COVID19 Crisis: Weak aluminium prices force Press Metal Aluminium to revise financial forecasts

Owing to weaker aluminium prices due to the COVID19 pandemic, Press Metal Aluminium Holdings Bhd has reportedly revised its forecasts for financial years 2020-22. For FY20, the company has cut its net profit forecasts by 29 per cent to RM 415.5, and for FY21 and FY22, 12 per cent and 13 per cent to RM 816.3 and RM 948.9, respectively.

According to the report, the company has also reduced its revenue outlook to RM 7,370.2 for FY20, RM 10,866.2 for FY21, and RM 11,137.1 for FY22. FV has also been reduced by 29 per cent to RM3.03 (from RM4.24 previously) based on 15 times revised FY21F earnings per share (EPS) (from RM4.24 based on 18 times FY21F EPS previously).

Assumptions for average aluminium selling price for FY20 to FY22 have been cut by 11 per cent and 4 per cent to US$1,600 per tonne, US$1,800 per tonne, and US$1,850 per tonne, respectively. Year to date, aluminium prices have averaged at US$1,710 per tonne and traded last at US$1,482 per tonne.

On the other hand, revised assumptions for average alumina cost for the said period are between US$270 per tonne and US$300 per tonne, from earlier US$350 to US$380. Alumina prices have also eased and were last traded at US$242 per tonne, down from US$280 a tonne in early January 2020.

However, this crisis could be mitigated by Press Metal’s recent signing of a 15-year power purchase deal with Sarawak Energy Bhd. According to the agreement signed, the latter will supply 500 megawatts of electricity to power an additional annual aluminium smelting capacity of 320,000 tonnes and boost its overall smelting capacity by 42 per cent to 1.08 million tonnes by 2021 from 760,000 tonnes at the present.