SHAH ALAM: Steel pipe manufacturer Hiap Teck Venture Bhd is targeting to achieve 10% growth in sales volume for the financial year ending July 31, 2016 (FY16), from 600,000 tonnes (for both manufacturing and trading) in FY15.
Speaking to reporters after the group’s AGM yesterday, executive director Foo Kok Siew said Hiap Teck is expected to benefit from government mega projects, including the mass rapid transit (MRT) and light rail transit (LRT) projects.
“Our downstream operations recorded 10% sales volume growth last year, so we still expect the same volume of growth (in FY16),” he added.
Commenting on its financial performance, Foo said better results are expected in FY16, noting the group’s losses in FY15 were due mainly to unrealised foreign currency loss arising from foreign currency shareholders’ loans, as well as the suspension of its jointly controlled entity, Eastern Steel Sdn Bhd.
The group suspended Eastern Steel’s trial production in October, as part of its strategy to minimise the losses, given the current depressed market prices of slabs, soft demand and increased volatility of foreign exchange rates.
For FY15, the group recorded a net loss of RM77.08 million, compared with a net profit of RM45.6 million in the previous corresponding quarter, due to loss incurred by the jointly controlled entity, as a result of the strengthening US dollar.
“Optimistically, I think next year’s result will be better because last year’s result was affected substantially by foreign exchange losses and trial production losses by Eastern Steel. Should the US dollar currency stabilise at a certain level, we shouldn’t have foreign currency loss anymore going forward,” Foo said.
Moving forward, he said the group is planning to improve its production efficiency and working capital management.
“We are managing our working capital very tightly, we want to bring down our inventory so that we can reduce our cost and financing.
“We are also trying to manage our sourcing of raw materials, because raw materials account for 80% of the cost of our goods,” he added.
The group purchases raw materials from Megasteel Sdn Bhd, Thailand, China and India.