Lion Corp’s escape plan to exit PN17 status; Tan Sri William Cheng’s Lion subsidiary Megasteel is Malaysia’s sole hot rolled coils (HRC) manufacturer v

November 5, 2013 Leave a comment

Updated: Tuesday November 5, 2013 MYT 9:06:13 AM

Lion Corp’s escape plan to exit PN17 status

BY HANIM ADNAN

Cheng had said last year ‘several foreign investors from South Korea, China and Taiwan have shown keen interest to take up some stakes in Megasteel. KUALA LUMPUR: Troubled steel product manufacturer Lion Corp Bhd, which recently slipped into Bursa Malaysia’s Practice Note (PN) 17 list, is in the midst of formulating a “workable” structure for its regularisation plan.Sources said the company would be looking at several avenues including divestment of non-core businesses, injection of fresh capital via new strategic shareholders either from local or foreign parties as part of its effort to quickly exit from the PN17 status for financially distressed companies.

“Lion Corp is working towards formulating and announcing its regularisation plan within the next three months and also to meet the deadline to submit its plan to theSecurities Commission within the next 12 months,” sources told StarBiz.

Lion Corp’s main business is in the manufacturing of flat steel products undertaken by subsidiary, Megasteel Sdn Bhd – the country’s sole hot rolled coils (HRC) manufacturer in Malaysia.

To recap, Lion group chairman and chief executive officer Tan Sri William Chenglast year said “several foreign investors from South Korea, China and Taiwan have shown keen interest to take up some stakes in Megasteel.

“But then again, these investors wanted to see a clearer steel policy by the Government before partnering with Megasteel.”

Sources pointed out that the crux of Lion Corp’s problem was due to the severe losses by Megasteel as it was facing tough competitions from the inflow of cheaper imported steel products especially from China into Malaysia.

Currently, Megasteel is operating at about 33% capacity, up by 1% from 32% in 2012. Its (Megasteel) long-term borrowings now stands at RM600mil while short-term working capital is RM130mil.

Over the past five years, Lion group has continuously been recording losses. For financial year (FY) ended June 30 2012, the group’s net loss has ballooned to RM461.2mil compared with a net loss of RM223.7mil a year earlier.

Although Lion Corp has managed to curb its net loss to RM247.9mil for FY13 due to better demand for steel in the first half this year, sources claim that the situation (higher steel imports into Malaysia) had actually worsened from the second quarter of this year.

“This is especially due to the continued steel dumping from foreign manufacturers and higher costs pressure.”

From January to June this year, 2.14 million tonnes of imported flat steel products have been imported into Malaysia compared with 1.65 million tonnes for the same period in 2012, registering a sharp increase of 29%.

When annualised, 2013 imports is expected to touch almost 4.3 million tonnes, up 11.7% from 3.85 million tonnes imported in 2012.

Furthermore, despite the implementation of certain measures under the new steel policy in February this year and also the imposition of anti-dumping duty on several steel products via the Countervailing and Anti-Dumping Duties Act 1993, sources noted that cheaper imported steel products had continued to flood the domestic market.

As a result, most of the local steel manufacturers are suffering from capacity under-utilisation, operating at only about 40% capacity.

Therefore, the Government would need to further tighten the procedures for importing duty exemption on imported steel goods and enforce stricter duty exemption processes which would weed out dubious imports and import of sub-standard steel products that can affect public safety, added the sources.

Filed under Investing Process, Macro Trends

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