Lower steel prices put Seafco back in the black

The company in the first half of the year booked a net loss of Bt11.33 million compared with net profit of Bt38.65 billion in the same period last year.

Managing director Narong Thasnanipan said yesterday that Seafco had secured steel prices for remaining contracts which were signed in the second quarter at roughly Bt40 per kilogram, while current prices have declined to about Bt30 per kg. Therefore, raw-material costs in the second half will certainly be lower than in the first half when the company secured steel prices at Bt20 per kg, while prices in that period soared to Bt30.

Seafco also has projects on hand in which only wages accounting for 30 per cent of the project value will be recognised as revenue. This is so that the company could diversify the risk from raw-material costs, with raw-material supply being the responsibility of the project owner.

"I expect the gross profit margin in the second half of the year will recover from 5 per cent in the first half to a normal level of 11 per cent, and gross margin for the full year should be 8 per cent. I therefore have a strong belief that Seafco will book a net profit in the second half and this could help the company to post net profit for the full year of operation," he said.

Narong said Seafco had projects on hand worth Bt1.4 billion, of which 60 per cent will be recognised this year.

The company expects to book revenue of Bt2 billion this year.

Seafco has proposed bidding documents worth Bt600 million in the second half of the year. It expects to win half the total value, he said.

Finansa Securities forecast in its research that Seafco would book a net profit of Bt67 million in the

second half after steel as well as diesel-oil prices have decreased

to Bt32 per kg and Bt33.04 per

litre, respectively.

The proportion of projects which will be recognised as wages has increased to 35 per cent - or a total revenue target of Bt1.09 billion - in the second half. The gross profit margin of those projects is 18 per cent, higher than those which will recognise both wages and raw-material costs. Gross profit margin in the second half is expected to be 13.2 per cent, improving from 5.6 per cent in the first six months and 11 per cent in the previous year.

The broker forecasts full-year revenue for Seafco at Bt1.86 billion, which is similar to last year, and net profit of Bt56 million - a decline of 20 per cent.