AISB banking on property development

SHAH ALAM: Steel maker Amalgamated Industrial Steel Bhd (AISB) sees the property development business, which it recently ventured into, as a new growth driver for the company, as its steel business continues to suffer from intense competition.
"We expect the revenue to start coming in after we launch the project. Since we target the commencement (of the project) around early 2016, we expect our financial year 2016 (FY2016) results to be good," its executive director Lim Yew Boon told reporters after the group's AGM yesterday.
"If we are able to launch (the project) by end of this year, we expect some revenue coming in," he added, noting the project is expected to be completed by 2017.
Lim said currently the group is in the midst of getting approval for the project development order, which is expected to be completed by October this year.
"Thereafter we will submit the building plan. Starting today, we are open for registrations," he said.
The project, which is located on its 11.5-acre land in Jalan Pelaya, Shah Alam will feature 12 units of semi-detached factories, two units of warehouses and six units of single-storey building, with an estimated total gross development value (GDV) of RM150 million to RM160 million.
Going forward, he said the group will continue to scout for land within the Klang Valley area, for which some RM50 million to RM60 million have been earmarked.
For the first quarter of financial year ended March 31, 2015 (Q1FY15), the group recorded a higher net loss of RM1.23 million compared with RM370,000 in the previous corresponding quarter.
Revenue also decreased by 18.5% to RM19.56 million from RM24 million previously, driven by a drop in sales attributed to the continuing sluggish market condition.
For FY14, AISB's net loss stood at RM1.35 million due to high raw material prices, such as hot rolled coils, as well as increasing labour and electricity costs.
Its revenue has been fluctuating over the years and was mainly affected by among others, intense competition in the market and worldwide depressed steel markets.
Commenting on its steel business, Lim said at the moment the demand is still weak driven by the sluggish market situation, which he hopes to achieve better result towards the third quarter of this year from its initiative to source raw materials from overseas.
"We are very careful in terms of buying raw materials now. Currently, we are sourcing our materials from oversea which is cheaper, such as from India and Indonesia," said Lim, noting its production capacity is around 500,000 tonne per month.
"Now we are doing below the capacity. We are doing about half (250,000 tonne) per month now. Until the market situation improved, then we will fill up the capacity," he added, noting raw materials constitute 90% of its production cost.
Before its diversification into the property development business, AISB was primarily engaged in the manufacture and sale of steel-related products, mainly black welded steel and galvanized industrial pipes, square and rectangular hollow tubes, tubes and conduits.