Higher costs erode CSC Steel’s Q4 profit

PETALING JAYA: CSC Steel Bhd’s net profit slumped 78.3% to RM6.19 million for the fourth quarter ended Dec 31, 2016 against RM28.53 million in the same period a year ago, due to substantial increase in production cost arising from higher raw materials prices aggravated by the weaker ringgit, as well as the absence of the writebacks.

Revenue, however, was up 18.3% from RM242.54 million to RM286.92 million, thanks to significant increase in sales volume and higher selling prices of its steel products.

In a filing with the stock exchange, the steel maker said moving into 2017, the weak ringgit and unpredictable business environment are expected to continue affecting local demand for its steel products and its ability to pass on further cost increases to the downstream customers.

It said that prices of its main raw material hot rolled steel (HRC) have been trending upwards due to increases in coking coal and iron ore prices.

However, CSC said coking coal prices have seen sharp correction recently and this increases the volatility of the HRC prices, which may impact its profitability.

On the international front, it said with the change of guards in the US, the business environment has become more unpredictable.
“The protectionist and anti-globalisation policies promised by the new leaderships during their election campaign, if materialised, may affect our exports to our neighbouring countries whose economies are export oriented,” it noted.

CSC, however, said the good news is China has promised to continue to shut down its excess steel capacity in 2017.

“With such a move, it is hoped that their record high export volume in 2016 will be greatly reduced in 2017. Barring any unforeseen circumstances, the group is cautiously optimistic to face the challenges with grit and determination to perform better in 2017,” it added.

For the full year of 2016, CSC Steel saw its net profit rise 25.8% from RM54.6 million to RM68.69 million on the back of a 1.7% growth in revenue from RM1.02 billion to RM1.04 billion.