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 2024 ("FY2024").

FINANCIAL PERFORMANCE

 The Group's core business operates within the steel industry, primarily focusing on the manufacturing of Cold Rolled Coil ("CRC") steel sheets and Steel Tubes and Pipes ("Steel Tube") through its 74.13% stake in its public listed subsidiary, Mycron Steel Berhad ("Mycron").

The Group manages other businesses through its two wholly-owned subsidiaries, namely:
  • Ausgard Quick Assembly Systems Sdn Bhd ("AQAS"), specialising in constructing commercial and residential structures for niche property markets using the Industrialised Building System (IBS), and
  • 3Bumi Sdn Bhd ("3Bumi"), which engages in the trading and distribution of food products.

Despite facing multiple macroeconomic challenges, including geopolitical uncertainties, inflation, and tighter financial conditions, the Group remained focused on fulfilling its commitments in FY2024. For the year ended 30 June 2024, the Group's revenue grew by 47.4% to RM810.2 million compared with RM549.7 million in FY2023. This robust growth was primarily driven by a 114.4% surge in sales volumes in the CRC segment due to higher export demand, and a 20.6% increase in the Steel Tube segment. This performance was achieved despite a 11.5% and 13.6% decline in average unit selling prices, respectively, in line with lower market steel prices.





Consequently, the Group posted a net profit of RM9.5 million for FY2024, marking a significant turnaround from the previous year’s reported net loss of RM16.9 million. Earnings per share for FY2024 rose in tandem to 1.43 sen as against a loss per share of 3.69 sen the year before.

Throughout the year, the Group strengthened its balance sheet and enhanced financial resilience. Group shareholders’ equity increased to RM416.3 million as of 30 June 2024, up from RM409.6 million at year-end 2023. With higher equity, the Group net asset value per share as at 30 June 2024 moved up to RM1.16 from RM1.14 per share at the prior year end.







STEEL DIVISION
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.

A smaller subsidiary, Silver Victory Sdn Bhd ("SV") is involved in the trading of steel related products.

"The Group strengthened its balance sheet and enhanced financial resilience. Group shareholders' equity increased to RM416.3 million as of 30 June 2024, up from RM409.6 million at year-end 2023."
STEEL DIVISION (CONT'D)
STEEL OPERATION REVIEW
In the first financial quarter of FY2024, the Group's Steel Division encountered challenges from declining steel demand and continued downward pressure on global steel prices. The division reported a revenue of RM162.8 million and a Profit Before Tax ("PBT") of RM2.1 million. Pricing pressures persisted, driven by structural overcapacity and weakened demand, particularly in regions such as Europe and Asia. These challenges were further aggravated by tighter monetary policies and the ongoing property crisis in China. Domestically, CRC producers saw increased margin pressure due to a rise in duty-evaded CRC imports. Despite these challenges, the Steel Division expanded its export sales, which accounted for 16.1% of total sales in the quarter.



In the second financial quarter, steel prices remained relatively stable, providing some relief to the market. The Steel Division's revenue grew by 7.6% to RM175.2 million, though gross profit dropped to RM8.6 million due to lower margin spread in the CRC segment. As in the fist quarter, the division continued to expand its sales internationally. As a result, the Steel Division recorded a Loss Before Tax ("LBT") of RM0.3 million.

In the third financial quarter, the Steel Division's revenue rose by 29.0% to RM226.0 million, driven by increased export volumes and improved average unit selling prices. The division's export sales increased to 41.3%, up from 25.7% in the previous financial quarter. The division achieved a higher gross profit of RM17.3 million, supported by increased volume throughput in the CRC segment and slightly improved gross margins in the Steel Tube segment.

The division's performance in the fourth financial quarter was bolstered by the CRC segment's improved gross and operating profits, both of which increased by over 50.0%, driven in part by stronger export sales. Revenue reached RM237.8 million, a 5.2% increase from the previous financial quarter. Contributing to the stronger gross profit performance, the quarter's overall performance saw a 59.0% improvement, further boosted by a RM1.9 million writeback on property, plant and equipment.

FOOD DIVISION


The Food Division, managed by 3Bumi, continues to represent a relatively small segment of the Group's overall business.

This year, the division remained underperforming, reflecting the impact of subdued consumer sentiment and cautious spending, particularly during festive periods, driven by rising food price inflation. Domestic sales were weak and fell short of expectations. Profitability was further affected by high input costs and the depreciation of the ringgit, which has led to higher import costs since FY2023. To attract buyers, products were offered at discounted prices.

