Rising steel price poised to enhance U-Li's profit

UNITED U-LI Corp Bhd, a maker of light fittings and cable support systems, expects higher profit margins this year as it benefits from rising steel prices.

Steel prices are hovering at RM4,000 per tonne, the highest in history, compared with RM3,200 per tonne some three months ago.

"The selling benchmark is better than last year's. Normally, we don't stomach the higher raw material cost. We pass it on to end customers," group managing director and chief executive officer, Datuk James Y. W. Lee told Business Times in an interview.

The company is optimistic it will continue to register high profit margins because of the cost mechanism.

"We are projecting 20 per cent growth in revenue this year and profit would grow in tandem with sales as we grow the local and export market and from higher selling price," Lee said.

U-Li makes building materials, integrated ceiling systems, steel roof battens, light fittings and cable support system for the housing and building construction, oil and gas, transportation, telecommunications and water industries.

For the fiscal year ended December 31 2007, it posted a net profit of RM10.25 million on the back of a RM145.6 million revenue.

For the first quarter of 2008, its net profit and revenue doubled to RM4.5 million and RM42.4 million, respectively.

Seventy per cent of the profit and revenue came from its local operation.

"We expect the growth momentum to prolong until year-end. We usually have up to RM80 million worth of contracts in hand at any one time to support the business," Lee said.

According to the company's annual report, its compounded annual growth rate over the last five years has been 20 per cent.

"We expect to replicate the past with double-digit growth. Steel prices are not stable. We expect it to increase, which would translate to more revenue. So rising raw material cost is in our favour. We always turn recession into opportunity," Lee said.

"Downstream activities have a good chance to increase selling price," he added.

Industry players are predicting that steel prices will hit RM5,000 per tonne by year-end, marking another new high.

"Our expansion will come in a year or two from now. Right now, we want to concentrate on business development," Lee said.

By New Straits Times (by Sharen Kaur)