Malaysian steelmaker Ann Joo Resources expects COVID-19 to impact its Q2, 2020 (April-June) results. The industry in the quarter was marred by production stoppages, disrupted supply chains and a steep fall in steel demand as the virus spread affected most countries.
The mill expects the steel industry to improve gradually in the second half of the year 2020 as economic activities in affected countries, including Malaysia’s have re-started after COVID-19-related lockdowns.
Domestic steel demand, however, continues to be affected as construction activities are running at a slow pace. The sector could get a push if the government increases its spending on infrastructure projects and in turn, spur demand for steel.
To minimise the impact of weak demand, the company plans to focus on strengthing its strategy in exports markets, mainly China. The Chinese government has fast-tracked its infrastructure spending with a ripple effect on steel demand. Ann Joo expects visible effects of these investments in the second half of 2020 with special bonds doled out by China government worth CNY3.75 trillion which will support infrastructure development further.
In Q1 2020, the company reported a loss after taxes of MYR30.56mn ($7.13mn) compared to MYR6.6mn ($1.54mn) in the prior-year quarter. Lower sales tonnage in domestic and export markets along with lower steel prices impacted the company’s performance. The government of Malaysia on March 18, issued a Movement Control Order (MCO) which partially hit the company’s operations in Q1 along with lockdowns and disruptions across the world amid COVID-19.
The company’s revenue declined to MYR445.67mn in Q1 2020 from MYR538mn in Q1 2019. Operating expenses declined to MYR470.94mn from MYR540.5mn in the prior-year quarter.