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Hiap Teck posts profitable 3Q despite lower sales, as JV contribution lifts

KUALA LUMPUR (Dec 16): Hiap Teck Ventures Bhd posted a net profit of RM6.97 million for its first quarter ended Oct 31, 2020 (1QFY21), marking its third consecutive quarter in the black, versus a net loss of RM3.27 million in the previous year’s corresponding quarter, as joint venture (JV) entity contributed profit during the quarter, as compared to a loss previously.

The steel products manufacturer’s revenue for the quarter, however, fell 20% to RM231.44 million from RM289.8 million a year earlier, which it said is due to lower sales as the construction sector struggled to return to normal after the various Movement Control Orders (MCO) imposed by the government. This caused its profit from operations to fall to RM8.59 million from RM15.26 million.

Nevertheless, its bottomline was boosted by the JV entity, which registered a profit of RM3.87 million for the quarter under review, compared to a loss of RM9.32 million previously.

On prospects, the group said global steel demand is expected to recover to 1.795 billion metric tonne (MT), up 4.1% from the expected demand of 1.725 billion MT in 2020, according to Worldsteel forecasts. This will be supported by strong recovery in China, the group said.

In Malaysia, steel consumption is estimated at 8.4 million MT, down 8% year-on-year, amid the MCO in the first half of the year. However, this is expected to improve in the second half of the year, as businesses resume operations.

It said the RM69 billion allocated in Budget 2021 for development expenditure will be a catalyst to boost local steel consumption in 2021.

“The group’s strategy is to remain focused, enforce strict cost discipline and to continuously enhance operational efficiency to sustain profitability, while observing stringent Covid-19 SOPs and placing top priority on employees’ health and safety at this juncture.

“This will ensure that the group will emerge stronger from the crisis to take advantage of any opportunity that may arise when the economy recovers,” it said.

Hiap Teck shares slipped one sen or 2% to close at 49 sen today, giving it a market capitalisation of RM675.68 million.

Source: TheEdgeMarkets