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Tuesday, August 23, 2016

Southern Steel’s loss grows on RM141mil asset write-off

Tuesday, 23 August 2016 | MYT 3:20 AM
Southern Steel’s loss grows on RM141mil asset write-off

KUALA LUMPUR: Southern Steel Bhd’s cumulative loss widened substantially in the fourth quarter (Q4) as a result of a RM141mil write-off of property, plant and equipment.

The write-off, which followed its unit Southern HRC Sdn Bhd’s recent decision to terminate a RM427mil manufacturing contract with Danieli & C. Officine Meccaniche SpA, resulted in the billet and steel bar maker posting a Q4 net loss of RM112.67mil against a loss of RM1.24mil a year earlier.

In a filing with Bursa Malaysia, Southern Steel said this caused the full-year loss attributable to its owners to balloon 88.1% to RM221.15mil.

On July 7, Southern HRC cancelled the contract given to Danieli, an Italian firm that supplies equipment for the metal industry, for the design, manufacture and supply of a thin slab casting unit for producing hot rolled coils.

While Southern HRC considers that it has credible grounds to end the contract and seek damages from Danieli, it has written off RM141mil representing the total capitalised direct attributable costs in commissioning the plant and the capitalised borrowing costs incurred for the plant.

Despite the worsening bottom line results, Southern Steel said, operational performance for the quarter under review and financial year were better than that of the corresponding quarter and period due to “intermitten price surge(s) in a generally depressed market.”

On its prospects for this financial year, the company, which has recorded losses two years in a row, said the market remained volatile “as the outcome of the safeguard measure petitions against the imports is still pending whilst the threat of cheap imports from China continues.”

“However, the board expects better operating performance for the financial year ending June 30, 2017, with sustained efficiency efforts and firmer selling prices,” it added.

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