Southern Alliance Mining's H2 net profit jumps 257 per cent to RM96.7m

SOUTHERN Alliance Mining (SAM), a Malaysian iron-ore producer, posted a 257 per cent jump in net profit to RM96.7 million (S$31.2 million) for the half-year ended July 31 this year, up from RM27.1 million a year ago.

Revenue rose to RM235.3 million for the same period, up 108 per cent from the RM113.2 million last year.

Earnings per share rose to 19.78 Malaysian cents, up 254 per cent from 5.58 Malaysian cents in the year-ago period.

A final dividend of S$0.016 per share was declared for FY2021, up from S$0.006 per share declared the year before.

For the full year ended July 31, 2021, net profit was up 139 per cent year on year to RM148.1 million; revenue was up 52 per cent to RM387.4 million.

The company said that this came on the back of increased iron-ore concentrate sales revenue. Iron-ore concentrate sales volume increased by about 8 per cent to 600,000 dried metric tonne (DMT); its average realised selling price rose by 76 per cent year on year to reach RM626.42 per DMT.

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SAM's gross profit margin for the year rose to 53.7 per cent, from 42.1 per cent a year ago.

Furthermore, other income increased by 130 per cent to RM6.7 million in FY2021 due to an increase in interest income as a result of higher cash and bank balances. 

In particular, the company received a one-off government grant from the Monetary Authority of Singapore amounting to RM600,000 in FY2021, compared to a grant of RM400,000 from the Social Contribution Appellate Board of Malaysia in FY2020. 

Net cash and cash equivalents at the end of FY2021 rose to RM245.5 million from RM149.9 million a year earlier. Net cash flows from operating activities also improved, from RM111.6 million the year before to RM173.1 million. 

The company said that the group was able to leverage the rise in iron-ore demand as key markets adopted an infrastructure-led recovery, which the company attributed to widespread stimulus packages targeted at boosting investment and spending.

Still, the company has seen a significant correction in iron-ore prices due to the Chinese government's tightening on steel output and the closure of the Ningbo port this year to curb the spread of Covid-19.

In the meantime, the company said that suboptimal production in Brazil, coupled with geopolitical tension between China and Australia, have led Malaysian iron-ore players to emerge as a primary beneficiary of the strong demand momentum.

The company noted that it has acquired an additional mining lease adjacent to its existing Mao’kil mines and will continue with its exploration activities at its Chaah and Mao'kil mines. It is also diversifying into gold-mining operations in a joint venture agreement that it entered into with the Sultan of Johor in July.

In FY2021, the group mined 0.97 million tonnes of ore from the Chaah mine and processed approximately 1 million tonnes of ore. 

Chief executive officer and executive director of SAM Pek Kok Sam said: "Although the Covid-19 pandemic is still evolving, we are confident of our growth prospects as iron-ore demand continues to be strong and hence, will continue to buoy iron-ore prices."

In April this year, Mr Pek said that the company had also started selling tailings, or waste from the iron-ore concentrate process, apart from iron-ore concentrate and pipe coating materials. 

"The main driver of the decision to sell tailings is the high market price. The high price has brought in buyers, particularly those whose business models comprise upgrading low-grade ore (including tailings) by mixing it with higher-grade ore for onward sales," SAM's chief executive Pek Kok Sam told The Business Times then.

"As tailings are not the group's main product, any sale arising from tailings will be a bonus. The demand for tailings will be there as long as the iron ore price remains high," he added.

SAM shares closed at S$0.985, up 0.5 per cent or S$0.005 on Friday.

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