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On behalf of the Board of Directors, I am pleased to present the Annual Report
of Melewar Industrial Group Berhad and its group of companies ("the Group") for the
financial year ended 30 June 2023 ("FY2023").
FINANCIAL PERFORMANCE
The Group's principal activity is in the
steel industry, focusing mainly on the
manufacturing of Cold Rolled Coil
("CRC") steel sheets and Steel Tubes
and Pipes ("Steel Tubes") through its
74.13% interest in its public listed
subsidiary, Mycron Steel Berhad
("Mycron").
The other businesses of the Group
are conducted through its two 100%
owned subsidiaries, namely:
- Ausgard Quick Assembly
Systems Sdn Bhd ("AQAS")
which specialises in delivering
and building commercial and
residential structures, catering
to niche property markets with
the use of the Industrialised
Building System (IBS), and
- 3Bumi Sdn Bhd ("3Bumi"),
which is involved in food product
trading and distribution.
For the twelve months to 30 June
2023, Group revenue declined by
26.9% to RM549.7 million from the
RM752.2 million reported in FY2022,
driven by the downward trend in
global steel prices, as well as lower
steel throughput volume, due to
weaker demand, and the dumping of
steel into Malaysia, by fellow Asian
net-steel producers.
As a result of the significantly lower
revenue and profit contributions from
the Steel Division operations, the
Group turned in a Loss Before Tax
("LBT") of RM18.5 million, in contrast
with a Profit Before Tax ("PBT") of
RM60.9 million in FY2022. The year
saw a write-down of steel inventories
amounting to RM11.0 million, an
increase from the RM10.0 million
write-down in the prior year, primarily
attributed to the sustained decrease
in raw steel prices.
FY2023 closed with Group
shareholders' equity of RM409.6
million, representing a net asset value
per share of RM1.14 as of 30 June
2023.
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STEEL DIVISION
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Mycron's business encompasses the
combined operations of two main
subsidiaries, namely Mycron Steel
CRC Sdn Bhd ("MCRC") and Melewar
Steel Tube Sdn Bhd ("MST").
MCRC is involved in the mid-stream
sector of the steel industry, converting
Hot Rolled Coil ("HRC") steel sheets
into thinner gauge CRC steel sheets.
MST is involved in the down-stream
sector, in the manufacture of Steel
Tubes, which are made from HRC or
CRC.
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STEEL DIVISION (CONT'D)
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OPERATIONS REVIEW
In the first quarter of FY2023,
the Group's steel division faced
challenges amid reduced steel
demand and a decline in global steel
prices. The division's performance
remained stagnant, generating
a revenue of RM120.1 million.
Persistent issues such as chronic
manpower shortages and disrupted
supply chains significantly impacted
steel consumption, leading to a sharp
decline in output across key steel-consuming industries.
The ongoing Russian-Ukrainian
conflict further intensified global
economic challenges, resulting in
soaring energy costs. The adverse
effects of rising energy prices and
excessive inflation rendered the
global economy and steel demand
susceptible. Consequently, steel
prices plummeted faster than raw
material costs, causing a contraction
in profit margins.
The second quarter witnessed the
Steel Division's negative performance,
marked by a revenue of RM134.2
million and a LBT of RM16.4 million.
Factors contributing to this included
weak domestic steel demand,
increased dumping of CRC steel
imports into Malaysia, and continuous
downward pressure on global steel
prices. The quarter marked the end of
nine consecutive profitable quarters.
In the third quarter, the Steel Division's
revenue declined to RM126.6 million
owing to lower unit selling prices.
The division recorded a marginal pre-tax profit
of RM0.15 million due to
lower price spreads and higher unit
production cost, caused by lower
throughput volume.
The fourth quarter enjoyed an uptick
in revenue to RM159.1 million, 26%
higher than the previous quarter,
driven by increased sales volume.
While contributing to a stronger gross
profit performance, the quarter's
overall performance narrowed to a
LBT of RM0.5 million, attributed to a
RM6.8 million year-end impairment
charge on property, plant, and
equipment.
