Press Metal sees a better year ahead

The Edge Malaysia reported that although grappling with the rising raw material cost and weaker aluminium selling prices, Press Metal Aluminium Holdings Bhd still expects a bigger bottom line this year, barring any curve balls. The optimism contrasts with the jitters in the market, which have been piling pressure on the company’s share price. Press Metal’s share price has been battered over the past 12 months, falling 24.5% after tripling in value in 2017.

While the decline may offer a buying opportunity for long-term investors, it is worth noting that key factors affecting the company’s prospects remain up in the air at the moment.

Analysts contacted by The Edge indicate that the selling pressure is primarily due to concerns over the impact of the rising alumina cost and weaker aluminium selling prices on the company’s earnings.

Mr Tan Sri Paul Koon Poh Keong, co-founder and group CEO, in an email said that “Barring unforeseen circumstances, we are still expecting year-on-year [profit] growth [this year], driven by increased contributions from value-added products, which is almost 50% [of output] now and which we are targeting to hit 60% this year.”

Mr Koon is referring to Press Metal’s drive to diversify away from its main products alloy wheel ingots for the automotive industry, aluminium billets and aluminium wire rods towards more value-added downstream goods.

Kenanga Research in a report that supply disruptions have pushed alumina prices up by 7% over the past 12 months to USD405 per tonne.

Meanwhile, the aluminium price on the London Metals Exchange dropped from its multi-year peak of USD 2,469 per MT last April to as low as USD 1,836 per MT earlier this month, a two-year low.

Alumina is a key raw material in producing aluminium. Commenting on the rising cost of alumina, Press Metal tells The Edge that the pressure may dissipate soon.

Mr Koon said that “We do not foresee this (high alumina cost) to be a permanent situation. Once production resumes (at Alunorte refinery), we expect the situation to turn around and alumina prices to normalise swiftly.”

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