Annual Report (Complete) - MYCRON Steel Berhad

Chairman’s Statement
On behalf of the Board of Directors, I am pleased to present the Annual Report of Mycron Steel Berhad and its group of companies (“the
Group”) for the financial year ended 30 June 2010.
Firstly, let me congratulate all shareholders, customers, suppliers, business partners and staff, in witnessing our Cold Rolled Coil (“CRC”)
Steel Sheet Division’s entry into its 20th anniversary of operation. Your support over the past 20 years has been invaluable, and has made
the Mycron Steel name, the very best brand, for quality CRC, in this country.
FINANCIAL RESULTS
The financial year ended 30 June 2010, is the second year of operation, since the commissioning of the plant upgrade and expansion
in June 2008, which saw the Group’s output design capacity for CRC, expand from 180,000 tonnes a year, to 260,000 tonnes a year, an
increase of 45%.
Accordingly, the Group had experienced, for the financial year under review, a significant 41.4% increase in CRC sales volume, to
181,000 tonnes (FY 2009: 128,000 tonnes). Although operating, on a year-by-year basis, at 49.2% of design capacity, the growth in sales
bodes well for the CRC manufacturing operation, which currently, on a month-by-month basis, is operating at near full capacity.
In line with this volume growth, sales revenue for the Group had increased substantially by 21.5%, to RMRM465.4 million, from RM383.3
million in the previous financial year.
The Group recorded a Profit After Tax of RM RM25.4 million, a strong turnaround from the Loss After Tax of RM38.4 million in the previous
year, which was caused by impairment provisions, following the collapse in raw material Hot Rolled Coil (“HRC”) Steel Sheet prices
during the global economic crisis of 2008.
The Group’s Net Assets have increased to RM1.45 per share (FY 2009: RM1.31 per share) with earnings for the financial year growing to
a healthy 14 sen per share.
PROPOSED DIVIDEND
The Directors have recommended a dividend of 3.5 sen, being the final dividend for the year ended 30 June 2010.
OPERATING OVERVIEW
The global economic crisis has had a negative impact, on the international steel industry, in 2009. Fortunately, this negative trend,
caused by heavy inventory de-stocking by manufacturers, came to an end, and was followed by inventory re-stocking activities, by
early 2010.
During the first half 2010, the global CRC industry, witnessed further demand improvements, in particular, from manufacturers of airconditioners
following the heat wave in Europe, and manufacturers of television sets preceding the world cup football. This increase in
demand for CRC, coupled with the anticipation of increasing sales price, following a similar increase in raw material prices, namely for
iron-ore and coking-coal, resulted in significant increases in sales revenue, for the global steel industry, during 2010.
In line with the international scene, domestically, 2009 also witnessed a fall in Malaysia’s total consumption of CRC-related products,
to 2.63 million tonnes (2008: 3.00 million tonnes), representing a fall in demand of 12.3%. Similarly, the recovery in domestic flat steel
demand also began towards the end of 2009, helped by increased economic activity, which was partly boosted by the Government’s
fiscal and monetary stimulus measures. The implementation by the Ministry of International Trade and Industry (“MITI”) of its New Steel
Policy in August 2009, and its introduction of Mandatory Standards, had also helped to promote the use of locally manufactured steel
products.
For the Group, CRC sales experienced a steady increase in monthly orders, during the financial year under review, with particularly
strong demand from January 2010 onwards. The improved quality of the Group’s CRC products, as a consequence of the June 2008
plant upgrade, had helped to significantly improve demand for the Group’s CRC products. Of particular note, is the penetration by
the Group, into two new customer sectors, which it had previously no access to, namely the automotive and the galvanizing sector.
This combination of increased demand, and penetration into new markets, has helped the Group attain significant and sustained
operating efficiencies and economy.
BUSINESS OUTLOOK
The Group is confident of the long-term growth potentials, for the manufacturing, electronic, palm-oil and petroleum industry of
Malaysia. All these industries require CRC as a core component, either in the form of a raw material, or in the form finished products, like
oil drums, and it is the view of the Group, that demand for its CRC products, will enjoy similar long-term growth prospects.
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