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Rich Sales Soaring, Share Drop Downplayed

June 17, 2008

By Chadamas Chinmaneevong, Bangkok Post, Thailand

Jun. 14–Rich Asia Steel projects its revenues will jump to over 10 billion baht this year, more than double last year’s total, thanks to continued demand for steel in the regional market.

CEO Angkakarn Tantiviroon said regional demand for steel would continue to be strong as Chinese exports had fallen due to higher domestic demand following last month’s earthquake in Sichuan.

India had also cut back steel exports to support stronger domestic demand, she said, which would also help push prices upward due to supply constraints.

RICH reported 2007 losses of 92.14 million baht on revenues of 4.63 billion baht. In the first quarter this year, profits totalled 64.23 million baht on revenues of 1.65 billion, a sharp turnaround from losses of 175.36 million on revenues of 1.29 billion in the same period last year.

Managing director Somkiat Vongsarojana said average retail steel prices had more than doubled to 40 baht per kilogramme this year from 19 baht last year.

Hot-rolled flat steel is being quoted this week at $1,050 per tonne, compared with $480 last year, with prices expected to reach $1,200 in 2009.

Mr Somkiat said the company’s production capacity had increased to 215,000 tonnes from 125,000 with the opening of a new plant, which will be mostly used to support demand from the auto parts and property sectors.

RICH is also introducing specialty-grade hot-rolled coil for use in LPG tanks to help meet soaring demand for alternative fuel systems in the local market.

He said the company had also arranged new credit lines from various banks in preparation of a significant expansion in the region.

RICH has dominated the headlines after its share price fell by 62 percent over the past five days.

On June 10 alone, the stock dropped by 47.92 percent as forced sales by brokers pushed prices down.

The sell-off came after Rich Asia announced last month that it would raise registered capital to 1.5 billion baht from 1.5 billion with the issue of five billion new shares with a par value of 0.10 baht each.

Existing shareholders will receive one warrant for every two shares held with an exercise price of 0.40 baht per share.

Funds raised from the capital increase will be used to cover short-term debt and as working capital.

“We forecast that the steel price will rapidly increase so we must need working capital to support our business in the future,” Mr Somkiat said.

he noted that the company’s debt-to-equity ratio was now a modest 0.84 times compared with 2.45 times at the end of last year.

He downplayed the sharp sell-down in the company’s stock, saying that major shareholders remained committed to the company’s long-term prospects.

“We aren’t worrying about the share price, and remain confident that if we show good performance, the real value of our shares will materialise in the end,” Mr Somkiat said.

Shares of RICH closed yesterday on the SET at 0.25 baht, down one satang, in trade worth 302.17 million baht.

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