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The Star Online: Business

Where’s the buzz?
Abu Sahid’s nerves of steel will see the company through
Maersk Signs US$54mil Rig Contract With Petronas

Posted:

SOMEWHERE in Corporate Malaysia, the
clock is ticking. It's nothing like a time
bomb, but still it's foolish to do nothing
before the deadline. The problem is, there's
less than three weeks to go.

That may sound like quite a bit of time, but
not so if you have to go through two lengthy
documents, totalling over 750 pages. Most
of these pages contain what are meant to be
statutory provisions eventually, and those are
written in the highly exact yet knotty language
of the lawyers.

Here's a delightful example: "A conversion
of a company pursuant to this section shall
not affect the identity of the company or any
rights or obligations of the company or render
defective any legal proceedings by or against
the company and any legal proceedings that
could have been continued or commenced
by or against it prior to the conversion may,
notwithstanding the conversion, be continued
or commenced by or against it after the conversion."

On July 2, the Companies Commission of
Malaysia (CCM) published exposure drafts on
the Companies Bill and the Interest Schemes
Bill. The public have until Aug 1 to submit
feedback via email.

These documents have much relevance
to the corporate and investment landscape
in Malaysia. The Companies Bill sets out
the legal framework that will replace the
Companies Act 1965, while the Interest
Schemes Bill contains provisions that will
separately govern the breed of investment
schemes that currently come under the
Companies Act.

In a May 2012 presentation at an MIA
event, a CCM senior officer said: "The new
Companies Bill will revolutionise the way
people do business in Malaysia."

Sure, the journey from exposure draft to
legislation will extend far beyond Aug 1 – the
Bills have to be passed in Parliament, for one
thing – but the stakeholders should familiarise
themselves with what's coming, and if
they have reservations or suggestions, now is
the best time to speak up.

Although this process of releasing exposure
drafts and inviting views and recommendations
is called a public consultation, the CCM
seems to be targeting a narrow audience.

There's no indication that the commission
had issued a press release on this matter. As
such, you're more likely to find out about the
exposure drafts if you visit the CCM website
or Facebook page. Another way is if you
belong to certain professional bodies that
presumably have been notified by the commission
and have announced the matter to
members.

Two such bodies are the Malaysian Institute
of Accountants (MIA) and Malaysian Institute
of Chartered Secretaries and Administrators
(Maicsa). That's understandable because company
law is central to the work of auditors
and company secretaries.

It appears that the two institutes are gathering
input from members to be forwarded to
the CCM. Each has set an earlier deadline for
feedback – July 15 for Maicsa members and
July 19 for MIA members.

Some speed-reading skills will be useful.
The consultation document on the Companies
Bill has 642 pages, with the draft Bill itself
stretched over 615 pages.

But what about the lawyers, bankers and
corporate finance specialists? Shouldn't there
be active discussions within their respective
circles about the Bills?

Yet, the websites of the Bar Council,
Association of Banks in Malaysia and
Malaysian Investment Banking Association
don't mention the CCM's public consultation
on the exposure drafts.

In fact, judging from the lack of recent
mentions in cyberspace and the media, the
Bills have apparently escaped the notice of
most people in the local business world.
That's not a good sign.

Unless you've been closely following company
law developments in Malaysia over the
past decade, there's a lot of catching up to do.

It was back in December 2003 that
the CCM kick-started the Corporate Law
Reform Programme through a review of the
Companies Act. The aim was to have "a conducive
and dynamic business and regulatory
environment for this country".

The commission formed the Corporate Law
Reform Committee (CLRC), chaired by former
Court of Appeal judge Datuk K.C. Vohrah,
to spearhead the review. Among the committee
members were representatives from
the public sector and regulators, lawyers,
accountants, secretarial practitioners and
academicians.

The CLRC submitted its final report to
the Domestic Trade and Consumer Affairs
Minister in June 2008. The CCM accepted all
but five of the report's 188 recommendations,
and these were translated into 19 policy
statements approved by the Cabinet in 2010.

