SSI reports B1.37bn Q3 loss
Written by Writer on Friday, October 31st, 2008
SSI reports B1.37bn Q3 loss
VICHAYA PITSUWAN
Sahaviriya Steel Industries Plc (SSI), the country’s largest hot-rolled steel maker, reported a huge loss of 1.37 billion baht in the third quarter, as a result of provisions set aside for inventory value declines in line with global steel prices. But president Win Viriyapraphaikit said that despite its third-quarter loss, SSI maintained a net profit of 314.8 million baht (0.02 baht a share) for the nine months to Sept 30. The figure is down 49% from 616.47 million baht (0.05 baht a share) in the same period last year, but he said SSI would finish this year in the black.
Third-quarter total sales were 6.7 billion baht, a 19% rise year-on-year from 5.63 billion baht, thanks to an average 55% increase in steel prices compared with the same period last year. Profit before provisions was 636 million baht, up 75% from a year earlier.
”Through inventory management we managed to cope well with an almost 50% price drop in steel products over the past two months, so we will remain in profit throughout the year,” he said.
”The net loss we booked in the quarter was just on paper. We are still gaining cash and I am quite confident that we are performing better than our peers.”
The poor third-quarter results pushed SSI shares down 5.4% to 0.35 baht _ their lowest value since April 10, 2002 _ in trade worth 9.72 million baht. The stock has fallen 57% this year, compared with a 52% decline in the SET Index, which jumped 6.3% yesterday.
Mr Win said SSI has improved inventory management by reducing its raw materials stockpile to under one month from a normal level of three months.
”To prevent loss from steel price fluctuations, stock management must be very flexible to keep up with price movements,” he said.
Despite the global financial crisis, Mr Win is bullish about next year due to construction projects that have been delayed by high steel prices.
”The volatile prices earlier this year led to delays to some construction projects as it was hard to cope with the spike in steel cost. However, with prices going down by almost 50% so far, delayed demand will come back,” he said.
He forecasts steel demand growing 3-4% next year, up from 1-2% this year.
While falling crude oil prices and a drop of nearly 90% in shipping costs have sunk steel prices to almost their lowest level in six years, Mr Win said he believes prices have already hit bottom.
In addition, SSI hopes cheaper operating costs and the yen’s strength against the dollar will give the company an edge on its Japanese rivals.
SSI plans to increase export sales from 10% of output this year to 20-25% of output next year, mainly to existing Middle East and Africa markets, where demand is still high. Export sales generate a margin of up to 8%, compared with a margin for domestic sales of only 5%.
Next year, SSI is also preparing to double its output of finished products, which is currently less than 100,000 tonnes a month.
Surachai Pramualcharoenkit, an analyst for Kim Eng Securities, said the steel sector was riding the downturn in line with the global trend and the influx of supplies released by speculators and commodity traders.
”Steel company shares have declined to reflect the steel market’s downturn,” he said. ”Look at the upside of the situation, steelmakers can now buy raw materials at a price far lower than two months ago. Their margin should be improved.”
He added that steel product prices were still better than those for other commodities such as nickel and zinc.
Bangkok Post
Friday October 31, 2008
