MALAYSIA Smelting Corporation Bhd’s financial results have been on a roller coaster ride as its performance is largely pegged to tin price movements.
As such, shareholders hoped the company would diversify into businesses that generate more consistent income streams.
However, the tin metal supplier, which has been in the business for over 100 years, is not keen to diversify.
Instead it wants to focus on its metal smelting business to continue driving growth.
“Even if we do [diversify], it will still be something related to tin usage,” its CEO Datuk Patrick Yong tells FocusM.
He was appointed as Malaysia Smelting CEO last October, following the resignation of his long-serving predecessor Chua Cheong Yong.
Yong says if there were to be any diversification, the tin chemical business might be one that the company considers, given the surge in tin chemicals usage, which is one of the fastest growing areas connected to tin consumption.
That said, Yong is optimistic on the business outlook. “The tin price is unlikely to suffer another crash,” he says.
Tin has been on an uptrend since it reached its five-year low of US$13,300 per tonne in mid-January last year.
Year to date, the average tin price is already between 15% and 18% higher than last year’s average.
Yong says the International Tin Research Institute (ITRI) projects the tin price uptrend to continue in the next three to four years, possibly to as high as US$30,000 (RM125,000) per tonne, breaching the current five-year high of US$25,000 recorded on Jan 18, 2013.
Chua left the company at a time when it was making good progress in its financial results.
Malaysia Smelting posted a higher net profit of RM31.95 mil for the nine months ended Sept 30, last year, from RM2.63 mil a year earlier, while revenue rose to RM1.13 bil from RM1.11 bil.
After posting two years of losses, the company turned around last year with a net profit of RM37.45 mil for FY16 ended Dec 31, from a net loss of RM4.8 mil in the previous year.
This was on the back of a 1% rise in revenue to RM1.48 bil.
Malaysia Smelting attributed the better results to higher tin prices and gains from the strengthening US dollar. Its core operations are driven by the smelting business and the Rahman hydraulic tin mine.
Nonetheless, for the nine months ended Sept 30, its net profit fell to RM29.29 mil from RM31.95 mil a year ago while revenue dipped slightly to RM1.12 bil from RM1.13 bil.
Yong says the fluctuating revenue is due to its close correlation to the tin price movement. He adds that such fluctuations can be minimised by holding onto stockpiles.
However, doing so will subject the company to foreign exchange fluctuations, particularly the US dollar.
Yong says tin is something that one can’t use on its own. It is normally used with alloys, especially pewter.
There are also many other uses for tin such as making solder.
A recent ITRI survey revealed that solder accounts for just less than 50% of global tin usage while tin chemicals account for 16%. In 2011, solder accounted for 52%.
Yong says tin has been extensively used in the plating process as well. Tin plating accounts for 15% of global tin usage.
Although he foresees aluminium being a possible substitute in the long run, the metal is not environmentally friendly.
Yong says its Port Klang smelter is 80% ready with a targeted operational date by end next year.
The smelter will be environmentally friendly, unlike its Penang smelter, which is using 100-year-old technology.
He says the Port Klang facility’s capacity is flexible. While it is designed for 40,000 tonnes per annum, this can be increased to 60,000 tonnes. It currently handles 30,000 tones only.
Malaysia Smelting is the second largest supplier of tin metal in the world, behind China’s Yunnan Tin Company.
Its single largest shareholder is Singapore’s The Straits Trading Company Ltd with a direct 27% stake.
The company’s 40%-owned associate, Redring Solder (M) Sdn Bhd, provides vertical integration to its tin smelting business and exposes the company to the downstream solder manufacturing business.