PMB Technology jumps on metallic silicon to unlock bigger opportunities

The appeal of silicon is apparent as more and more products capitalise on its near boundless possibilities

The appeal of silicon is apparent as more and more products capitalise on its near boundless possibilities.

PMB Technology Bhd, recognising the potential, jumped into the metallic silicon business last year in an attempt to diversify its business but more so to get a foothold in more value-added segments and products.

Chief executive officer Koon Poh Ming is thinking of opportunities downstream including in monocrystalline silicon which is used as the base material for silicon-based discrete components and integrated circuits commonly used in modern electronic equipment in the solar and semiconductor industry, as well as sealant — widely used in construction.

“Today, many things around us contain silicon ... the textile industry, whereby the softener has silicon. Silicon-based paint ... a lot of silicon is also used in the car industry. There’s even silicon bottles today,” said Koon after an extraordinary general meeting (EGM) last month, noting their heat-resistant property.

In the EGM, shareholders unanimously voted to dispose of PMB Technology’s entire trading of aluminium extrusion business, to major shareholder Press Metal Aluminium Holdings Bhd for RM44.39 million, to fund its metallic silicon business.

PMB Technology, incorporated in 2002, is an associate company of Press Metal — Southeast Asia’s largest aluminium smelter.

PMB Technology is mainly involved in the design, fabrication and installation of aluminium curtain walls, cladding, skylights and façade works, as well as the fabrication and installation of aluminium system form works. It is also the largest aluminium scaffold system manufacturer and the sole distributor of Haulotte aerial access equipment in Malaysia.

Koon said the aluminium trading business would be “better handled” by Press Metal, and that PMB Technology intends to be very focused on the new core business, especially as it foresees that “times will continue to be tough”. PMB Technology does not expect the disposal to have significant impact on its bottom line, but anticipates a one-time gain.

According to a shareholder circular ahead of the EGM, the businesses being sold make up 26.5% of the group’s net profit for financial year 2018 (FY18) of RM9.3 million. Also, PMB Technology will be recognising a one-off net gain on disposal of RM10.01 million, equivalent to about four years worth of profit contributions from the businesses being sold.

Koon said PMB Technology’s strategy is to streamline its businesses with a clear focus on maximising returns from the metallic silicon business.

The construction of its second-phase manufacturing facility in the Samalaju Industrial Park in Bintulu, Sarawak was on track to be completed by end-2019 but it will only be commissioned in February or March.

Having spent RM300 million on the expansion, PMB Technology projects its production capacity of metallic silicon to double to 72,000 tonnes per year. Together with the completion of the second phase, the group’s total combined built-up area dedicated to its metallic silicon business will be nearly doubled to 1.245 million sq ft from 630,000 sq ft.

PMB Technology is producing about 33,000 tonnes of metallic silicon annually, and is targeting 45,000 tonnes this year, rising to the full capacity of 72,000 tonnes by 2021. “If things all go well ... with 45,000 tonnes of output, our revenue will be hitting about US$80 million to US$90 million and by 2021 will be seeing some US$140 million,” said an optimistic Koon.

He sees annual silicon demand growth normalising to about 5%. “We saw a dip [in silicon demand] because of the trade war, but by next (this) year, we expect the impact from the trade war to taper off,” said Koon, who is hoping to maintain a minimum 5% profit margin for the metallic silicon business amid market volatility.

For the cumulative nine months of FY19, PMB Technology’s profit margin for the total business was about 3%.

Source: The Edge Markets

Posted on : 06 January 2020
Last Updated : Thursday 21st May 2020