Outlook remains bright for Malaysia's largest integrated aluminium producer

The near to medium term outlook of the South-east Asian aluminium producer Press Metal Bhd (Press Metal) remains bright, driven by the increased capacity from its Samalaju Phase 3 project, observed a recent industry report. The integrated aluminium major's Phase 3 smelter in Samalaju is at the tail-end of ramping up and is expected to be fully commissioned in the next few weeks.

In addition, Phase 2 of its Samalaju smelter has returned to normal operations in late November 2015 after six months of fire damage repair while the Mukah smelter (Phase 1) continues its regular production.

“We expect its aluminium smelting capacity to rise to 760,000 tonnes per annum (tpa) or 1.5 per cent of global primary aluminium production, and sales tonnage to surge 65.7 and 11.8 per cent year-on-year (y-o-y) in the financial year 2016 (FY16) to FY17 respectively.

“Its aluminium smelters in Sarawak represent a successful lowcost model currently in the first quartile of the global production cost curve,” said a company spokesperson.

Press Metal Berhad is a Malaysian-based aluminium company with an extensive global presence. With a smelting capacity of 440,000 tonnes and an extrusion capacity of 190,000 tonnes per annum, they are the largest integrated aluminium producer in South East Asia.

On Press Metal’s first quarter of 2016 (1Q16) results, Kenanga Investment Bank Bhd’s research arm (Kenanga Research) noted that the group’s core net profit (CNP) of RM52.8 million came in broadly within expectation, as it expected stronger earnings from higher production in upcoming quarters.

Quarter-on-quarter, the research team said that the group’s 1Q16 CNP was up by 36 per cent, mainly due to higher profit from its smelting and extrusion segment (an increase of 51.3 per cent); hence, CNP margin improved by 1.3 percentage points.

“We believe this could be due to recovery in aluminium prices in 1Q16 (an increase of 1.4 per cent q-o-q),” it commented.

Y-o-y, Kenanga Research explained that Press Metal’s 1Q16 revenue increased by 22.2 per cent on the back of higher production from Samalaju Phase 3 plants, which has been commissioning since December 2015.