SINGAPORE (Feb 7): Union Steel Holdings, the metal recycling company, reported a 31.5% drop earnings to $0.3 million in 2Q18 from $0.5 million in 2Q17.
Group revenue decreased by 27.8% to $17.0 million in 2Q18 mainly due to lower contribution from its steel trading and marine equipment businesses in Singapore.
The lower contribution was partially offset by the maiden revenue contribution of $2.9 million from its industrial crane business and higher contribution from its mechanical engineering business.
Despite a fall in the group’s gross profit, gross profit margin improved to 19.4% in 2Q18 from 18.1% in 2Q17, supported by profit contribution from the mechanical engineering and scaffolding services, as these business segments command higher profit margins relative to the group’s recycling and trading business segments.
Lower revenue and gross profit, coupled with a 26.0% decline in other operating income in 2Q18 due to lower rental income generated and foreign exchange gain, led to a sharp decline of 78.0% in the group’s profit before tax.
The group’s cash and cash equivalents remained high at $21.5 million, even after taking into account the repayment of $4.5 million in bank loan in 2Q18. Net gearing decreased to 24.3% as at Dec 31, 2017 from 37.2% as at June 30, 2017.
Union Steel says the outlook for the steel industry remains challenging as steel prices are volatile and demand is expected to remain soft in the next few quarters.
Shares in Union Steel closed flat at 72 cents on Wednesday.