YEAR IN REVIEW
Resources
Newly smelted tin ingots
Straits Trading’s 54.8% owned resources subsidiary, Malaysia
Smelting Corporation Berhad (“MSC”) has, in the last few
years, embarked on a long and difficult journey of strategic
restructuring to bring MSC back to its core tin business
and de-risk its earlier multi-resource business model. Key
elements of this strategy include divestments of non-tin
related assets, exiting from Indonesia by disposing of
MSC’s remaining interests in the Indonesian tin business
and further enhancing the profitable core operations.
The execution of this strategy led to a series of significant
impairment provisions which affected MSC’s bottom line.
Fortunately, this was mitigated by the strong performance
at its core tin operations. However, with the completion of
the disposal of its Indonesian subsidiaries and most of its
remaining non-tin assets, MSC can now look forward to a
more consistent positive performance and improved cash
flow from its profitable core operations in the years ahead.
FINANCIAL PERFORMANCE
The core operations of MSC, comprising the Butterworth
international smelting business and Rahman Hydraulic Tin
mine, continued to be profitable. However combined pretax
profit was lower at RM68.43 million in FY2014 compared
with RM100.24 million in FY2013. Profit from continuing
operations was RM44.99 million before tax and RM22.66
million after tax respectively in FY2014. Earnings were
dragged down primarily by higher cost pressures leading
to a lower profit margin, provision for financial guarantees
relating to MSC’s operations in Indonesia amounting to
RM9.6 million as well as the negative impact of foreign
currency translation.
Revenue increased 21% to RM1.9 billion in FY2014 from
RM1.6 billion for FY2013, helped by higher sales quantity
of refined tin.
INTERNATIONAL SMELTING BUSINESS
The Butterworth international smelting operations achieved
a pre-tax profit of RM38.63 million in 2014. Tin production
increased to 34,971 tonnes in FY2014 from 32,668 tonnes in
FY2013, helping to maintain MSC’s position as the second
largest producer of refined tin metal in the world. The
higher production was achieved on the back of an increase
in smelting throughput and a healthy intake of crude tin
metal in 2014. During the course of the year, a new furnace
was commissioned increasing the overall smelting capacity
by 15%.
However, intake of crude tin, which has been a major intake
component for refining at the Butterworth smelter for a
number of years, will remain highly volatile and is very much
contingent on the quantity imported from Indonesia.
RAHMAN HYDRAULIC TIN SDN BHD (“RHT”)
RHT operates a hard rock open pit mine in the State of
Perak and is Malaysia’s oldest and largest operating tin
mine accounting for about 40 to 60% of the country’s tin
production. The mine maintains a clean safety record and
complies with stringent regulatory environmental and
mining standards.
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THE STRAITS TRADING COMPANY LIMITED ANNUAL REPORT 2014
