Business

Tuesday March 24, 2009

Mycron banks on three-pronged strategy for recovery


PETALING JAYA: Mycron Steel Bhd will bank on a three-pronged strategy to bounce back from the current economic slowdown which has severely affected demand for its cold-rolled coils (CRC), said chief executive officer Azlan Abdullah.

“We will focus on producing higher-end CRC for the auto sector, the electro galvanised steel market and increase exports especially to the Asean region,” he told StarBiz, referring to the three-pronged strategy.

The flat steel manufacturer is currently producing some 500 tonnes of CRC monthly for Proton Holdings Bhd to manufacture auto components.

Proton’s newly launched multi purpose vehicle (MPV) uses Mycron’s CRC for 19 components, according to Azlan.

Mycron Steel Bhd's CEO Azlan Abdullah

“If demand picks up for the MPV, it will be a good sign for Mycron. Proton is also gaining popularity overseas and this will boost demand for our CRC as well.

“We are also talking to Perodua to supply to the CRC for their auto components. This is all possible largely due to our new facilities which enable us to produce higher grade CRC,” he said.

Mycron expanded its plant last year, increasing its annual production capacity by about 45% to 260,000 from 180,000 tonnes.

It is also aiming to supply to the electro galvanised steel market, which consumes some 300,000 tonnes of CRC per annum.

Electro galvanising refers to the coating of a metal, especially iron or steel, with zinc by electroplating.

The finished product is used mainly in goods such as household appliances.

“We are confident we can produce this grade of CRC with our new facilities and we are talking to the electro galvanising manufacturers to supply to them. We hope to start supplying to them by year-end.

“The CRC is currently imported, so what we are doing is import substitution,” Azlan said, adding that there were two electro galvanising manufacturers with a capacity for 250,000 tonnes of CRC per annum in the country.

Mycron is also eyeing the export market, especially the Asean region.

Mycron has been badly hit by falling demand for CRC since the fourth quarter of last year with demand dropping by about 60%.

“January saw the lowest sales of only about 5,800 tonnes – the lowest monthly sales on record for Mycron.

“However, sales picked up in February to over 7,000 tonnes,” Azlan said, adding that the plant was now producing at about 30% capacity.

Monthly sales were normally 12,000 to 13,000 tonnes going by past averages.

In addition, Azlan said customers were delaying taking delivery of their orders, cancelling sales and even asking for rebates because of the low demand.

“We are sitting on double the amount of finished stocks we normally have. It is cash lying there that we cannot realise,” he added.

Nevertheless, he expects demand to start picking up by the third quarter of the year as customers start to replenish stocks and the Government’s stimulus package takes off.

On the group’s results for the year ending June 30, 2009, Azlan does not expect good figures as recovery is expected to take place only in the third quarter.

Mycron recorded a net loss of RM18.8mil for the second quarter ended Dec 31, 2008 versus a net profit of RM2.3mil in the corresponding quarter of 2007 after an impairment loss of RM21.1mil.

However, the group made a marginal operating income of RM99,000 minus the impairment loss.


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