CSCSTEEL ... Nov09

CSC Steel Holdings Bhd posted net profit of RM38.89 million in the third quarter ended Sept 30, an improvement of 42% from RM27.32 million a year, mainly due to the absence of the write-down in inventories.

It said on Friday, Nov 13 that revenue was RM261.48 million, down 31.4% from RM381.17 million a year ago. Earnings per share was 10.42 sen compared with 7.29 sen.

"The significant drop in revenue is due to lower selling prices of our steel products although sale volume improved marginally," it said.

"Despite the lower revenue, profit before tax increased by RM25.1 million or 88.2% to RM53.6 million. This is mainly due to the absence of the write-down of inventories to net realisable value amounted to RM30 million made in the corresponding quarter," it added.

When compared with the second quarter ended June 30, 2009, the group's revenue rose 61.9% from RM161.6 million to RM261.5 million in 3Q. Profit before tax increased by RM41.1 million or 328% from RM12.5 million in 2Q.

CSC Steel said the better performances in revenue and profit before tax were driven by both higher sales volume and favourable selling prices of its steel products.

"The improved sale volume was supported by the timely increase in supply of hot rolled steel (HRC) from our ultimate parent company, China Steel Corporation, to make up for the delay in local HRC supply," it added.

For the January-September period, net profit was RM54.03 million compared with RM100.85 million the previous corresponding period. Revenue also fell, down to RM596.19 million compared with RM1.167 billion a year ago.

On the current year prospects, it said the local steel market has slowed down since October 2009 after a series of price increases since second quarter 2009.

CSC Steel said overcapacity and high inventory which caused steel prices falling in China since August 2009 was the main factor that made local buyers cautious in re-stocking activities.

However, from mid October 2009, steel prices in China had begun to increase. CSC said the group expects steel market to recover by end of the year or beginning of 2010 as the stimulus packages introduced by many countries, especially China, with forecast GDP growth of above 8.0% this year, performed excellently.

As for Malaysia, it said domestic steel demand was increasing as projects under the stimulus packages, are being gradually implemented.

"Coupled with the current low inventory level, we expect greater re-ordering activities to take place once international steel market starts to recover," it said.