YANGON: SET-listed steelmaker Millcon Steel Plc (MILL) plans to use its new Myanmar factory as a base for commercial-grade production while developing Thailand's production to move towards high-grade steel to serve more advanced technology in industry.
Sittichai: Tailoring output to local needs
Chief executive and president Sittichai Leeswadtrakul said his company had joined Thai concrete materials maker General Engineering Plc to buy a 2.3-hectare site in Myanmar's Thilawa Industrial Estate for a factory producing steel mainly for construction and prefabricated concrete materials.
Millcon, controlled by the second generation of the Leeswadtrakul family, owns 40% of the new asset, which requires an investment not exceeding US$14 million. General Engineering also owns 40% and local partners 20%.
The company started its business in Myanmar three years ago with a representative office under the operation of Mill Thiha Co, its venture with Myanmar partner Thiha.
"Mill Thiha is ready to be a distributor for products from the new plant in Thilawa," said Mr Sittichai.
The project is expected to be completed in next year's second or third quarter, generating annual revenue to Millcon of 900 million baht.
Mr Sittichai said his company planned to use Myanmar as a base for commercial-grade production, as the type of products fit well with market demand.
"Myanmar is in the early stage of development, so it requires basic infrastructure that will need a lot of commercial-grade and construction steel," he said.
In Thailand, Millcon will move towards special-grade steel production by integrating the facilities and technology of Thai Special Steel Industry Plc (TSSI), which it recently purchased from the Thai Asset Management Corporation for more than 3 billion baht.
The company took more than three years to complete the deal due to legal cases and accrued debts at TSSI, which was one of the companies hardest hit by the 1997 financial crisis.
"It's a good deal for us. TSSI is the only company that produces special wire rods as a raw material for hundreds of fittings or fasteners used mainly in the automotive, electrical appliance and machinery sectors," said Mr Sittichai.
These wire rods are now imported despite Thailand being a major production hub for cars and electrical appliances. TSSI, which will operate as Millcon Special Steel, will produce 150,000 tonnes a year of wire rods in its first phase before expanding to its full capacity of 500,000 tonnes.
"One of the most valuable assets in TSSI is its 600 rai of land in the middle of Map Ta Phut, and that's hard to find these days. Its value has skyrocketed since 1997," said Mr Sittichai.
Millcon's annual capacity for producing billets, steel bars, structural steel and other long-shaped steel is 850,000 tonnes. With the acquisition of TSSI, capacity will rise to 1.35 million tonnes next year.
The company recently agreed finance facilities of 7.4 billion baht with Bangkok Bank.
The first phase to make TSSI's facilities operational will cost 600 million baht, the second phase will require 1 to 1.5 billion baht for starting production of the special wire rods and for upgrading products step by step, and the rest of the funds will be used as working capital. Millcon recently increased its registered capital by 1.5 billion baht.
It hopes that after TSSI generates revenue, its earnings before interest tax depreciation and amortisation will improve to 15% from 7-8%.
MILL shares closed Friday on the SET at 2.26 baht, up four satang, in trade worth 5.84 million baht.