Stronger second half seen for Press Metal

PETALING JAYA: Press Metal Aluminium Holdings Bhd is expected to record a stronger second half (2H18) on the back of a stronger US dollar against the ringgit, lower carbon anode prices and a better product mix, said Kenanga Research.

The research house said that the largest aluminium smelter in South-East Asia’s 1H18 core net profit of RM316mil had come in within both its RM720mil forecast at 44% and consensus’ RM761mil estimate at 42%.

The 1H18 core net profit excludes unrealised forex losses of RM5.2mil.

“There is normally a 6–8 weeks impact lag in capturing the fluctuations in carbon anode prices due to an order-to-delivery time gap.

“Hence, we believe the full benefit of lower carbon anode price would only kick in during Q318,” it said in its report.

In addition, the research house said it was upbeat about the group’s ongoing plan to raise wire rod capacity to 200,000 MT by yearend.

It said this should lift the composition of high-value product to near 50% and underpin profit margins in the second half.

“However, we note that news flows such as US’ sanctions on Rusal and partial closure of Brazil’s Alunorte plant could continue to create volatility in the alumina and aluminium markets and affect Press Metal’s profitability.

“Should the said sanction be lifted or Alunorte plant restart, aluminium and alumina prices could see a temporary pullback, which is unfavourable to Press Metal Aluminium given that it hedges alumina inputs but not aluminium sales,” it said.