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NRA Capital Pte Ltd

Written by: NRA Team

Friday 2 Aug 2013

BH Global - 2Q13 results review

Putting its hope in its Oman steel wire plant

BH Global 2Q2013 net profit declined by 87% yoy to S$0.3m mainly from losses in its discontinued operations in Batam and higher expenses at its Gulf Steel Specialty Plant in Oman. Excluding losses from the discontinued operations, 2Q13 core profit of S$1.3m was 34% lower yoy. Management has guided that it will focus on ramping up production at its galvanized steel manufacturing plant.

BH Global 2Q13 net profit declined by 87% yoy to S$0.3m.  However, excluding discontinued operations from its Batam yard, core net profit was 34% lower yoy.   Its supply chain management and Engineering Services segment  both saw revenue declines of 31% yoy and 54% yoy, respectively while its Manufacturing was the only bright segment, registering growth of 38% yoy. 

Key notes takeaway from results briefing:

  • Gross profit margins improved 8.3% pts yoy to 33.7% due to lower contribution from Engineering Services which yields lower gross margins.
  • Operating expenses increased 27% yoy due to Oman steel plan. 
  • The group recovered the two vessels stolen last month with no impact on financials at the moment. It will wait for buyers to pay remaining balance before releasing them. 
  • The group's Galvanized steel wire manufacturing plant started production in 2Q13.  It has capacity to ramp up production to 60,000 tonnes or equivalent to US$60m revenue on its existing line (51% owned subsidiary). 
  • The group will invest more into R&D and manufacturing capacity for its LED segment (25% owned associate). 

Currently its 51% owned galvanized steel wire manufacturing plant is running at 10% utilization rate (S$1.7m sales contributed in 1H2013), where we understand from the management the company will need 50% utilization rate to breakeven. Management is optimistic the electrical cable demand is strong in Middle East region, where they believe will be one of the key suppliers for the cable manufacturers in the region. We believe that this steel wire plant will be the growth driver in the future for the group to diversify from the depressed marine sector in the near-term. 


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