PETALING JAYA: The largest aluminium smelter in the region, Press Metal Bhd, is likely see better margins this year following the recovery of aluminium prices.
\nAluminium was trading at its lowest 13 months ago. In mid-February, the commodity hit US$1,900 a tonne or 20% higher than it was a year ago.
\nPress Metal is planning a production increase of 20% to 760,000 tonnes this year.
\nGroup chief executive officer Datuk Paul Koon PohKeong said that aluminium prices would remain stable this year, especially with lower output from China.
\n\u201cPress Metal is also targeting to increase our production of \u2018value-added\u2019 products that demand higher margins,\u201d he told StarBiz.
\nPresently, he said 30% of its capacity was \u201cvalue-added\u201d aluminium products and the firm is targeting to increase it to 50% of total production this year.
\n\u201cWe expect the demand for aluminium to increase especially from the automotive sector that is going into low-emission technology vehicles, especially in Europe.
\n\u201cIn addition, China will be using more aluminium for its nationwide high-speed rail projects,\u201d he said.
\nIn February, the Chinese government proposed a reduction in aluminium production in several provinces during the winter months to address the concerns about the country\u2019s air quality.
\nIn China, industries such as steel and aluminium burn coal, contributing to the problem of air pollution.
\nPress Metal posted a net profit of RM495.5mil in the financial year ended Dec 31, 2016, more than a three-fold jump from RM132.35mil in the previous year on the back of a stronger US dollar and higher output.
\nRevenue for the year increased more than 53% to a record RM6.6bil from RM4.3bil previously.
\nProfit margins in FY16 stood at 8% compared with 3% in FY15.
\nIn addition to the stable aluminium prices and increase in product mix, Koon said the Samalaju Port, scheduled to open in mid-June, could improve the company\u2019s margin.
\nKoon said the company would expand its plant in Samalaju, Sarawak, to ride on the growth in demand for aluminium.
\n\u201cAluminium is a metal of the future, it is not expensive, durable and light,\u201d he said.
\nThe company exports about 90% of its products, with the rest for local consumption. It has two aluminium smelting plants in Sarawak namely Mukah and Samalaju.
\nKoon said Press Metal has used almost 60% of its land in Samalaju, with the company having completed the third phase expansion last June.
\n\u201cWe have 40% left for expansion in Samalaju, it depends on the timing and how much power we can secure in the state,\u201d he said. A 25-year power purchase agreement enables the company to operate at a relatively lower cost.
\nThe company has been able to maintain its profitability during the downturn in aluminium price and a fire incident at its smelting plant in 2015.
\nWith the planned expansion, Koon said that the firm would work on strengthening its balance sheet.
\n\u201cWith the amount of cash flow we are generating, we are confident of reducing our debt fast,\u201d he said.
\nLast week, Press Metal received its shareholders\u2019 approval to undertake a corporate exercise that would see shares of the company being exchanged to a new holding company (newco).
\nThe exercise would involve one newco share for every Press Metal share.
\nOnce the share exchange has been completed, the newco, known as Press Metal Aluminium Holdings Bhd, would be the holding company of Press Metal and would take over its listing status.
\nThe move is seen as one of the company\u2019s initiatives to boost growth.
\nShares in Press Metal have been trending upward, increasing more than five times in 18 months.
\nThey were last traded at RM2.59 a share, based on a price-earnings ratio of about 17 times FY16 earnings.
\n\u201cWhile some quarters may argue that there is limited growth potential for Press Metal post the full commissioning of all its smelters, we see room for earnings upside from potential cost-savings,\u201d said RHB Research in a report.
\nIt said the cost-savings could be derived from a new smelter that was sharing some common infrastructure and the cut in land logistics as well as shipping costs while the increase in the production of value-added goods would enhance profits.<\/p>\n","protected":false},"excerpt":{"rendered":"
PETALING JAYA: The largest aluminium smelter in the region, Press Metal Bhd, is likely see better margins this year following the recovery of aluminium prices. Aluminium was trading at its lowest 13 months ago. In mid-February, the commodity hit US$1,900 a tonne or 20% higher than it was a year ago. Press Metal is planning […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-13992","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"\n