Managing director and major shareholder Sittichai Leeswadtrakul vows to upgrade the image of Mill Con Steel Industries from a family to a professional business by welcoming foreign firms as partners.
To ensure that the growth of Mill Con is sustainable in the steel industry, which faces fluctuations because its prices follow global trends, it must adjust its shareholding structure as well as organisation structure, he said.
The Leeswadtrakul family has been known as steelmakers, as they own both Mill Con and G Steel.
A road map for Mill Con has been laid out for the next three to five years to make it grow steadily and become professionally managed as well as to develop into an integrated steel products manufacturer.
Mill Con is a manufacturer and distributor of round bars and deformed bars from steel billet.
Mill Con wants to raise capital by welcoming foreign companies to invest in it. The injected funds would be used to build a Bt3.8-billion green mill to help the company fortify its position in the steel industry.
"My family and I opted to reduce our stake in Mill Con to 20 per cent from 40 per cent so foreign partners can hold shares in the company. We can raise funds through the new share allotment and have already received a loan of Bt5 billion from Bangkok Bank to invest in the green mill," he said.
Mill Con is issuing 763 million new shares on top of its 580 million existing shares. About 218 million of the new shares will be allotted for convertible debentures for its subsidiary in Germany called DEG. The convertible debentures will be completed when the green mill is up and running by the end of next year. The rest of the new shares will go to IB Thailand, a subsidiary in Italy and Aero Sun Investments Ltd.
When the share allotment is completed as expected next quarter, he and his family will hold 20 per cent of Mill Con, DEG 8 per cent, IB Thailand 6 per cent and Aero Sun 4-5 per cent. The new partners will send their representatives to sit on the board of directors.
The green mill has a production capacity of 5 million tonnes a year, of which 350,000 tonnes will be supplied to Mill Con and the rest will be sold to the partners.
Mill Con's business and financial structures will be significantly changed in 2012 because the green mill has its own melting furnace, which can produce steel by itself. The company can buy steel scrap instead of importing steel billet and cut raw-material cost. Steel scrap sells for about US$300 per tonne, while steel billet is $600 per tonne.
The cost reduction will drive its income because its gross margin will improve to 15-20 per cent from 5-8 per cent now. Earnings before interest, tax, depreciation and amortisation will rise to Bt1.5 billion-Bt1.6 billion from Bt400 million-Bt500 million currently.
"In 2012, our financial status and shareholder structure will be stronger. The company can compete in this industry after changing to a middle-downstream business from presently only a downstream business," he said.