SET-listed Tata Steel Thailand Plc (TSTH), the local unit of India's largest steelmaker, is conservative about sales volumes for its 2019 fiscal year, which began in April, projecting slight growth to 1.24-1.25 million tonnes after witnessing overall rebar volume in the country shrinking during January to June.
Tata's projection is down from the 1.32-1.35 million tonnes projected earlier.
The company's related rebar products represent roughly 55% of all steel products sold in the domestic market.
Thailand's rebar sales volume dropped by 5.4% to 2.6 million tonnes in the first six months of 2018, said chief executive Rajiv Mangal.
"Disbursement of the government's budget did not meet the company's expectations, particularly for the state's megaprojects," he said.
"Meanwhile, many long weekends and the early rainy season also reduced local rebar demand."
The related rebar products are normally used for the construction sector.
Mr Mangal said he remains confident about overall rebar volume in 2018 reaching 6 million tonnes, unchanged from the year before, as Tata expects local sales volume in the second half to exceed 2.6 million tonnes.
"Rebar demand is expected to recover in the second half as we believe the government will speed up megaprojects -- for metropolitan mass transit and highways -- and the construction sector will return to positive movements," he said.
Moreover, Tata forecasts overall steel demand will grow by 5-8% this year to 18 million tonnes because the government will accelerate the construction of megaprojects.
Last year, Thailand's steel demand dropped by 5-6% to 17.8 million tonnes.
In a related development, Tata posted revenue for its first quarter of fiscal 2019, ending in June, of 5.4 billion baht, up by 18% year-on-year. Total steel volume for the period stood at 281,500 tonnes, up by 1.91%.
The company posted a net profit of 56 million baht from April to June.
Mr Mangal said Tata's steel exports to other Asian countries such as India, Cambodia and Laos could offset the slowdown in construction sales in Thailand.
He said Tata expects its financial performance in the second quarter of its fiscal year, starting in July, to be better than the first quarter.
"There will be many positive signs from high-speed and double-track railway projects increasing steel consumption," Mr Mangal said. "Moreover, Tata Thailand plans to increase steel exports as demand has increased significantly in other markets."
Tata is planning to increase production capacity of cut-and-bend steel with a 75-85 million baht investment to upgrade its machinery as it aims to serve demand growth of this product.
Cut-and-bend steel is a type of rebar. Tata produces 10,000-13,000 tonnes per month and wants to add another 3,000-3,500 tonnes per month.
Tata also targets high value-added products, including cut-and-bend steel, deformed bar, high tensile rebar and seismic rebar by another 22-25% to 220,000 tonnes in fiscal 2019 because those products have higher margins, meet buyers' demands and are ready to use.
TSTH shares closed yesterday on the SET at 0.76 baht, up one satang, in trade worth 210,920 baht.