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Home / 2005 Annual Report: Managing Director/CEO’s Statement


For the year under review, the business environment in which the local steel industry operated in was more challenging as compared to the previous year. Overall demand of steel decreased and cost of raw materials and freight was affected by fuel price hike.

Against this background, Masteel achieved a turnover of RM306.4 million and a Profit Before Tax of RM23.3 million for the financial year ended 31 December 2005.

Compared to the previous year, the Company’s revenue grew 9.1% from RM280.8 million, while Profit Before Tax decreased 35.1% from RM35.9 million, which included a RM11.8 million write-back of electricity arrears accrual in previous years. Not considering the write-back, the actual year-to-date reduction in Profit Before Tax was 3.3%.


In terms of operation, the year was marked by strategic implementation of cost-cutting measures to increase both cost-efficiency and productivity in the manufacturing of our steel products. The objective was to utilise the best plant and process technology to produce quality steel products at the lowest production cost.

For our meltshop facilities in Bukit Raja, Klang, we had in earlier months of 2005 upgraded all existing machinery to be adapted to use natural gas. In June, the switch from liquefied petroleum gas to natural gas was successfully commissioned. This strategic move was expected to reduce the cost of production by about 10% per annum.

In August, an agreement was signed with Danieli & C SpA of Italy to provide the plant with the latest Supersonic Lancing System (SLS) technology, which would effect in a reduction in production cost by about 5%, and an increase in production capacity by 10% per annum. The technology will be fully utilised in the Bukit Raja plant by second half of 2006 to further enhance our operation’s competitiveness.


The Malaysian Iron & Steel Industry Federation (MISIF) forecast the local steel industry to grow by 8% in 2006, based on recovery of construction sector. The overall outlook for 2006 is positive, as supported by the following factors:

1.Construction Industry Recovery

Under the Ninth Malaysia Plan, the Government has recently announced allocations of RM48.6 billion and RM18.4 billion for the development of infrastructure and housing projects respectively. The implementation of the plan, which will start in 2006, is expected to boost the local construction industry at an average of 3.5% for the next five years.

The steel industry is looking to benefit from the positive growth and re-bound of the construction industry.

2. Positive Economic Outlook

The Bank Negara Malaysia projected a strong GDP growth of 6% for the year 2006, underpinned by stronger exports and resilient local demand.

3. Anticipation of Higher Steel Prices

Due to positive outlook in the construction sectors of ASEAN region, prices of steel is on the upswing in the first quarter of 2006. Overall, international steel price increased by 20% in the quarter.

In anticipation of a further increase in steel prices, the Board of Directors is cautiously optimistic of the Company’s performance in 2006.


After a year of challenges, I wish to thank all the management and staff at Masteel for their contribution to our performance in 2005. On their behalf, I would also like to thank our customers and shareholders for their trust and support, as we continue to put our efforts to build a stronger Masteel for tomorrow and the long term.


Managing Director/Chief Executive Officer

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