Kinsteel - Still In Dire Shape ..

It reported a higher net loss of rm94.6 million in the latest quarter ended March 31 of the FY2014. It was attributed to zero production by its subsidiary Perwaja Holdings Bhd with the curtailment of gas and electricity supply to the latter and lower sales revenue.

Also contributing to the loss was the write down of inventory of rm90 million at Perwaja. The subsidiary assets of rm90 million were also written off.

Cumulative losses for the 15 month period (15MFY2014 from Jan 2013 to March 2014) came in wider. For the period the group reported a loss of rm300 million.

Perwaja’s restructuring scheme is still in progress. Expect it to be protracted as it may take time to get all of its creditors to agree to the restructuring scheme to uplift its PN17 status. Even if the creditors were to agree to the restructuring proposal, the group will still need a cash injection or additional equity capital to carry on its business operations. Securing additional capital will be a big hurdle for the group.

Its business operations have continued ti face challenges due to weak steel prices and demand. Dumping cheaper steel products by China mills has caused prices of steel products to soften.

In addition, global overcapacity in China is likely to impact steel product prices as production continues to outpace demand.