ADEQUATE INSURANCE: management said it had adequate insurance coverage and could utilise the extra capacity at its Samalaju plant to ensure delivery to its affected customers.
KUCHING: Press Metal Bhd (Press Metal) might see its Mukah plant remain in shutdown for three to six months due to the blackout on June 27.
AmResearch Sdn Bhd (AmResearch) in a research report on the group yesterday suggested that Press Metal Bhd’s Mukah plant could be shut down for three to six months depending on the severity of the damage caused by the power outage last week.
“We were told that preliminary investigations have already been initiated but it would take some time before the insurers could ascertain the full impact and consequence of the damage,” AmResearch said.
“Nevertheless, management said it had adequate insurance coverage and could utilise the extra capacity at its Samalaju plant to ensure delivery to its affected customers.
To recap, the blackout resulted in solidification in the pots and the plant had to be shut down for reconstruction works.
“As Press Metal is seeking claims from its insurers, we deem it unlikely that management would also seek damages from Sarawak Energy Bhd for the incident. Management said the closure is unlikely to have a significant impact on its earnings.”
Nevertheless, AmResearch computed the impact of the closure of the Mukah plant for six months, which would reduce its FY13F net profit to RM36.8 million from RM138.4 million previously.
“However, the shortfall could be less as our rough estimates still assume status quo for electricity cost during the period.”
Meanwhile, Malaysian Rating Corp yesterday downgraded Press Metal’s outstanding RM317.5 million Redeemable Secured Loan Stocks (RCSLS) with detachable warrants from A- to BBB following the unexpected shutdown of the Mukah plant.
“However, our computations show that Press Metal would still have sufficient operating cash flow of RM301 million against RM330 million previously should the Samalaju plant be closed for six months.”