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BRC Asia Q2 profit soars to S$5.4m on acquisition of peer; adopts new dividend policy

STEEL-BAR seller BRC Asia's second-quarter net profit soared to S$5.4 million, eight times its S$661,000 profit for the year-ago period, which excluded a S$313,000 gain after tax from discontinued operations.

The higher profit for the quarter to March 31, 2019 was attributed to higher revenue generated from the sales order book of steel fabricator Lee Metal Group - which BRC Asia bought in July 2018 - and better buying power for bulk purchase of raw material.

The group also adopted new dividend policies that will see it paying out a target annual dividend of not less than 30 per cent of net profit for fiscal 2019 and 2020.

No dividend was declared for the quarter, but the group intends to pay a final dividend of at least five Singapore cents per share for fiscal 2019.

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Earnings per share was 2.3 Singapore cents versus 0.31 Singapore cent previously. BRC shares were up 1.5 per cent, or S$0.02 at S$1.35 as at 11.01am.

Revenue more than doubled to S$231.1 million, from S$109 million on higher volume of value-added sales tonnage delivered, which was partly contributed by Lee Metal, and increased selling prices due to higher steel costs.

The group noted that construction demand had bottomed out in 2017 and continues to show growth, with construction output having registered its first expansion in the fourth quarter of 2018 after nine consecutive quarters of contraction.

Additionally, the April announcement by integrated resorts operators to build a fourth tower at Marina Bay Sands, a 15,000-seat entertainment arena, 2,000 more hotel rooms and a bigger Universal Studios Singapore theme park should provide a boost for construction demand in the coming few years.

Growth in construction demand will be anchored by mega projects in the transport sector for the foreseeable future, the group said.

These projects include the planned North-South Corridor Expressway, the Thomson East-Coast MRT Line, Changi Airport Terminal 5 and the Tuas Mega Port, which is expected to be the largest container terminal in the world when completed in 2040.

In contrast, the pipeline for new public residential housing remains muted.

Against this backdrop, the group said it is experiencing an improving demand landscape for reinforcing steel, and together with the rolling completion of projects that were taken during the construction industry downturn over the last couple of years, it expects healthier profitability in the future.

As at March 31, BRC Asia's order book was about S$750 million, and the duration of the projects in the sale order book may be up to five years.