I read this article from theedgemarket.com. I have reproduced it to benefit investors. After reading it, I will have to revised the article I wrote in a hurry when I saw Hiap Teck’s announcement yesterday.

I know many weak shareholders will sell their holdings because Hiap Teck’s latest quarter profit is reduced due to MCO shut down. Before they start to sell, they should read this article carefully to understand the situation.  

KUALA LUMPUR (Sept 29): Hiap Teck Venture Bhd’s net profit surged by nearly six times to RM60.48 million for the fourth quarter ended July 31, 2021, from RM10.29 million a year ago, lifted by higher steel prices and higher share of profits from a joint venture entity.

The JV entity, Eastern Steel Sdn Bhd, contributed a profit of RM49.45 million to the group in the quarter, compared with RM10.20 million in the preceding year’s corresponding quarter, Hiap Teck said in a filing with Bursa Malaysia.

Eastern Steel, an integrated iron and steel mill, is owned 35% by Hiap Teck, with the remaining stake held by Shougang Group of China.

“The JV entity’s much improved performance can be attributable to higher steel prices, costs savings arising from the 55MW power plant completed in October 2019, the completion of its first 100,000-tonne coke oven plant in June 2021 and the reversal of impairment loss of another RM66.15 million, which was provided in previous years,” said Hiap Teck.

The group said its revenue, however, fell 21.59% to RM164.83 million, from RM210.22 million in the previous May-July quarter, due to shorter operating periods with the imposition of full movement control order.

The group’s trading division reported a 21% decrease in revenue to RM100.05 million from RM126.44 million in the preceding year's corresponding quarter, while the manufacturing division posted a 23% fall in revenue to RM64.31 million from RM83.13 million.  

On a quarter-on-quarter basis, however, net profit shrank 8.25% from RM65.93 million in the third quarter, as revenue dropped 50% from RM329.64 million, arising from lower sales at both the trading and manufacturing divisions due to the imposition of lockdown measures.
 
For the full financial year (FY21), Hiap Teck’s net profit saw a whopping jump to RM163.43 million from RM4.29 million in FY20. Twelve-month revenue rose 15.98% to RM1.08 billion from RM932.87 million.  

“Despite all the challenges, the group recorded its highest profits ever with a profit after tax of RM163.5 million for FY21. Management is also positive on the group’s performance in the coming quarter due to the longer operating period, as the group resumed operations on Aug 16, 2021, the continued strength of steel prices and the expected recovery from the reopening of the economy,” the group said.

Meanwhile, it said Eastern Steel’s continued investment in plant and equipment to enhance cost efficiencies, will further improve contributions to the group.

Following the completion of 100,000 tonnes of its planned 400,000-tonne coke oven plant in June, the group said its JV entity’s second 100,000 tonnes will be completed in October, with the next 200,000 tonnes targeted for completion by the second quarter of 2022.

“The coke oven plant will significantly reduce the JV entity’s production costs and improve its profitability,” it added.

Additionally, it said Eastern Steel also sees exciting opportunities as China continues to pursue its carbon emissions targets and production restrictions and rely more on imports for general purpose items

Shares in Hiap Teck closed up 2.5 sen or 4.5% at 58 sen on Wednesday, for a market capitalisation of RM1 billion.