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Kinsteel expects to turn around Perwaja by year-end(Business Times (Malaysia) Via Thomson Dialog NewsEdge) KINSTEEL BHD, which is taking over as the majority shareholder of Perwaja Sdn Bhd, is confident it will completely turn around the debt-ridden steel manufacturing company by the end of this year. Kinsteel chief executive officer Henry Pheng said one of the strategies to meet the objective is to increase Perwaja's working capital with the support of several local and foreign financial institutions. "We are finalising the deals towards this end and indications are positive that we have their (the financial institutions') full confidence and support. "If all goes well, we expect to turn around Perwaja by end of this year. "Rest assured, we are handling its management and will be the one closing the account. Therefore, we should know what we are talking about," Pheng told reporters after Kinsteel's extraordinary general meeting (EGM) in Kuantan yesterday. At the EGM, shareholders unanimously approved the group's strategic alliance with Maju Holdings Sdn Bhd. The alliance effectively gave the nod to Kinsteel's takeover of management at Perwaja's Kemaman and Gurun mills. The Securities Commission has recently approved the strategic alliance, whereby Kinsteel will acquire 51 per cent of the Kemaman mill directly and 51 per cent of the Gurun mill, through Perfect Channel Sdn Bhd for a combined value of RM297.6 million. After the merger, Maju Holdings is left with a 49 per cent stake in Perwaja. It will also take up a 28 per cent stake in Kinsteel. Pheng said both Perwaja mills are expected to once again run at their combined annual maximum capacity of 4.6 million tonnes by the end of next year. Their current output stood at an average of 2.4 million tonnes per year. He said logistically, the strategic alliance allows better efficiency as the upstream Kemaman mill is just a short distance from Kinsteel's middle-stream mill in Gebeng. "It will effectively enable Kinsteel to be a fully integrated steel player," said Pheng. Kinsteel's product range will expand to include direct reduced iron (DRI) and billets produced by the Kemaman mill. Others include beam and sections, bar and wire rods, wire mesh and nails produced at the Gurun mill. Workforce at the Kemaman mill is 1,200 people, Gebeng 600 and Gurun 500. Kinsteel group managing director Tan Sri Pheng Yin Huah said he was pleased with the support of the shareholders. "The acquisition of Perwaja Steel and Gurun plants is a reflection of Kinsteel's desire to move up the value chain and provide higher value-added products to our customers," he said. "I am confident that the strategic alliance will be earnings enhancing for the shareholders. "It will also allow Kinsteel to achieve greater economies of scale by reducing production cost per unit as a result of streamlining of operations and shared functions." He described approval for the strategic merger as timely in view of the expected rise in demand for construction grade steel products following the government announcements on the execution of several key infrastructure projects under the Ninth Malaysia Plan (9MP). "In addition, the development of the South Johor Economic Region (SJER) will further fuel the construction industry in Malaysia." Kinsteel, he said, also plans to expand its export base in the South-East Asian markets for wire rods, beams and sections. Perwaja's debts before the merger amount to RM654 million, comprising RM217 million bank borrowings and RM437 million owed to third-party creditors. Perwaja, which started out as a national project in 1982 and later made losses hitting as much as RM2.9 billion, was bought over by Maju Holdings Sdn Bhd's executive chairman Tan Sri Abu Sahid Mohamed and his brother Datuk Abu Talib Mohamed in June 1997. |