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FOOD DIVISION
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The Food Division, under 3Bumi,
continues to represent a comparatively
minor unit of the Group's overall
activities.
Due to reduced consumer demand
caused by increased food price
inflation and reduced expenditure
on premium imported food items,
the division's revenue contracted
by 16.2% to RM7.0 million from
RM8.4 million in FY2022. The division
reported a LBT of RM5.6 million,
compared to a loss of RM3.6 million
incurred in the previous year.
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TOWARD A SUSTAINABLE FUTURE
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The Group recognises the significance
of conducting operations in a
sustainable manner and are actively
striving to achieve sustainability
objectives and targets aligned with
global reporting standards. Our
commitment is to integrate sustainable
practices across various aspects
of our operations, encompassing
Governance, Climate Change, the
Environment, our People, and the
Community. Since embarking on our
sustainability journey, the Group has
accomplished noteworthy milestones,
detailed further in the Sustainability
Statement of this Report.
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PROSPECTS FOR THE NEW FINANCIAL YEAR
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The uncertain global economy is
anticipated to linger for the next
financial year. The drawn-out
geopolitical conflict in the West
and tension in the East continue
to cast a long shadow on the world
economy, which could intensify with
more restrictions on trade and cross-border
movements of capital, as well
as contribute to additional volatility,
in global commodity prices. On top
of that, China's underperforming
economic recovery, higher expected
inflation, and elevated interest
rates, will constrain any room for
discretionary spending, raise the risk
of debt distress, and dampen global
economic activity.
The Group ended the current financial
year in a loss position with steep
contraction in sales volume, especially
for steel related products, mirroring
the weak performance of the nation's
manufacturing sector, as reflected in
its Purchasing-Managers-Index's ten
straight months of contraction. Similar
contraction is seen in major exporting
nations as global trade shrank.
With the regularisation of various
Malaysian infrastructural projects,
such as the National Energy Transition
Roadmap, and remnants of the
12th Malaysia Plan, there is hopeful
anticipation, that these initiatives, will
favourably impact, the domestic steel
industry in the coming year.
For the domestic food industry has
experienced increased operational
costs, and a weakened Malaysian
currency, which has resulted in
imported food inflation. To enhance
competitive advantage, the Food
Division is working assiduously
to further sharpen, simplify, and
streamline operating processes,
and will focus on securing more
customers, broadening product
array and value-added services,
whilst vigilantly observing evolving
consumer trends and shifting market
conditions.
In summary, the Group's prospects
outlook for the next financial year
remains cautious, with the possibility
of tepid rebound in the second half of
the next financial year, in line with the
World Trade Organisation and World
Bank’s projection, for the regional
steel and food industry.
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GOVERNANCE
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The Board of Directors of the Group
recognises that corporate governance
principles, are the foundation upon
which stakeholder confidence is built.
In addition, we acknowledge the
importance of conducting business
with integrity, and in accordance
with generally accepted corporate
governance principles.
Our board members and senior
executives will continue to focus
on upholding the highest standards
of corporate governance and
business ethics in the operations of
the Group. The Governance model
for the Group includes, among
others, the Board Charter, Terms of
Reference of Board Committees,
Anti-Fraud/ Anti-Corruption Policy,
Fit and Proper Policy, Communication
Policy, Conflict of Interest Policy, and
Corporate Disclosure Policies and
Procedures.
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ACKNOWLEDGEMENT
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On behalf of the Board, I would like
to express my deep appreciation
to everyone in the Group for their
unwavering passion, dedication,
effort, and determination over the
past year. I wish them every success
in the year ahead.
I would also like to extend my
wholehearted appreciation to my
fellow Board members for their strong
commitment and invaluable counsel.
To our valued business associates,
customers, suppliers, and
shareholders; thank you all for your
continued support.
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TUNKU DATO' YAACOB KHYRA
Executive Chairman
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