thai metal forges ahead with plan

The Nation

Despite downward trends in both the economy and steel prices, Thai Metal Trade is going forward with its 10-year business plan to invest Bt1 billion to establish the company's goal of "Providing Structure for Your Imagination".

This is the company's vision to sustain the business from 2008 through 2018, during which it plans to grow by an average of 10-15 per cent per year. The vision focuses on three key goals: to become a steel learning centre and consultant, a manufacturer of alternative steel products and a service provider.

Through the end of the plan, the company hopes that its trading partners and customers will jointly develop new products that not only serve market needs but are also suitable for all projects.

President Paisal Tarasansombat said the strategy fits Thai Metal's development as an integrated steel business. As a steel trader, the company not only sells steel products but also focuses on customers' business risk by assisting in finding material financing.

"Our policy is not only to sell products but also to concentrate on our customer's success. We always ask our customers how they will use the steel they buy from us for each project. This helps reduce their risk and match their purchases with their financial structure," he said.

Under the new vision, the company will spend Bt400 million to set up a learning centre and business consultant unit. The plan will encourage Thai Metal to learn more about new steel technology and innovative products, create more choices of steel products and provide ideas to combine steel with construction.

In addition, the company will set up an internal centre focused on training programmes and other human-resources development. The plan will require an investment of Bt200 million.

Lastly, the plan is to work more closely with customers to help design business models for them.

The company invested more than Bt200 million this year to create more value-added products, such as special coated steels.

Paisal said the company had restructured its business plan during the regional financial crisis of 1997. The emerging plan focused on self-reliance instead of borrowing from banks, and reducing loans while concentrating more on a favourable debt-to-equity ratio.

The strategy proved that the company was moving in the right direction. The economic slowdown and dramatic price drops in the world's steel market have not damaged the company's operating results.

The company's net profit reached Bt640 million at the end of the third quarter. That was far higher than its projection of Bt400 million for the entire year.

The company targeted sales of Bt9 billion and 300,000 tonnes in volume this year, an increase of 10 per cent from last year. However, sales revenue is forecast to drop by 20 per cent and sales volume to decline to 250,000 tonnes next year due to the world recession.

Paisal pointed out that Thai

steel traders had faced huge losses since late in the third quarter this year, when prices dropped by 50

per cent to Bt20 per kilogram.

"So far, profits from the first half of this year and losses from stock speculation in the third quarter by steel traders is nearly in balance," Paisal said, adding that the company had to keep a close watch on trading in the last quarter to see if the price drop would affect operating results.

The price swing this year has shortened steel traders' stockpile from a normal 60-90 days to 30. They learned from the fluctuating price that huge stocks could create huge losses in line with market prices.

"This has been the most volatile year in the steel industry since the company began. The fluctuating factors derived from government policies, domestic and international business developments, the oil price and political violence," he said.

Thailand's steel consumption is expected to drop from 13 million tonnes this year to 11 million tonnes next year. This forecast is based on a decline in demand from major consumers such as the automobile, electrical appliances and property sectors.

The only factor keeping hope alive in the steel business is the government's plan to accelerate the construction of mega-projects, Paisal said.