OM Holdings (OMH) has reported its 1HFY24 results, which came in line with expectations, as higher sales volume following the completion of a major maintenance cycle is anticipated to boost the topline in 2HFY24. Analysts at Kenanga Stock Broking House have maintained an OUTPERFORM call, reflecting confidence in the company's future performance despite challenges in the global steel sector.
For the first half of the financial year, OMH recorded a net profit of USD12.7 million, accounting for 43% and 45% of the house and street's full-year estimates, respectively. The company did not declare any dividends during this period. Year-on-year, revenue fell by 4% to USD308.4 million, primarily due to a 49% decrease in ore volumes traded and lower average selling prices (ASP). S&P Platts data indicated that the spot price for ferrosilicon (FeSi) dropped by 19%, while silicomanganese (SiMn) prices decreased by 2%. In contrast, raw material costs surged, resulting in a significant 33% decline in net profit.
On a half-year basis, OMH's revenue increased by 14% compared to USD269.5 million in 2HFY23, supported by a 22% rise in alloy sales and a higher realised ASP from SiMn. The spot price for SiMn saw a 14% increase, while FeSi prices dipped slightly by 4%. This growth allowed the company to recover from a small net loss of USD0.1 million in the previous half, achieving a net profit of USD12.7 million.
Looking ahead, analysts at Kenanga have revised production volume guidance for FY24, expecting an output of 460,000 to 490,000 metric tonnes per annum (MTPA), an increase from the previous estimate of 430,000 to 470,000 MTPA. This adjustment follows the successful completion of major maintenance on 14 out of 16 furnaces, with the remaining two FeSi furnaces scheduled for maintenance in 2025. Despite subdued demand from the steel sector, the ASP is expected to stabilise, as it has already surpassed the levels seen in 2HFY23.