KUALA LUMPUR: Press Metal Aluminium Holdings Bhd’s 2021 earnings could potentially be muted by the group’s softer production ramp-up and higher alumina prices.
RHB Investment Bank in a report yesterday said it is trimming Press Metal’s 2021 earnings by 14%, largely to incorporate softer production ramp-up over the second and third quarters of this year, as well as slightly higher alumina rates.
Separately, the research house said Press Metal has upskilled more of its internal workforce in Sarawak and is optimistic on fully ramping-up its new phase three smelter in Samalaju Industrial Park, Bintulu, by either end-September or early October.
“From the fourth quarter of 2021, its smelters should also receive regular alumina shipments from its upstart Bintan P1 refinery at more favourable spot prices, compared with the bulk of the nine-month 2021 alumina supply being linked to London Metal Exchange aluminium prices.”
Meanwhile, UOB Kay Hian said it expects favourable supply-demand dynamics and hedging to catalyse Press Metal’s earnings beyond 2021.
“Management noted that aluminium supply remains tight on the back of global shipment disruption, shrinking output from China on restricted power usage by smelters and a 15% tax levy imposed by Russia from August to December this year.
“Meanwhile, demand dynamics remain favourable, premised on all-clean energy applications ranging from automobile (electric vehicles), renewable energy (solar), packaging, power transmission and construction.
“Riding on the high tide, the group has hedged 50% to 60% of its aluminium sales volume at US$2,100 (RM8,803) per tonne for 2021 and US$2,200 (RM9,222) to US$2,500 (RM10,480) per tonne for 2022 and 2023.”
Press Metal’s net profit surged nearly three-fold year-on-year to RM255.58mil in the second quarter ended June 30, bolstered by higher realised aluminium prices and increased production output. For comparison, the group recorded a net profit of RM90.07mil in the same quarter a year earlier.
Cumulatively, in the first six months of financial year 2021, Press Metal’s net profit more than doubled to RM461.3mil as compared to RM192.63mil in the same period last financial year. Revenue, on the other hand, improved by 33.17% year-on-year to RM4.74bil from RM3.56bil.
UOB Kay Hian said Press Metal’s second quarter earnings could have been better if not for the delay of full commencement of Samalaju’s P3 plant and operational disruption due to stricter lockdown at its Bintulu and Klang sites.
“Additionally, the travel restriction (of sourcing engineers from China) has added difficulties to Press Metal’s expansion,” it said.