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The Straits Times / The Business Times News on HG Metal
HG Metal's profit jumps 5-fold to $16.6mVince Chong - November 25, 2004The Business Times DESPITE a shorter reporting period of 11 months because of a change in financial year-end, steel trader HG Metal Manufacturing's FY2004 net profit soared more than five-fold to a record high of $16.6 million. The $16.6 million earnings for the 11 months ended Sept 30 compare with a net profit of $3.16 million for the 12 months ended Oct 31, 2003. Turnover surged 61.2 per cent to $174.7 million from $108.4 million. Mainboard-listed HG Metal, which hails itself Singapore's only steel stockist with manufacturing capability, attributed the sales jump to strong global and regional demand for steel products, higher steel prices and a bigger sales team. Earnings per share came to 14.77 cents, up from 4 cents. Net asset value per share was 35.64 cents, up from 27.3 cents. To reward shareholders, the group has proposed dividends totalling 1.5 cents per share - made up of a one-cent final dividend and a special dividend of 0.5 cent per unit - and a one-for-three bonus share issue. Cash and cash equivalents rose to $15.5 million from $5 million, while gearing dropped to 1.49 from 1.79. This gearing compares with a typical 2 for steel companies, chief executive Wee Piew said at a briefing yesterday. He added that the bullish steel demand improved gross margin significantly to 20.1 per cent, from 11.7 per cent. 'The global demand for steel products remains strong with most shipyards' order books looking to be full in FY 2005,' he said. 'Fundamentals are strong for example, with Middle East bulking up on their infrastructure projects. The prospects for the construction industry are also likely to improve after many years of consolidation.' Steel plates now cost about US$600 per tonne in Asia, and global shortage means that it will continue to rise this quarter. This is partly caused by the temporary shutting down of some global mills as they revamp and upgrade their facilities to cater to future demand. But despite rising steel prices, Mr Wee has said before that he does not believe the sector is overheating as there is a strong underlying demand. HG is currently expanding its premises, including building a 15,000 square foot warehouse extension for higher-value steel products. Subsidiary Oriental Metals has also obtained a 90,000 sq ft plot for a new factory-cum-warehouse. The group said it remains positive about the outlook for FY2005 and expects the first-half to be better than that of FY2004. HG shares closed unchanged at 57.5 cents yesterday. The counter has risen 86.7 per cent so far this year, outpacing the 15.6 per cent gain in the benchmark Straits Times Index.
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