OMH’s Sarawak plant to see higher production volume

Nov 14, 2023

The group guided for a total output of 340 to 400 million tonnes (MT) in FY23 from its plant in Sarawak, versus 320 to 370MT three months ago thanks to higher capacity utilisation as more furnaces, which are under major maintenance, are expected to restart sooner than expected.

KUCHING (Aug 1): OM Holdings Ltd (OMH) guided for higher FY23 production volume in its financial year 2023 (FY23) due to shorter maintenance periods for a few furnaces.

The group in an analysts briefing guided for a total output of 340 to 400 million tonnes (MT) in FY23 from its plant in Sarawak, versus 320 to 370MT three months ago thanks to higher capacity utilisation as more furnaces, which are under major maintenance, are expected to restart sooner than expected.

Its two manganese alloy furnaces and one ferrosilicon furnace completed their major maintenance in 2HFY23 as compared to only two manganese alloy furnaces in 1QFY23.

“The remaining five ferrosilicon furnaces will undergo major maintenance works in phases throughout 2HFY23. FY23 production base case is at similar levels to FY22,” said analysts with Kenanga Investment Bank Bhd (Kenanga Research) in its review today.

It guided for ferrosilicon production volume of 120 to 140MT in FY23 (60MT in 1HFY23) and 223 to 263MT for manganese alloy production volume in FY23 (123MT in 1HFY23).

Its metallic silicon production was temporarily suspended in 2QFY23 due to the furnace not performing as anticipated within the framework of the EPC contract.

“Instead, ferrosilicon was temporarily produced from a MetSi furnace given better prices and margins over manganese alloy. The metallic silicon production is expected to restart in early 2024.

“Ferrosilicon spot price fell seven per cent to US$1,559 per MT on average in 1HFY23 versus US$1,682 in 2HFY22 due to elevated inventory and lower input costs.

“Meanwhile, manganese alloy ASP also continued to decline due to a similar reason as FeSi prices have already retraced to 4QFY22 levels despite higher power price.

The silicomanganese spot price dipped three per cent to US$1,033 per MT in 1HFY23 from US$1,063 per MT in 2HFY22.

In view of the weak ASP and lower-than-expected manganese alloy production volume, we cut our FY23 to FY24 earnings estimates by 56 to 22 per cent to US$34.6 million to US$55 million.

“We also reduce manganese alloy production assumption by 18 to 13 per cent to 220.8MT-254.8MT from 270MT-294MT previously; and ferrosilicon ASP assumption to US$1,500 per MT for FY23 from US$1,600 and manganese alloy ASP assumption to US$900 for FY23 from US$1,000.

“However, we maintain our FY24 ASP assumptions for ferrosilicon and manganese alloy unchanged at US$1,350 and US$950 respectively. We also keep our US$0.015 NDPS unchanged.

“We continue to like OMH for its structural cost advantage over its international peers given its access to low-cost hydro-power under a 20-year contract ending 2033; its strong growth prospects underpinned by plans to expand its capacity by 30 to 36 per cent to 610,000-640,000 metric tonnes per annum over the medium term; and its appeal to investors given its clean energy source.”