Worst is over for Hiap Teck
Group banks on Budget 2021 development expenditure, rising steel prices and new plant
STEEL product manufacturer Hiap Teck Venture Bhd is confident of a good outlook ahead, as the worst is over following the conclusion of the group’s financial year on July 31, 2020 (FY20), which bore the brunt of the effects of the movement control order (MCO) from March until May.
Executive director Foo Kok Siew says FY20 was the group’s worst period as it was impacted by a significant reduction in profit due to the MCO and Covid-19 pandemic.
“With normalcy expected in growth next year, greater development expenditure as stipulated in Budget 2021, rising steel prices and the completion of our new coke oven plant, we are confident of a good outlook for the current financial year and the couple of years ahead.
“However, challenges will lie in the control of the Covid-19 outbreak as well as the speed of the government’s development expenditure,” he tells Starbizweek.
Hiap Teck registered a net profit of Rm4.6mil in FY20, a 81.5% decline as compared to FY19.
The group posted a net profit of Rm27.19mil and Rm24.82mil in FY18 and FY19, respectively, since its joint venture Eastern Steel Sdn Bhd resumed operations in 2018.
Hiap Teck owns 35% equity in Eastern Steel, which is an operator of a fully-integrated blast furnace steel plant with a rated annual production capacity of 700,000 tonnes per annum.
Hiap Teck is an integrated steel player involved in upstream operations through Eastern Steel, which produces steel slabs and billets, as well as downstream operations through its wholly owned subsidiaries which produce steel pipes and scaffolding.
“Our capital expenditure for 2021 and 2022 will be focused on reducing the production cost for Eastern Steel.
“Following the completion of the new coke oven plant by the second quarter of 2021, which will further reduce production costs, the group aims to increase Eastern Steel’s production capacity from 700,000 tonnes per annum to two million tonnes per annum by 2024,” says Foo.
In December 2018, Hiap Teck added a billet caster plant with a production capacity of one million tonnes per annum, which provided Eastern Steel the flexibility to optimise its revenue mix.
Then in 2019, the group completed the construction of a 55MW power plant, which resulted in substantial savings in energy costs for Eastern Steel.
The improvement in efficiencies has facilitated Eastern Steel’s operations to surpass its rated capacity, with the highest operated capacity at 117%.
Apart from efforts to optimise production for Eastern Steel, Hiap Teck will also be growing its markets in China, Vietnam, Indonesia, Thailand, the Philippines, India, South Korea
and Taiwan.
Eastern Steel exports 70% of its steel slabs and billets.
Meanwhile, Hiap Teck is eyeing opportunities for its downstream operations of steel pipe and scaffolding manufacturing in Sabah as it ventures into the state.
In March this year, Hiap Teck incorporated a 100%-owned subsidiary, Huatraco Scaffold (Sabah) Sdn Bhd, to penetrate the Sabah scaffolding equipment market and promote collaboration with local Sabah corporations.
Besides that, the group, through Alpine Pipe Manufacturing Sdn Bhd, entered into a joint venture with Jetama Sdn Bhd, an indirect wholly owned subsidiary of the Sabah state government through Kota Kinabalu
Water Sdn Bhd, a subsidiary of Sabah
Development Bhd.
The joint-venture company, Jetama Alpine Pipe (Sabah) Sdn Bhd, in which Alpine Pipe owns 49% equity, will penetrate the Sabah market for pipes and hollow sections.
Jetama will provide the local knowledge while Alpine Pipe will supply products and provide technical expertise.
“We foresee greater infrastructure spending for water development and replacement of water pipes in east Malaysia.
“As such, we aim to strengthen our presence in east Malaysia through our two subsidiaries, Huatraco Scaffold (Sabah) and Jetama Alpine Pipe (Sabah).
“Sabah and Sarawak are large, diverse states that are expanding their water transmission systems,” says Foo, adding that the group is looking to establish its presence in Sarawak.
In Sabah, the state government had previously proposed the building of a new dam in the Mondoringin area, to be called the Papar Dam.
The project is estimated to cost Rm3bil, which will be funded by the state government.
Caretaker Chief Minister Datuk Seri Shafie Apdal was quoted as saying that water remains an issue in Papar and with all the development taking place in Kota Kinabalu, the supply will not be enough.
Hiap Teck commands an estimated market share of 12% in Malaysia for the production of steel slabs and billets.
On the other hand, the group’s steel pipe manufacturing arm, Alpine Pipe, is one of the largest in the country, commanding a market share of about 25%.
Going forward, Hiap Teck expects to increase its market share progressively.