Ann Joo’s Q2 profit driven by steel price recovery

PETALING JAYA: Ann Joo Resources Bhd posted a net profit of RM92.40 million for the second quarter ended June 30, 2016 compared with a net loss of RM10.85 million a year ago due to the recovery in the selling price of various steel products, despite persistent influx of Chinese steel products.
In a filing with Bursa Malaysia yesterday, the group said the higher profitability was also due to significant earnings contribution from its investment in hybrid Blast Furnace-Electric Arc Furnace (BF-EAF) technology, which has enabled the group to vastly improve its cost structure.
Both manufacturing and trading divisions contributed positively to the group, recording a segmental operating profit of RM93.56 million and RM11.45 million respectively in Q2’16 as compared with segmental operating loss of RM7.57 million and segmental operating profit of RM2.40 million respectively in Q2’15.
Revenue for the quarter rose 16.64% to RM584.66 million from RM501.27 million a year ago on the back of improved market sentiments and recovery in steel prices, which led to higher selling price and tonnage sold.
The group expects the steel market to remain highly volatile despite steel prices rising in the second half of 2016 on the back of recovery in demand, and prices are set to rise on the real impact from China’s capacity cut and demand boosts.
Locally, steel demand will be driven by the rollout of mega infrastructure projects including MRT2, LRT3 and Tun Razak Exchange (TRX), as well as the construction of major high-rise buildings such as Menara Warisan Merdeka.
“The imposition of trade measures on China by certain neighbouring countries also creates large regional opportunities. This provides the group with flexibility of selling to domestic and/or export markets, depending on price and market conditions,” said Ann Joo.
The group expects its performance for the second half of 2016 to remain satisfactory on the back of improved market sentiments and price normalisation in domestic and international markets.
“However, the group’s profitability is still largely dependent on the effectiveness of the Chinese government in eliminating steel overcapacity as well as the Malaysian government on curbing the imports of steel products into Malaysia,” it said.
For the six months ended June 30, 2016, Ann Joo posted a net profit of RM97.92 million compared with a net loss of RM5.52 million a year ago. Revenue for the period rose 5.11% to RM1.07 billion from RM1.02 billion a year ago.