KUALA LUMPUR (Aug 28): Steel products maker Ann Joo Resources Bhd recorded a net loss of RM37.75 million in its second quarter compared to a net profit of RM20.7 million a year earlier,  despite a 12.7% rise in revenue to RM574.32 million from RM509.63 million.

The group in its exchange filing today attributed the loss in the quarter ended June 30, 2019 (2QFY19) to a lower selling price, coupled with rising raw material and fuel costs.

Additionally, the group said it incurred higher-than-usual production costs due to the scheduled blast furnace shutdown, besides other costs including allowance for inventories written down of RM22.54 million and overhead cost for the plant’s temporary shutdown, as well as plant upgrading activities costing RM4.98 million.

Ann Joo’s second consecutive quarterly loss brings its first-half net loss to RM44.35 million, a sharp deterioration from the RM82.15 million net profit it recorded in the year-ago period. Cumulative revenue grew a marginal 1.3% to RM1.11 billion from RM1.1 billion.

The group, which had paid an interim dividend of six sen a year ago, did not declare any dividend this time around.

The group said the industry landscape in the third quarter is challenging, driven by weak near-term domestic demand, oversupply of construction steel locally and global economic uncertainty arising from US-China trade friction.

Its performance for the full year will be heavily dependent on the rectification pace of the domestic oversupply situation and steel price trends in both domestic and export markets.

Nevertheless, the group believes there will be improvement in domestic steel consumption eventually with the revival of selected mega infrastructure and large-scale development projects.

“With the successful relining exercise for its blast furnace and upgrading measures undertaken in the second quarter, the group is focusing on driving cost and operating efficiency, and continually enhancing its competitive position in preparation for an eventual recovery in the steel sector.

“The recent decline in key raw material prices, particularly iron ore and coking coal, will drive lower production costs going forward,” it added.

Shares in Ann Joo closed three sen or 2.38% down at RM1.23 today. The stock has lost about one-fifth of its value over the past two months, to now bring Ann Joo a market capitalisation of RM637.63 million.