Nico Steel overturns doubts with 15.5% gain

The pandemic and adverse dispute didn&rsquo t stop the company from growing.

Metallurgical and materials solutions specialist Nico Steel Holdings Limited reported a 15.5% increase in revenue to $11.1m (US$8.2m) and a net profit of (US$260,000) for the six months ended 31 August 2020 amidst the intensified trade dispute between the United States and China, and the ongoing coronavirus pandemic.

In a press release, Nico Steel said that although the trade dispute led to uncertainties and derailed the company from some development projects, they have been striving to secure opportunities to work with dominant Chinese brand owners and their key module vendors in the mobile communications sector.

In HY2021, Nico Steel mainly fulfilled orders from regular foreign brands, as well as new orders from the Chinese companies that they received during the Chinese New Year period in late January 2020 and the lockdown of Chinese cities in February 2020.

Geographically, China remained as the key revenue contributor to Nico Steel, contributing 90% of their revenue, an increase from 84.6% HY2020. Revenue from Thailand declined from $1.35m (US$1m) in HY2020 to $1.08m (US$800,000) in HY2021 as the rest of the world outside China continues to grapple with the coronavirus pandemic.

In tandem with the higher revenue, their gross profit increased by 18.5% from $2.17m (US$1.6m) in HY2020 to $2.58m (US$1.9m) in HY2021, as a result of the increase in higher margin value-add customised solutions including electroplating services. Correspondingly, the gross profit margin climbed from 22.7% in HY2020 to 23.3% in HY2021.

Total operating expenses including marketing and distribution, and administrative expenses decreased by 10.4% to $2.17m (US$1.6m) in HY2021.

Marketing and distribution expenses decreased by 22.2% to roughly $282,000 (US$208,000) in HY2021 due to lower marketing and travelling expenses, while administrative expenses fell by 8.4% to $1.9m (US$1.4m) in HY2021 with further cost management. Other expenses shrunk by 4.7% to around $55,000 (US$41,000) in HY2021 due to the decline in foreign exchange losses as the Renminbi depreciated against the US dollar during the financial period under review.

Finance costs decreased by 15.5% from $100,000 (US$74,000) to $84,000 (US$62,000) in HY2021. The decrease was mainly due to lower interest rates in trade facilities and secured bank loans in HY2021 for raw material purchases.

Taking into account the operational expenses, the company reversed its net loss of $385,000 (US$283,000) in HY2020 to a net profit of just about $350,000 (US$260,000) in HY2021. Correspondingly, net asset value increased from $20.3m (US$15m) to $21m (US$15.5m) as at 31 August 2020. Nico Steel&rsquo s balance sheet remains sound and it continues to maintain a net cash position.