to observe and adapt to the new policy.
Barring any unforeseen circumstances, the current steel market is expected to continue its optimistic movement for the rest of the year.
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