A Look At CSC Steel Latest Quarterly Earnings

CSC Steel announced its earnings tonight.

It suffered massive losses!

However, one really should not be to shocked given the massive plunge in steel prices and its demand. And as suggested in the posting More Views On CSC Steel, losses could be expected.

What interest me was what CSC Steel has to say in its earnings note.

• B1. Review of performance
  The Group achieved revenue and loss before tax for the current quarter of RM205.1 million and RM58.5 million respectively. This represents a reduction of RM94.0 million or 31.4% lower in revenue than that of its corresponding quarter. As a result of the revenue contraction, profit before tax of RM16.3 million in the corresponding quarter was reduced by RM74.9 million or 458.3% lower to a loss before tax of RM58.5 million.
  
  Despite the drastic drop in demand and selling prices of our steel products as a result of the global financial crisis and the inventory write-downs of RM58.3 million, the Group still achieved profit before tax of RM52.0 million for the whole year.
  
  B2. Variation of results against preceding quarter
  The Group’s revenue has decreased drastically by 47.3%, from RM389.2 million in the preceding quarter to RM205.1 million in this quarter. The decrease in revenue is due to sales volume contraction and lower selling prices of our steel products.
  
  The decrease in revenue together with inventories write-down have resulted Group’s profit before tax to reduce by 305.5% from RM28.5 million in the preceding quarter to a loss of RM58.5 million this quarter.
  
  B3. Current year prospects
  The credit crisis triggered in the United States since September 2008 has badly hit the confidence of consumers and world economy, which has resulted in steel prices in the fourth quarter 2008 dropping drastically after it reached historical high in third quarter 2008. As the demand for steel products was also shrinking significantly, most of the steel manufacturers worldwide have suffered substantial losses.
  
  However, we foresee that the steel prices and demand may improve in view of the decrease in oil and raw material prices, the bailout plans for restructuring the financial market and economic stimulus packages instituted. The steel market in China has already shown signs of improvement lately.
  
  Demand for steel in China has increased and this has brought about increases in steel prices. If the supply of steel could be controlled to match demand, the global steel market may stage a rebound in the near future. Based on the Group’s performance since early 2009, the Group is optimistic of achieving profitability for first quarter 2009, barring unforeseen circumstances. The rest of the year remains unpredictable.

It's balance sheet is commendable. Really. Do please have a look yourself. :P

However what I did not like about CSC remains.

Back in November, I wrote the following: Regarding CSC Steel'sCurrent Earnings And Its Investments In Marketable Securities

Yes another of them local corporate who dabbles too much! (see Pintaras Jaya Announced Massive Losses In Their 'Investments' as another example!)

The following is from today's earnings notes.


And CSC continued to be overly aggressive with these marketable securities!

It sold some 19.5 million worth of securities and purchased some 19.3 million worth of securities!

Yup, holy cow!

Does CSC Steel management reckon that they are super duper investor/traders or what????

What is happening? Arghhhhhhhhhhhh!!!!

Now what I am failing to understand is that CSC now states its marketable securities now has a market cost of 46.12 million with a market value of 47.57 million. (It has paper profits what! So what on earth am I mumbling about?) With a total loss of only 89 thousand.

Now look at what's stated in its quarterly earnings last November, Quarterly rpt on consolidated results for the financial period ended 30/9/2008.

Now compare this screen shot taken from CSC quarterly earnings notes in November

with this.

The market cost of these securities went down from 56.16 million (market value of 57.3 million) to a market cost of 46.12 million (market value of 47.57 million).

And CSC achieved this with a loss of 89 thousand!

WOW!

CSC Steel management must have super duper hindsight and super duper trading skills yes?

How?