Press Metal Aluminium Holdings Bhd is estimated to mark an exponential double-digit net profit in the Financial Year 2022 (FY22). Though aluminium spot prices have declined, there is a sufficient hike in carbon anode prices which will increase operational costs.
There is a projected growth of 50 per cent on a year-on-year basis (y-o-y) in FY22 for the biggest aluminium smelter in South-East Asia, even though the Hong Leong Investment Bank (HLIB) Research predicted a quarter-on-quarter (q-o-q) downfall in net profit for the third quarter of FY22 (3Q22).
For the financial year 2023 (FY23), the HLIB claims that the net profit for Press Metal would have a restrained growth of 41 per cent y-o-y.
The enormous y-o-y growth for FY22 and FY23 has been calculated keeping in mind the stocks from its 25 per cent owned PT Bintan alumina refinery. Moreover, Press Metal has successfully funded the expansion of the third phase of its Samalaju smelter to increase productivity.
The HLIB Research denoted: “On the upcoming 3Q22 results, core earnings for the quarter could come in within the range of RM315mil to RM365mil, barring any unforeseen swings in the cost structure.”
This amounts to a fall of 11 per cent to 23 per cent q-o-q and a hike of 16 per cent to 34 per cent y-o-y.
The above has been calculated keeping the London Metal Exchange aluminium spot prices in mind, which averaged at US$2,357 per tonne in 3Q22, in contrast to the average of US$2,896 per tonne in 2Q22 and US$2,652 per tonne recorded in 3Q21.
HLIB Research data also showed that carbon anode prices averaged at RMB 4,250 per tonne in the first nine months of FY22.
“We highlight that carbon anode serves as a catalyst in the production of aluminium and is part of the production cost of Press Metal,” HLIB magnified the details.
“With that, we are expecting some profit margin squeeze in 3Q22 earnings quarter-on-quarter, coupled with lower revenue due to the recent dip in aluminium spot prices,” the research house said in a statement on October 31.
HLIB seemed affirmative about Press Metal’s ten-year agreement with Glencore wherein the Anglo-Swiss multinational company would provide the former with alumina and off-take aluminium for almost one decade.
The Glencore and Press Metal alliance might catapult the Malaysian organisation’s position as having some of the lowest carbon-emitting smelters worldwide.
Glencore is headquartered in Switzerland with recognition in more than 35 countries as the world’s largest aluminium trader. Glencore specialises in commodity trading and mining.
The HLIB report also asserted that Press Metal’s evaluations are perfect because of its favourable cost structure since major of its energy costs are outsourced through a 15 to 25-year power purchase agreement with Sarawak Energy Bhd.
To conclude the study, Press Metal has inherited the scarcity premium of a growing large cap. Moreover, its smelters leave considerably less amount of carbon footprints as they all are hydro-powered, green-energy consuming bodies.
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