Press Metal Aluminium’s nine-month net profit lags behind consensus forecasts, marking a 21% Y-o-Y fall

On Tuesday, November 28, Press Metal Aluminium Holdings published its third quarter fiscal report, showing a lag from the consensus forecasts. Nonetheless, market analysts have maintained their recommendations on the company, with expectations that aluminium prices will remain subdued.

Press Metal posted a 3 per cent drop in net profit for Q3 2023 to MYR 306 million versus MYR 315.8 million a year ago. The nine-month consolidated net profit amounted to MYR 894 million, missing the research house’s full-year expectations and the consensus estimate.

The decline in net profit could be attributed to the sluggish global aluminium prices on the London Metal Exchange that were 6 per cent down Y-o-Y at US$2,203 per tonne in 3QCY2023.

“The core bottom line slipped 3% year-on-year (y-o–y) and 21% year-to-date (YTD), as average London Metal Exchange (LME) aluminium spot prices were down 6% y-o-y at US$2,203 (RM10,233) per tonne in 3QFY2023 (versus US$2,359 per tonne in 3QFY2022), and down 22% YTD at US$2,308 per tonne in 9MFY2023 (versus US$2,832 per tonne in 9MFY2022),” said Hong Leong Investment Bank (HLIB).

Press Metal’s revenue in the third quarter was MYR 3,440.6 million, down by 10.5 per cent from MYR 3,845.2 million a year ago. In total, during nine months of the year, the company’s revenue amounted to MYR 10,270.5 million versus MYR 11,773.73 million during the corresponding period of the previous year.

HLIB maintained “sell” call on Press Metal, stating: “We like Press Metal due to: i) its favourable cost structure, as the bulk of its energy costs are locked in via a 15-25 year power purchase agreement with Sarawak Energy Bhd; ii) its solid track record as an investible aluminium proxy in Malaysia; and iii) its favourable ESG (environmental, social and governance) profile as its smelters are hydro-powered.”

“However, we are tactically bearish on Press Metal, as we believe aluminium prices are capped in the near term, as a cloudy global economic outlook and slowing construction activities continue to weigh on demand growth for aluminium moving into 2024. For the time being, we choose to stay on the sidelines, and await signs of an inflexion point for the aluminium market,” it added.

 Maybank Investment Bank said in a note that it forecasts the aluminium demand growth to remain moderate at +1%/+3%/+2% for 2023-2025, respectively, driven by only the worldwide greenhouse gas emission reduction drive, which will boost electric vehicle penetration, compensating for lacklustre demand from the construction sector.