Despite these challenges, the division's revenue grew by 16.1%, reaching RM8.2 million compared to RM7.0 million in FY2023, mainly due to stronger export sales of certain food products. However, the division still recorded a LBT of RM4.9 million, an improvement from the RM5.6 million loss incurred in the previous year.




COMMITMENT TO GOOD CORPORATE GOVERNANCE

The Board of Directors of the Group is dedicated to maintaining high standards of corporate governance, recognising that effective governance is essential for achieving sustainable, long-term growth in returns for its shareholders. Our board members and senior executives remain focused on upholding the highest standards of corporate governance and business ethics.

In FY2024, the Group introduced several new policies, including the Directors' Conflict of Interest Policy, the Personal Data Protection Policy, which governs the management of personal data collected and processed by the Group, and the Non-Assurance Services Pre-Approval Policy. Additionally, existing policies, such as the Conflict of-Interest Policy for Employees, the Anti-Fraud/Anti Corruption Policy, and the Whistleblowing Policy, were revised to enhance their effective implementation across the Group.

SUSTAINABILITY INTEGRATION & DIRECTION
The Group is continuously strengthening the integration of Environment, Social and Governance (ESG) factors into its business strategies. Key initiatives include enhancing sustainability risk management and reporting in alignment with the recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD), thereby improving communication with investors as climate change evolves. This year, the Group also initiated limited assurance on selected sustainability information, further affirming its commitment to transparency. More information is available in the Sustainability Statement.

Aligned with our commitment to sustainability and the Malaysian Government's key initiatives, such as the National Energy Transition Roadmap (NETR), New Industrial Master Plan (NIMP 2030), and Circular Economy (CE) Policy Framework, we acknowledge our role in contributing to the Nation's sustainability objectives.




PROSPECTS FOR THE NEW FINANCIAL YEAR
Looking ahead, the global economy is expected to remain stable, despite being vulnerable to financial market turbulence and geopolitical headwinds. With ongoing tensions in the Middle East, the Russia Ukraine conflict, and elections in several countries accounting for more than two-thirds of global Gross Domestic Product, there are risks of disruptions in energy, trade, and financial markets, which could drive up inflation and hinder growth.

The global steel industry remains highly sensitive to China's steel export trends, making it difficult to predict future steel demand and prices. China's prolonged economic slowdown, particularly in its struggling property market, has significantly dampened consumer sentiment and is expected to take time to recover. As China continues to export excess steel to Southeast Asia, the outlook for both regional and domestic steel markets appear increasingly grim. Regional steel prices, which have been declining since January 2024 and hit new lows in August 2024, are projected to stay weak in the near term. Domestic steel producers will likely continue facing intense competition and margin pressure from imports amid subdued domestic demand, high inventory levels, falling steel prices and currency depreciation.

As the Group enters financial year 2025, the main challenge for its steel and food divisions will be the persistently narrow profit margins, driven by weakened purchasing power and rising costs of doing business in Malaysia. Manufacturing and operating costs are expected to increase due to several factors, including higher tariffs on electricity and water, rising natural gas prices, the service tax hike to 8% since March 1 on retail goods and services, a potential minimum wage adjustment, and the introduction of unsubsidised market rates for diesel starting in June 2024, all of which have curbed consumer spending.

The reduced profit margins are largely due to higher costs of goods (such as increased import and distribution costs) and rising operational expenses (including labour, utilities, and rent). Overall, sluggish demand is likely to continue impacting the Group's steel and food divisions throughout 2025, given the current climate of weak consumer sentiment, constrained purchasing power and the continuously dumping of steel into Malaysia by fellow Asian net-steel producers.

Despite lingering external uncertainties, several growth drivers remain positive, such as the ongoing global tech upcycle, increased investment flows and the accelerated implementation of catalytic initiatives under national master plans. The rise in foreign direct investment inflow, driven by "geopolitical de-risking," may spur local facility and factory constructions, boosting domestic steel demand. The demand for steel is also expected to be supported by Nation's various projects under the NETR, NIMP 2030 and the CE Policy Framework. Furthermore, continued government support through targeted cash assistance and subsidies for lower and middle-income groups, and withdrawals from the Employees Account) are likely to stimulate consumer consumption.

In conclusion, the Group anticipates continued challenges for both the domestic steel market and food industry. The outlook for the next financial year will hinge on the implementation of domestic policies related to subsidies and price controls, along with global commodity prices and financial market developments. The Group is focused on maintaining production momentum and strengthening its presence in both domestic and international markets, aiming to sustain positive performance in the year ahead.





TUNKU DATO' YAACOB KHYRA
Executive Chairman