KUALA LUMPUR: Southern Steel Bhd’s joint venture with Belgium-based steel wire producer NV Bekaert SA for the production and marketing of specialised steel wire is expected to strengthen its presence in Asean.

According to Southern Steel, the joint venture company Bekaert Southern Wire Pte Ltd (Bekaert Singapore) that was set up in Singapore last month, brings together a part of NV Bekaert’s Indonesian operations and Southern Steel’s wire operations in Malaysia.

“The joint venture was negotiated for the manufacture and sales of specified steel wires for the Asean region. The JV complements and increases the service level to customers,” said group managing director Datuk Dr Tan Tat Wai in the company’s annual report released last week.

NV Bekaert, a global leader in wire production technology, will inject its entire galvanised and multi-coated wire business in Indonesia into Bekaert Singapore. In turn, Southern Steel will inject its wholly-owned subsidiaries Southern Speciality Wire Sdn Bhd and Southern Wire Industries Sdn Bhd. Southern Steel’s wire operations include two production plants  in Shah Alam and in Ipoh.

According to a previous statement from Bekaert, the product portfolio of Southern Steel’s wire operations includes a wide range of galvanised and speciality steel that complement its operations in Karawang, Indonesia. Bekaert will hold 55% equity interest in the JV company, with Southern Steel holding the rest.

According to Southern Steel, the steel wire operations have come under pressure due to an influx of imports. “Southern Wire Industries’ export-oriented business came under stronger pressure due to depressed international market conditions and an influx of imports. This resulted in increased losses in FY12 with lower volume recorded,” said Tan in the annual report.

According to chairman Datuk Kwek Leng San, the group’s revenue grew 6% to RM3.3 billion, but profit attributable to shareholders declined to RM8.7 million from the previous corresponding period.

Despite the lower profit, the overall cash flow of the group was positive, enabling it to pay a first and second interim tax-exempt dividend totalling 10 sen per share in financial year 2012.

Nevertheless, “barring any unforeseen circumstances, the board expects the group to perform better in the new financial year ending June 30, 2013”, added Kwek.

The steel industry has been hit by increased competition due to an influx of imports, particularly from China. According to industry executives, imports tend to have an advantage over local millers as they benefit from the harmonised tariff under trade agreements between Asean countries as well as the Asean-China Free Trade Agreement.

This article first appeared in The Edge Financial Daily, on Oct 8, 2012.