Perstima ... Aug10

It views the fluctuation of raw material prices brought about by a new pricing mechanism for iron ore, which commenced this year, and cheaper imports from China, as the biggest challenges for the group going forward.

However, the company hoped to mitigate the price fluctuation risk, after one of its main black steel plate suppliers, JFE Steel Corp Ltd of Japan, commenced production from a new facility in Japan at the end of 2010.

Black steel plate is the main raw material used in manufacturing steel plates, which in turn is mainly utilized for the canning of edible products.

Tin plate exports from China are expected to grow by 33% this year to 600,000 tonnes from 450,000 tonnes in 2009. As Chinese manufacturers are new in the export market, their selling prices are very cheap. However, its managed to keep most of our established customers due to the perceived lower quality of Chinese tin plates.

Perstima is also looking to maintain the record dividend payout of 40.5 sen in the financial year ended March 31, 2010 (FY10), as the company has no major capital expenditure (capex) in the coming year.

It has been paying out dividends of 20 sen per share for three consecutive years since FY07.

Some of the main shareholders of Perstima that are set to benefit from the high dividends are Versalite Sdn Bhd, which has a 32.84% share, and JFE Shoji Trade Corp from Japan, which holds a 13.95% stake. Perstima deputy chairman Hiroshi Kume and non-executive director Rin Nan Yoong control Versalite with 49.99% and 50% stake respectively.

Perstima has sufficient internal funds to finance around RM30 million in capex for the next two years. The company’s cash reserves stood at RM86.03 million as at June 30, 2010, while total borrowing was reduced to just RM9.77 million from RM66.62 million a year earlier.

More than 80% of the company’s production in Malaysia is sold locally, including to major food canning companies such as Can One, Kian Joo and Nestle Malaysia Bhd while the remaining 20% is exported to countries such as Iran, Bangladesh and Sri Lanka.

For its first quarter ended June 30, 2010, its net profit surged 145% year-on-year to RM24.25 million from RM9.9 million, on the back of a 4.3% increase in revenue to RM202.23 million from RM193.87 million.

The company attributed the rise in revenue to “timing differences between the selling price and the raw material price changes coupled with better contribution” from its subsidiary companies.
Earnings per share was higher at 24.42 sen from 9.97 sen previously while net assets per share stood at RM3.22 from RM2.97 previously.