Profit Warning From CSC Steel
Sunday, May 10, 2009
On Today's Business Times: CSC Steel expects net profit to erode further
- CSC Steel says prices of flat steel products used in cars and home appliances had deteriorated since the fourth quarter of last year
CSC Steel Holdings Bhd (5094), the country's largest producer of cold rolled steel by volume, expects its profit downtrend to continue because of falling steel prices and production cuts arising from lower demand.
Its RM58.8 million net profit in the fiscal year ended December 31 2008, down 26 per cent from the previous year, was below expectations.
Revenue, however, rose to RM1.37 billion from RM1.3 billion.
Managing director Su Wei Jin said that prices of flat steel products used in cars and home appliances had deteriorated since the fourth quarter of last year as demand slowed along with the world economy.
Like other steel producers worldwide, CSC Steel has cut production in response to the weaker demand.
Su said its plants have been operating at 40-50 per cent capacity since the fourth quarter of last year compared with 100 per cent in March-July.
"We will try our best to stay profitable, but it's hard to predict. Even if prices were to go up, we don't know how long they will stay high," he told Business Times in an interview in Malacca.
"The problem is China's demand for steel (during the boom years) led to an oversupply situation in the flat products segment and weak demand today. It is not easy to reverse the situation."
Nevertheless, the company has no plans to lay off its 600-odd workers in the country, but has embarked on cost-cutting measures instead.
CSC Steel is a 45 per cent-owned subsidiary of China Steel Corp, Taiwan's largest steelmaker.
CSC Steel fell into the red in the fourth quarter of last year because of sudden drops in demand and selling prices of its steel products as well as inventory writedowns of RM58.3 million caused by the global financial crisis.
Fortunately, the loss was offset by its good performance in the first nine months.
Su foresees that steel prices and global demand may improve in the remaining months given the fall in prices of crude oil and raw materials, the bailout plans for restructuring the financial market and the various economic stimulus packages.
"We are optimistic of achieving profitability in the first quarter of 2009 as we have brought our inventory under control and saw a recovery in demand for flat rolled steel in February.
"Still, net profit and revenue will be lower than in the same period last year due to lower selling prices and demand," he said.
CSC Steel is due to release its first-quarter results next Monday.
CSC Steel previous blog postings:
- A Look At CSC Steel Latest Quarterly Earnings
- More Views On CSC Steel
- Regarding CSC Steel'sCurrent Earnings And Its Investments In Marketable Securities
CSC Steel was used to be known as Onarsteel.
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