New chapter for YKGI after disposal of coated coil biz in 2019
KUALA LUMPUR: The disposal of its coated coil business in April 2019 marked a new chapter for YKGI Holdings Bhd and its subsidiaries (YKGI) as the Group shifted its focus to the downstream segment of the steel industry.
According to the group in its Annual Report 2019, the disposal of coated coil business was a strategic decision for the good of the group in the long term. Following that, the group streamlined its operations from the mid-stream steel sector to the downstream steel sector.
“After the disposal, the group’s working capital requirement has been eased and this enabled more financial resources to be allocated to its profit-generating business units.
“In light of the Covid-19 pandemic, the disposal was timely as it would have been a tremendous financial strain to the group had the coated coil business remained.
“The above aspiration has been part of the management team’s medium term strategy which is currently being implemented,” it said in its management discussion and analysis.
“We are passionate, and we believe we can achieve our aspirations and objectives by continuously striving for excellence, doing more with less, being better than yesterday.”
The group’s metal roofing business, which operated predominantly in East Malaysia, expanded to the west when the group acquired a 51 per cent equity interest in a metal roofing company based in Johor for a consideration of RM3.50 million in August 2019.
This acquisition served as a platform for the group’s expansion of its downstream business in West Malaysia. This is in line with the group’s vision to be the leading metal roofing company in Malaysia.
“The group’s revenue and profit before tax for the continuing business in 2019 were RM201.20 million and RM4.44 million respectively. All the revenue was derived from the metal roofing business – a significant portion was generated from East Malaysia’s operation.
“Despite a slight reduction in the turnover as compared to 2018 of RM221.20 million, an improvement in the product margins resulted in an increase of 15.8 per cent in the group’s profit before tax from RM3.84 million in 2018 to RM4.44 million in 2019.”
The group registered a higher profit before tax of RM4.44 million in 2019 compared to RM3.84 million in 2018. The improved profitability was mainly contributed by the higher profit margin in the supply and installation of the metal roofing products.
“The post-disposal financial results showed that the downstream business segment can generate better profit for the group. The group’s disposal of its coated coil business is a good move in the right direction,” it continued.
The group’s total loss attributable to the shareholders was RM7.40 million which was much lower than RM133.51 million registered in 2018. In 2018, the group provided an allowance for impairment loss on the Coated Coil Business of RM107.0 million under MFRS 5, Non-current Assets Held for Sale and Discontinued Operations.
“The financial position of the group improved after the disposal of the coated coil business. Working capital remained positive with a ratio of 1.08 times versus 1.06 times for 2018. As at December 31, 2019, the gearing ratio of the Group stood at 1.73 times.”