In 2016, the chairman believe the Government will intensify efforts to stem the cheap and dumped imports of steel and steel related products to ensure a level playing field for all the stakeholders in Malaysia.
KUCHING: 2015 proved to be a difficult year for YKGI Holdings Bhd (YKGI) with oil price plummeting, lower buying power due to the GST implementation, and weakening ringgit.
The company recorded a smaller loss in 2015 compared to 2014 mainly due to the lower cost of raw materials that resulted in a higher gross profit margin. However, the unexpected depreciation of the Ringgit did not allow us to fully leverage on the lower cost of raw materials.
“In 2015, we continued to be affected by the influx of cheap steel imports from China, largely due to the massive excess capacity in China,” said Lim Pang Kiam, chairman for YKGI.
The scenario is not expected to improve in the near future, he added.
Under this unfavourable operating environment, the Group reported a lower revenue of RM491.6 million but managed to reduce operating loss to RM16.6 million. Despite the losses incurred, YKGI has shown a marked improvement in financial performance, achieving a gross profit of RM26.9 million for 2015.
“Our gross profit margin likewise improved to 5.5 per cent in 2015 from 2.4 per cent in 2014. The increase in gross profit margin is the result of aggressive cost cutting measures, better inventory management, implementation of new business strategies and frontiers. This year, we will continue to focus on improving manufacturing efficiencies and expanding the downstream market in East Malaysia,” he added.
In 2016, the chairman believe the Government will intensify efforts to stem the cheap and dumped imports of steel and steel related products to ensure a level playing field for all the stakeholders in Malaysia.
Any delay in the implementation of safeguard measures or anti-dumping policies applied by affected individual companies to the Government will not only deprive the Government of its rightful source of income, but will also be harmful to the domestic economy in the event these local companies succumb to this unfair trade.
For 2016, the Board envisages a better financial performance due to improved cost to income ratio from the implementation of the business transformation plans initiated and implemented since the second half of 2015.
“We believe these planned initiatives will continue to improve the profitability of the group,” said Lim.
In 2015, YKGI seemed to have a hard time finding a balance between the high cost of production, unexpected weakening of the Ringgit, depressed selling prices of our products and the influx of cheap imports from China.
The increase in steel demand in ASEAN has not benefitted steel producers in the region as the production of hot rolled steel products in Malaysia dropped about six per cent on year in the first six months of 2015 while imports surged by 18 per cent with China dominating the lion’s share of these imports.
Despite the fact that many countries in Asean have taken various initiatives to protect their domestic industries from such unfair competition, many steel producers are still unable to find meaningful solutions to alleviate this problem.
“In view of this, it is therefore crucial that the Malaysian Government quickly formulates policies that will safeguard the industry against these cheap imports and a consistent steel policy that will uphold local production and protect Malaysia from being the dumping ground for such imports especially from China which is operating in excess capacity.
“For the year ahead, our operating environment will remain challenging in the tides of volatile foreign exchange rates and a weak ringgit, depressed selling prices and the senseless dumping by foreign millers,” Lim added.
“As a company, 2015 was a year of pain and change. We introduced numerous measures to bring cost down, to raise efficiency, to implement new business initiatives, and to grow our East Malaysia businesses by expanding to Tawau, Sandakan, Miri and Bintulu.
“It is my sincere hope that these changes will bring about a positive impact to our bottomline for 2016.”