Press Metal expects minimal impact from potential US levy
KOTA KINABALU: Press Metal Aluminium Holdings Bhd (Press Metal) is cautiously optimistic about its results for the financial year 2018 (FY18) as it hopes to sees minimal impact from US’ potential levy duties on steel and aluminum.
In its Annual Report for 2017, Press Metal remarked: “Barring unforeseen circumstances, we are cautiously optimistic that our group will be able to achieve satisfactory results for the current financial year ending December 31, 2018.”
On trade matters, it pointed out that Press Metal has limited exposure to the potential US levy as its product sales to US accounts for only 0.5 per cent of its FY17 and 0.7 per cent of the first quarter of 2018 (1Q18).
“The current trade negotiations between the US and China have led to uncertainty in the global economy growth. The import tariffs imposed by the US on steel and aluminium may disrupt global supply chains by potentially raising prices for consumers worldwide.
“Press Metal has limited exposure to the potential US levy as our group’s smelting products were not exported to the US for FY17.
“During the 1Q18, Press Metal has monthly sales of about 200 tonnes to the US which accounted for about 0.3 per cent of our total monthly revenue.
“As for our downstream extrusion products, total exposure to the US was about 2.5 per cent out of total extrusion capacity.
“Overall, the group’s exposure to the US aluminium market was about 0.5 per cent for FY17 and 0.7 per cent for 1Q18,” it explained.
Meanwhile, on business risks which might impact its performance, Press Metal noted that the risks mainly evolves around adverse changes in the aluminium market prices and foreign currency rates as its smelting products are indexed to LME and quoted in US dollar.
“It is our group’s policy to hedge up to approximately 65 per cent of our total aluminium production for a period of up to two years. Certain material costs such as alumina which are pegged LME, will fluctuate based on the LME prices movement and provide a natural hedge environment,” the group said.
It also pointed out that its products are quoted to the US. Hence, it noted, “The group has exposure to foreign currency exchange risk on sales, purchases, cash and cash equivalents, and borrowings that are transacted in US dollar, Australia dollar, British pound sterling, renminbi, Singapore dollar, Hong Kong dollar, and the euro.
“US dollar is our main exposure as our core business, smelting revenue, and purchases are substantially linked to US dollar.”
It order to mitigate its US dollar exposure, Press Metal highlighted that it has entered into a foreign currency hedging contracts with reputable financial institutions.
Overall, Press Metal noted that aluminium’s beneficial properties include its low density, strength, ductility, and corrosion resistance.
“Already, aluminium used in transportation reduces vehicle weight, therefore reducing fuel consumption, and greenhouse gas emissions.
“Its flexibility and formability also allow virtually unlimited design potential in building and others. Aluminium foil packaging is also the lightest material to offer a complete barrier to light, gases and moisture. Unique combination properties of aluminium prompted us to believe that the demand for this metal will continue to increase,” it said.