Rising aluminium prices won’t hurt Swisstek or Alumex
View(s):Aluminium prices have been spiking up over the past six months by nearly 20 per cent (US$ 1901 / Metric Tonnes (MT) in March ’17) while the rupee has depreciated by some 4 per cent year on year.
In this light leading aluminium firms, Swisstek Aluminium and Alumex PLC – both companies under businessman Dammika Perera controlled conglomerates – have been impacted by the price hikes, but analysts say that both firms will ride this bad patch as the demand for aluminium products is so high for infrastructure. Alumex and Swisstek are both in the business of manufacturing and selling aluminium extrusions for the local and export markets.
Alumex came under the umbrella of Mr. Perera diversified conglomerate, Hayleys PLC in November, 2010 while Swisstek is under his Lanka Waltiles Group. Alumex is the market leader with a market share of over 50 per cent maintained during the past decade and Swisstek has some 40 per cent.
Swisstek Aluminium profit before taxation dropped 6.2 per cent in Q3FY17 owing to higher aluminium prices eroding its margins. Alumex’s gross profit margin dropped to 30.2 per cent (Q3 FY 16 – 32.7 per cent) and earnings before interest and taxes (EBIT) margin to 20.7 per cent (Q3 FY16 – 23.4 per cent).
Alumex has already enforced a near 5 per cent price increase, and may see further increases to pass the cost to customers due to rising prices, analysts said. “The total demand now for aluminium is 2,500 MT for a month. So there’s a lot of scope,” an analyst said. “The Lanka Walltiles’ subsidiary Swisstek intends to fulfill more than half this demand,” an official told the Business Times. He added that the company would continue to see demand assisted by the rapid infrastructure development in the city.