CSC Steel Earnings And Its Unit Trust Investments

Yesterday CSC Steel announced its earnings. The Financial Daily had this: CSC Steel earnings surge in 1Q

• CSC Steel earnings surge in 1Q
  Written by Joseph Chin
  Saturday, 08 May 2010 07:28
  
  KUALA LUMPUR: CSC Steel Holdings Bhd’s earnings surged to RM30.59 million in the first quarter ended March 31, 2010 from RM5.71 million a year ago following favourable prices for steel products and it expects to continue to stay profitable this financial year.
  
  It reported on Friday, May 7 that revenue rose 63% to RM281.59 million from RM173.16 million a year ago. Earnings per share were 8.2 sen versus 1.53 sen.
  
  “The better performance in revenue is driven by higher sales volume and favourable selling prices of our steel products. The improvement in revenue has increased the profit before tax as well,” it said.
  
  When compared with the fourth quarter ended Dec 31, 2009, CSC said revenue increased by 2.9% from RM273.7 million to RM281.6 million mainly due to higher sales volume of its steel products.
  
  “Despite the higher revenue, profit before tax reduced by RM3.8 million or 8.9% to RM39.1 million. This is mainly due to the lower selling prices of our steel products for the quarter under review,” it said.
  
  On the prospects, CSC said although the selling prices of its steel products for this quarter were lower than for the preceding quarter, the steel market had performed credibly in the first quarter of 2010 and steel prices were rising progressively as the global economy move towards positive growth and out of the economic recession.
  
  “As the prices of raw materials such as iron ore and coal have risen significantly, it would certainly be the main driver for the steel prices to move upward. Although steel prices in the domestic market are expected to follow the upward trend, however, it would be a challenging task for the company to pass on the increased costs to the downstream customers,” it said.
  
  CSC said as for the rest of this year, under the present rational market conditions, both the supply and demand of steel were not expected to experience great volatility.
  
  It said small healthy corrections in prices may be inevitable but in the long run, the market trend was moving up gradually due to the cost push pressure from increasing raw material prices a result of limited resources and oligopoly in the iron ore industry.
  
  “Barring any unforeseen circumstances, the group is cautiously optimistic that the second quarter and the rest of 2010 will continue to be profitable,” it said.

Yeah compared to previous year's wash out numbers or recession numbers, CSC's earnings this quarter does look impressive.

But as CORRECTLY stated in the article, current earnings dropped some 8.9% when compared to previous quarter.

How?

Did CSC Steel earnings really surge? Hhmm.. don't you love all these BEST SOUNDING financial news headers?

Anyway, my last blog posting on CSC Steel was in Feb 2010. Review Of CSC Steel Earnings

(ps: Nov 2009, CSC made 39 mil, Feb 2010 CSC made 32 mil, May 2010 CSC only made 30.5 mil. )

Anyway in that posting, I highlighted CSC unit trust investment.

• CSC Steel has some 58.506 million in Unit Trust Funds!

Is that too much?

Now before I post the numbers from CSC current earnings, do have a guesstimate.

How?

I went HOLY COWPITALIST COW the very instant I saw them figures!!!!!

CSC purchased another 15 million worth of securities!!!!!!!!!!!!!!!!!!

In its cash flow statements CSC had classified them as unit trust funds.

And as at yesterday's earnings, CSC were holding some 76.2 million worth of unit trust funds.

Seriously... don't you think the management should stop and ask themselves if they are over doing this???

When market is hot, companies who dabbles in such activities might make money but what if the market goes terribly wrong? Do you trust the company management to make the correct decision? Do they know if they are wrong? Or would they stubbornly hold on to their wrongness?

And yes, I am always not in favour of Listed Companies OTHER Investments

4 years ago (LOL! yeah that long ago), I wrote the following: Local listed companies dabbling in the share market

I mentioned the following points:

• When we see 'marketable securities' in the balance sheet, we, the minority investor is really at risk for the following reasons:
  
  1. what types of marketable securities are we talking about?
  
  The term marketable securities is simply so vague. So what kind of marketable securities are we talking about?
  
  Bonds? What kind of bonds? What if it is a junk bond that is tanking?
  Unit trusts? What kind?
  Stocks? What kind of stocks? Investment grade stocks or speculative stocks?
  
  2. Who is making the investing decisions?
  
  Fund managers? Who? And what sort of investments are we talking about?
  Or are the management/owners on a DIY? That's even worse. What divine skills do they have?
  
  3. Transparency.
  
  There is simply no transparency involved, and everything is simply based on blind faith that such investments should generate some sort of income. And there is no way the minority investor can be sure if the management/owner of the listed company is abusing the company's funds to buy shares in another listed company for personal vested interests or reasoning.
  
  4. Management focus.
  
  Once they dabble in the stock market, the management/owner focus is being diverted. How could the minority investor expect the management/owner to remain focus on the core business when they are burdened with the extra responsibility of ensuring good results from their investment?