Press Metal has limited exposure to US market

PETALING JAYA: Press Metal Aluminium Holdings Bhd’s overall exposure to the US aluminium market is about 0.5% for financial year ended Dec 31, 2017 (FY2017) and about 0.7% in the first quarter of 2018.

Group chief executive officer Tan Sri Koon Poh Keong said Press Metal has limited exposure to the potential US levy as the group’s smelting products were not exported to the US in FY2017.

Sarawak-based Press Metal is the largest aluminium producer in South-East Asia with annual smelting and extrusion capacity of 760,000 tonnes and 160,000 tonnes, respectively.

In the first quarter of 2018, Press Metal had monthly sales of about 200 tonnes to the US which accounted for about 0.3% of its total monthly revenue, Koon said in the company’s latest 2017 Annual Report.

“As for our downstream extrusion products, total exposure to the US was about 2.5% out of the total extrusion capacity,” he added.

The current trade negotiations between the US and China have led to uncertainty in the global economy growth, Koon said, adding that the import tariffs imposed by the US on steel and aluminium may disrupt the global supply chains by potentially raising the prices for consumers worldwide.

For Press Metal, he said the business risks which may have significant impact on its performance are basically the adverse changes in the aluminium market prices and foreign currency rates as “our smelting products are indexed to the London Metal Exchange (LME) and quoted in US dollar”.

Having said that, it is the group’s policy to hedge up to about 65% of its total aluminium production for the period of up to two years, he said.

Koon explained that certain material costs such as alumina which are pegged to LME will fluctuate based on LME price movement and provide a natural hedge environment.

On foreign currencies hedges, he said Press Metal has exposure to foreign currency exchange risk on sales, purchases, cash and cash equivalents and borrowings that are transacted in the US dollar, Australian dollar, British pound sterling, yuan, Singapore dollar, Hong Kong dollar and euro.

“The US dollar is our main exposure as our core business, smelting revenue and purchases are subhstantially linked to the US dollar,” said Koon.

In order to mitigate the US dollar exposure, Press Metal has entered into foreign currency hedging contract with reputable financial institutions.

Barring unforeseen circumstances, Koon is cautiously optimistic that the group will be able to achieve satisfactory results for the current financial year ending Dec 31, 2018.