Chia Yi Steel Co Ltd (嘉義鋼鐵), which manufactures steel products for the hydraulic, automobile and agricultural industries, yesterday said that it expects revenue to grow more than 15 percent annually this year, on the back of increasing orders from the agricultural and construction machinery sectors.
“After several years of a slump in the industry, the company has seen a better-than-expected recovery in customer demand since the beginning of this year,” company chairman Tsao Kuang-chao (曹光照) said by telephone yesterday, citing growing orders placed from Chinese and Japanese machinery makers.
Demand has been improving as global clients seem to be more willing to purchase new equipment this year after bloated inventories eased, Tsao said.
The company received some rush orders in the first quarter, he said.
To cope with rising demand, the company plans to expand its annual capacity from 22,000 tonnes to 28,000 tonnes by the end of the year, which would also help lift margins as it would not have to pay overtime, he said.
Tsao gave an optimistic business outlook for the rest of the year.
“Chia Yi Steel is likely to reach the break-even point in the second half,” he said.
The company has been in the red for the past two years.
The company lost NT$33.99 million (US$1.13 million) in the first quarter, compared with NT$6.44 million in the same period last year, it said in a filing with the Taiwan Stock Exchange.
Gross margin plunged to 8.18 percent last quarter from 18.71 percent in the first quarter of last year. The company blamed the decline on higher-than-expected labor and transportation costs, as well as an unfavorable product portfolio.
However, revenue in the first quarter rose 9.84 percent to NT$247.4 million from NT$225.2 million for the same period last year.
China and Japan are two major revenue sources for the company, accounting for 40 percent and 30 percent respectively.
In related news, the company’s board this month approved a plan to raise NT$69 billion by issuing 6 million new shares. The proceeds are to be used to repay bank loans and strengthen capital structure.
The steelmaker set the price of the new shares at NT$11.5, the company’s filing to the stock exchange showed.
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