Sunday, April 13, 2014

Press Metal

Its future prospects remain upbeat despite a headline third quarter FY2013 net loss.

Despite the net loss, the company posted a decent core profit of RM19.5mil in the third quarter after excluding an asset disposal loss and the fixed and financing costs for the Mukah smelter post the power outage that halted operations, and recognising a deferred tax asset.

The better results despite the distressed aluminium prices – averaging at USD1,782 per tonne in the third quarter supports the view of that its Sarawak smelters enjoy lower cost curves, derived from competitive power costs and strategic location.

Also there had been some positive developments for Press Metal of late after its disposal of its loss-making Hubei smelter in September 2013 through an asset swap that sees it acquire a profitable extrusion unit.

Its RM444mil deal with Sumitomo Corp will see the latter take a 20% stake in the Samalaju smelter. The deal underscored Sumitomo’s commitment in the aluminium manufacturer.

The company will make a gain of RM336.4 mil from the disposal. The sales proceeds would help pare down Press Metal’s net gearing to 1.2 times from 1.74 times.

Expect the fourth quarter earnings to improve further as the disposal of the Chinese smelter assets is expected to be oneoff while its Mukah plant has re-commenced operations.

Ongoing repairs at the Mukah plant following a power outage in June 2013 and weak aluminium prices might put a cap to its share price.

No comments:

Blog Archive


Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.