Hello fellow investors and market watchers!
MALAYSIA STEEL WORKS (KL) BHD (Masteel) has just released its unaudited condensed consolidated financial statements for the second quarter ended 30 June 2025. This report offers a crucial glimpse into the company’s performance amidst a dynamic market landscape. While Masteel achieved a commendable increase in revenue, its profitability faced significant headwinds. Let’s dive into the details and understand what’s shaping the steel manufacturer’s journey.
Q2 2025 Performance Highlights: Revenue Up, Profits Under Pressure
Masteel’s top-line performance saw a healthy boost, driven primarily by strong export demand. However, this growth did not translate into better profitability due to softening steel prices and increased operational costs.
Revenue Growth Driven by Export Strength
For the quarter, Masteel recorded a robust increase in revenue, a positive sign reflecting market demand and the company’s sales efforts.
Current Quarter (Q2 2025)
Revenue: RM 649.37 million
Preceding Year Corresponding Quarter (Q2 2024)
Revenue: RM 556.49 million
This represents a
in revenue quarter-on-quarter, primarily attributed to a higher sales volume of steel products from the export market. Looking at the year-to-date performance, the trend continues:
Current Year To-Date (H1 2025)
Revenue: RM 1,256.98 million
Preceding Year Corresponding Period (H1 2024)
Revenue: RM 1,219.00 million
The cumulative revenue for the first six months saw a
, indicating a sustained positive momentum in sales volume over the half-year.
Profitability Takes a Hit
Despite the revenue growth, Masteel’s profit before tax (PBT) and net profit experienced a notable contraction during the quarter and year-to-date. This was mainly due to lower sales margins, a result of softening steel product prices, coupled with higher operating and finance expenses.
Current Quarter (Q2 2025)
Profit Before Tax: RM 0.91 million
Net Profit: RM 1.12 million
Basic Earnings Per Share: 0.16 sen
Preceding Year Corresponding Quarter (Q2 2024)
Profit Before Tax: RM 6.84 million
Net Profit: RM 4.30 million
Basic Earnings Per Share: 0.63 sen
The profit before tax saw a significant
, while net profit dropped by approximately 74.01%, and basic earnings per share by around 74.60% compared to the same quarter last year.
Current Year To-Date (H1 2025)
Profit Before Tax: RM 2.28 million
Net Profit: RM 1.50 million
Basic Earnings Per Share: 0.22 sen
Preceding Year Corresponding Period (H1 2024)
Profit Before Tax: RM 12.53 million
Net Profit: RM 7.44 million
Basic Earnings Per Share: 1.10 sen
The year-to-date profit before tax declined by a stark
, with net profit and EPS seeing similar decreases of approximately 79.89% and 80.00% respectively. This underscores the challenges faced in maintaining margins despite higher sales volumes.
Financial Health and Cash Flow
On the balance sheet, Masteel shows a relatively stable financial position. Total assets slightly increased to RM2,329.61 million as of 30 June 2025, compared to RM2,273.19 million at the end of 2024. Total equity also saw a marginal rise to RM969.87 million, from RM968.37 million previously.
A notable positive development can be observed in the cash flow statement. Net cash generated from operating activities for the first six months of 2025 surged to
, a significant improvement from RM13.44 million in the same period last year. This strong operational cash generation is a healthy indicator, suggesting the company is effectively managing its core business cash conversion, even if profitability is currently pressured.
However, the company’s borrowings remain substantial, with total secured borrowings at RM614.35 million as of 30 June 2025. All borrowings are denominated in Ringgit Malaysia.
Risks and Prospects: Navigating a Shifting Landscape
Masteel’s future performance is intrinsically linked to broader industry trends and strategic initiatives. The report highlights several key factors that could influence its trajectory:
Industry Tailwinds from China and Local Developments
Malaysian local steel prices are heavily influenced by trends in China. Recent policy changes by the Chinese government, such as directives to halt steel production in the Tangshan area and new housing policies in Beijing, have positively impacted steel prices in China and the broader ASEAN region. Local steel prices have reportedly rebounded over 10% since July.
Furthermore, the adverse effects of US global tariffs and the dampening of consumer sentiments due to the expansion of domestic Sales and Service Tax (SST) are showing signs of abating. This could provide a more stable market environment for Masteel.
Strategic Advantages and Future Opportunities
Masteel is strategically positioned to benefit from several domestic opportunities:
- Climate Change Bill: As the lowest Greenhouse Gas (GHG) emission steel mill in Malaysia, Masteel anticipates that the upcoming Climate Change Bill, which may introduce a carbon tax, will be a positive factor for its business prospects. This could offer a competitive advantage in a carbon-conscious future.
- Construction Sector Growth: Located in the Klang Valley, Masteel has already benefited from Malaysia’s construction sector growth, which expanded by 12.9% in Q2 2025.
- 13th Malaysia Plan (13MP): The company expects an uptick in job awards ahead of the 13MP, scheduled for tabling next month. This, coupled with improving news flow on major public infrastructure projects, suggests a strengthening order book environment for local contractors.
Given these factors, Masteel expects the demand for its steel products to remain firm for the rest of the year.
Corporate Development: Successful Private Placement
Masteel successfully completed a private placement of 67.5 million new shares at an issue price of RM0.256 per share. This exercise raised RM13.824 million, which has been fully utilized for working capital and associated expenses. This move enhances the company’s financial flexibility and supports its ongoing operations.
Summary and Outlook
MALAYSIA STEEL WORKS (KL) BHD’s Q2 2025 report presents a mixed picture. While revenue growth, particularly from exports, and a significant improvement in operational cash flow are positive signs, the substantial decline in profitability due to market pricing and cost pressures is a clear challenge. However, the external environment shows promising signs of recovery with steel price rebounds and strong domestic construction growth prospects. Masteel’s strategic position as a low-emission producer and its recent capital-raising efforts put it in a potentially resilient position to capitalize on these opportunities.
Key points from the report include:
- Robust revenue growth, driven by higher export volumes.
- Significant pressure on profit margins due to softening steel prices and increased operating/finance costs.
- Substantial improvement in net cash generated from operating activities, indicating strong operational efficiency.
- Positive outlook on steel price recovery influenced by policy changes in China.
- Favorable domestic market conditions, with the construction sector benefiting from government initiatives and the upcoming 13th Malaysia Plan.
- Successful private placement bolstering working capital.
The company remains optimistic about firm demand for its products for the remainder of the year.
Masteel is navigating a complex landscape, balancing the immediate challenges of profitability with the promising prospects of a recovering market and strategic advantages. While the decline in quarterly profit is concerning, the robust operating cash flow and the positive industry outlook provide a silver lining.
What are your thoughts on Masteel’s ability to maintain this growth momentum in the coming quarters and fully capitalize on the improving market conditions? Share your insights in the comments below!
