Sino Hua-An Lost Money.... Again.

Sill losing money. That's the three words that best describe Sino Hua An's earnings reported lasted.

On the Edge Financial Daily: Sino Hua-An posts smaller net loss of RM2m in 1Q

( ps: They probably say 'smaller loss' is good again. Doesn't matter if it still losing money because losing less money always better than losing more money!! )

• Sino Hua-An posts smaller net loss of RM2m in 1Q
  Written by Melody Song
  Monday, 17 May 2010 23:43
  
  KUALA LUMPUR: SINO HUA-AN INTERNATIONAL BHD [] posted a smaller net loss of RM2.48 million for the first quarter ended March 31, 2010 (1Q10) compared with a net loss of RM23.63 million a year earlier because of the rising prices of its products.
  
  Its revenue was 20.1% higher at RM373.59 million from RM310.95 million a year earlier while loss per share was 0.22 sen. The company is involved in the production and sale of metallurgical coke and its by-products.
  
  "The average prices of metallurgical coke, ammonium sulphate, crude benzene, tar oil, coal slime and middlings during the current quarter under review have increased by approximately 23%, 4%, 157%, 80%, 57% and 13% respectively compared with the preceding year's corresponding quarter," it said in a statement to Bursa Malaysia Securities on Monday, May 17, adding the price of coal gas has remained consistent.

Hmm.. so many factors mentioned. Sorry can't help by laughing for a moment.

The average prices of metallurgical coke, ammonium sulphate, crude benzene, tar oil, coal slime and middlings during the current quarter under review have increased by approximately 23%, 4%, 157%, 80%, 57% and 13% respectively compared with the preceding year's corresponding quarter....

Anyway the article continues..

• It also attributed the 13% rise in the cost of sales to RM367.9 million to the 29% increase in average price of raw materials, namely coking coal.

13% rise in cost of sale.,,

• However, it said the gradual recovering trend in the coking steel industry helped the company to record a gross profit of RM5.7 million in 1Q10 from a gross loss of RM1.35 million previously.
  
  On the company's prospects, Sino Hua-An said it was hopeful of seeing prices for metallurgical coke increasing on the back of gradually returning demand.
  
  "Although it is recognised that the prices of coking coal may also rise in tandem, the group is hopeful that the extent of its hike is less than that of metallurgical coke, thus enabling the group to achieve better financial results for the current year," it said.

Damn... so many factors involved... sounds like a not very profitable business to be in!

I dug out KN's last comments made on Hua An back in Feb.

• Outlook. We remain positive of the China’s economy robustness.According to the Worldsteel, China will continue as the biggest driver of world steel demand, however, the domestic steel industry is expected to grow at moderation and at 5% growth . Nevertheless, we are lowering our FY10 net estimate by 9% to RM64.7m as we revised marginally lower of our assumption of coke price. We are also introducing our FY11 earnings estimates with net profit of RM70.6m. The pricing sluggishness of coke and short-term steel demand volatility remain as key risks to our earnings forecasts.
  
  Maintain BUY with lower target price at RM0.58 based on FY10 PER of 10x (in line with the small-to -medium size Malaysian steel players and 30% discount to its China’s peers).

Their fy 10 and fy 11 earnings estimate for Huan An are 64.7m and 70.6m. Hua An started the year, losing 2.48 million. At this rate, the earnings estimates look way beyond, yes?

These are OSK comments made in Feb 2010.

• Looking forward. Although the 4Q numbers were not impressive due to a pullback in China’s steel production, we see better 1Q numbers as we discern a sustainable uptrend in steel prices after the Golden Holiday, with coke prices averaging at RMB1,900 per tonne, which is around 18% from the recent low. As such, we reckon China’s domestic steel prices should continue to go up, at least in 1HCY10. Moreover, given that crude oil is trading at around USD79 per barrel, Huaan’s by-products may continue to benefit as they are highly correlated with oil prices.
  
  Maintain BUY. While we remain positive over 1HFY10, the volatility of the commodity cycle has obscured the company’s earnings visibility in 2HFY10. Hence, this prompts us to reduce our earnings forecast for FY10 by 20.1% to RM100.3m. Nonetheless, we reduce stock’s fair value to RM0.70 based on 7.8x FY10 EPS. As investors are forward looking, our bullish view for the next six months supports our BUY recommendation on Sino Hua-An.

LOL! OSK earnings forecast is rm 100.3 million. Mind you they said they lowered it by 20.1%.

How?

Past postings can be found here: Sino Hua An