KUALA LUMPUR (Aug 26): Ann Joo Resources Bhd's net profit for the second quarter ended June 30, 2022 (2QFY22) fell 54.27% to RM34.09 million, from RM83.70 million in the same corresponding quarter last year, despite higher revenue.

The lower net profit was primarily attributed to higher allowance for an inventory write down of RM84.32 million in 2QFY22, against RM2.36 million in 2QFY21, mainly to write down the cost of certain inventories to their estimated net realisable value. 

This was mitigated by the recognition of compensation for a trespassing claim of RM26.97 million from Tenaga Nasional Bhd, said Ann Joo, which is primarily engaged in the manufacturing and trading of steel related products. 

Ann Joo’s bourse filing on Friday (Aug 26) showed that its revenue for the quarter under review rose 19.56% to RM805.94 million from RM674.07 million, thanks to higher prices for domestic and export sales, coupled with higher local sales tonnage. 

Ann Joo’s net profit for the cumulative six months ended June 30 (1HFY22) plunged 57.4% to RM67.015 million, from RM157.31 million. Six-month cumulative revenue increased by 18.26% to RM1.48 billion from RM1.25 billion. 

Moving forward, the group said construction steel demand is likely to gain traction in the upcoming September-October construction peak period, in anticipation of China’s efforts to step up fiscal and monetary measures to boost the infrastructure and property sectors. 

“Although the improvement in infrastructure spending is unlikely to fully offset the headwinds from the property sector, it may at least moderate the downward pace of steel demand in the near future, which, when combined with steel output cuts, will lend support to steel prices,” it said. 

On the domestic front, steel demand is expected to remain lacklustre, hindered by public funding constraints for infrastructure projects and mounting cost pressures caused by rising interest rates, inflation concerns and labour shortages, said Ann Joo. 

“In addition, the uncertainty surrounding the 15th General Election poses challenges to political stability, as well as the path of economic growth and market recovery. Given the heightened level of market uncertainty, the group remains highly cautious and prudent in managing through this volatile and challenging period,” Ann Joo added. 

Ann Joo shares closed down two sen at RM1.07 on Friday, for a market capitalisation of RM619.08 million. The stock has fallen 40.22% year-to-date.