Wednesday, Feb 22, 2006
The reaffirmation of Negeri Sembilan Cement Industries Sdn Bhd’s (NSCI) RM200 million Bai Bithaman Ajil Islamic Debt Securities (BaIDS) rating at A+ID(bg) reflects the security provided by AmMerchant and Bumiputra-Commerce Banks’ respective Bank Guarantees; whilst the reaffirmation of the rating MARC-2 ID /A-ID accorded for NSCI’s RM130 million Murabahah Notes Issuance Facilities (MUNIF) reflects improvements in the company’s financial profile and its position as one of the larger integrated cement producers in the domestic cement industry. However, moderating the ratings is the company’s vulnerability to the industry and economic cycles.
A wholly owned subsidiary of Cement Industries of Malaysia Berhad (CIMA), NSCI is the third largest integrated cement producer in the country, behind Lafarge Malayan Cement Berhad and YTL Cement Berhad. The ranking is based on its cement and clinker production capacity of 3.4 million tonnes (m.t.) and 2.8 m.t. per annum respectively. Operating out of two plants, located in Negeri Sembilan and Perlis (where there are two production lines), NSCI has achieved continuous year-on-year growth in its cement and clinker production since the 1997 economic crisis.
The growth of the cement industry is directly correlated to developments in the construction sector. In the near term, higher demand for cement is expected, in tandem with the construction sector’s expected recovery in 2006 and growth is expected to increase by 3% (2005: -1.1%), spurred by a turnaround in the civil-engineering sub sector, following the expected implementation of new infrastructure projects under the Ninth Malaysian Plan (9MP). The financial performance of the cement manufacturers will largely depend on the level of domestic demand and cement price stability.
Although revenue in FY2004 increased marginally by 3.9% to RM378.0 million, gross profit decreased to RM68.5 million due to the escalation of production costs, primarily due to an increase in coal prices. Profit from operation increased by 11.1% to RM47.3 million, resulting in an improvement in operating profit margin. For the eight months period ended August 2005, NSCI recorded operating profit of RM22.2 million and pre-tax profit of RM10.5 million on the back of RM251.0 million in revenue. NSCI’s sales were relatively affected by the slowdown in construction activities in the first half of 2005 with revenue at 7.8% below its budgeted figure.
The debt to equity ratio as at end August 2005 was 0.6 times, below the covenanted level of 0.8 times. Going forward, the leverage level is expected to improve progressively with the amortization of the BaIDS and MUNIF.
A wholly owned subsidiary of Cement Industries of Malaysia Berhad (CIMA), NSCI is the third largest integrated cement producer in the country, behind Lafarge Malayan Cement Berhad and YTL Cement Berhad. The ranking is based on its cement and clinker production capacity of 3.4 million tonnes (m.t.) and 2.8 m.t. per annum respectively. Operating out of two plants, located in Negeri Sembilan and Perlis (where there are two production lines), NSCI has achieved continuous year-on-year growth in its cement and clinker production since the 1997 economic crisis.
The growth of the cement industry is directly correlated to developments in the construction sector. In the near term, higher demand for cement is expected, in tandem with the construction sector’s expected recovery in 2006 and growth is expected to increase by 3% (2005: -1.1%), spurred by a turnaround in the civil-engineering sub sector, following the expected implementation of new infrastructure projects under the Ninth Malaysian Plan (9MP). The financial performance of the cement manufacturers will largely depend on the level of domestic demand and cement price stability.
Although revenue in FY2004 increased marginally by 3.9% to RM378.0 million, gross profit decreased to RM68.5 million due to the escalation of production costs, primarily due to an increase in coal prices. Profit from operation increased by 11.1% to RM47.3 million, resulting in an improvement in operating profit margin. For the eight months period ended August 2005, NSCI recorded operating profit of RM22.2 million and pre-tax profit of RM10.5 million on the back of RM251.0 million in revenue. NSCI’s sales were relatively affected by the slowdown in construction activities in the first half of 2005 with revenue at 7.8% below its budgeted figure.
The debt to equity ratio as at end August 2005 was 0.6 times, below the covenanted level of 0.8 times. Going forward, the leverage level is expected to improve progressively with the amortization of the BaIDS and MUNIF.