Analysts expect CSC’s FY19 earnings to grow by eight per cent assuming the anti-dumping duties improve its GI steel sales by one per cent.
KUCHING: CSC Steel Holdings Bhd’s (CSC) high margin galvanised (GI) and pre-painted galvanised (PPGI) steel sales has been projected by analysts to continue supporting earnings despite lower margin for the group’s cold rolled (CRC) steel in the third quarter of 2018 (3Q18).
The research arm of Maybank Investment Bank Bhd (Maybank IB Research) estimated that the spread between China’s hot rolled coil (HRC) and CRC steel average prices in 3Q year to date (YTD), as of September 14, has fallen significantly to US$49 per metric tonne (MT) from US$74 per MT in 2Q18 and US$157 per MT in 3Q17.
“The spread has also remained below the CRC steel conversion rate of US$100 per MT due to escalation of HRC prices at a faster pace,” Maybank IB Research said.
“This could point to lower margin for CSC’s CRC steel in 3Q18. That said, we expect its high margin GI and PPGI steel sales to continue supporting the bottom line.”
According to Maybank IB Research, a preliminary determination on the anti-dumping probe on GI imports from China and Vietnam could be known by November 16, 2018.
This is two weeks ahead than what the research firm had earlier assumed.
“Should the probe be extended, it could only be by one month,” the research firm noted.
Maybank IB Research believed a prospective positive outcome would be timely to sustain CSC’s financial year 2019 (FY19) sales and margin.
“We expect CSC’s FY19 earnings to grow by eight per cent assuming the anti-dumping duties improve its GI steel sales by one per cent.”
Maybank IB Research highlighted that CSC’s GI steel is also the group’s most exported product.
The research arm thus viewed the prospective imposition of duties for GI products to help offset slower CSC’s GI exports, particularly to the US due to the new US import tariff on steel products since March 2018.
“That said, we have already imputed the shortfall in export to the US market.”