But the revamp was not yet over.
In February 2010, the CCM set up the
Accounting Issues Consultative Committee
(AICC), whose members were mostly drawn
from the accounting bodies and regulators.

The objective was to align the new legal
framework for companies with the international
accounting standards and practices. The
AICC's recommendations have been incorporated
in the Companies Bill.

There were other inputs that helped
shaped the Bill. These came from regulatory
authorities and professional bodies, and from
recent World Bank and OECD reports.

Although a lot of views have already been
reflected in the Com panies Bill, it doesn't
mean it no longer requires any scrutiny and
polishing.

The corporate sector evolves fast; a proposed
measure that made sense five years
ago may now be irrelevant or worse, counterproductive.

Amid that long review process,
new stakeholders may have emerged and
their interests may have been overlooked.

The Companies Act is a major influence
over how business is conducted in Malaysia.

After almost 10 years and a false start or two,
we're getting so close to the introduction of a
total replacement. Here's when we ought to
resist haste and impatience, and instead focus
on making sure that the law is the best that
it can be.

Executive editor Errol Oh is lookin g forward to the corpor ate milestone o f the new Companies Act coming in to force.

Abu Sahid’s nerves of steel will see the company through

Posted:

IN his typical no holds barred manner, the exuberant Tan Sri Abu Sahid Mohamed gives StarBizWeek an insight into his entire 17 years of involvement in the long-ailing Perwaja Steel. Reiterating the fact that the asset was thrust on to him by the Government, Abu Sahid says "I am not crazy to have wanted this.

I am an operator (of businesses) and that's why I was asked to turn this around". Abu Sahid also recalls how there were a number of offers coming to him in the early days of him taking over Perwaja by local and foreign players including by the Mittal Steel company, which he turned down as that would have meant Perwaja would no longer be the country's main steel supplier.

"Every developed country needs a large steel player for development," he enthuses. All is not lost for Perwaja, Abu Sahid claims and there are plans to nudge it back to health, despite the numerous headwinds it is facing. Here are excerpt of that interview:

SBW: Please tell us how you got roped into Perwaja?

AS: I never asked for Perwaja. I am not a crazy man. I am an operator, a businessman, not a corporate player. I know what to do to turn around businesses. The Government was looking for a solution and one day Tun Mahathir (then prime minister Tun Dr Mahathir Mohamad) called me, and we met for two and a half hours… Two hours 20 minutes to be exact. 'I want you to take over the running of Perwaja. You know what this is all about,' he said.

I was shocked. I was a small businessman and had no money. But I was supplying scrap metal, transportation and technology to Perwaja. I also supplied spare parts to UMW. And that's how I got to know Eric Chia (the late Tan Sri Eric Chia who ran Perwaja from 1988 to 1995).

The instruction from the Government was simply this: 'This is the price, you make it happen'. But there was no way I could have made it with the price given and that's why it took a while for us to negotiate on the final price. That was in 1996 when they asked me to move into Perwaja. But it was only in 2003 when we completed the privatisation. So in effect, I was

the company for a number of years without owning it. I promised the Government, give me 10 years to make it happen. We lost money, year after year, for eight years. After 10 years, I privatised it. (I thought) when I find a strategic partner, I will list it.

I targeted to list the company on Aug 20, 2008 (20/08/2008). You know why? It's my birthday. You can never get another "20/08/2008". That was the day Perwaja was listed.

Why did you hold on to the company considering its troubles and difficult business?

Yes, there were a number of attractive offers. From parties ranging from Tan Sri William Cheng, Tan Sri Quek Leng Chan, Lakshmi Mittal.

But I had promised the Government to make Perwaja happen. Not to flip it. The Mittal group had a sixmonth long discussion with me. They flew in on their private jets for many meetings. Not unexpectedly, they wanted to take whole of it (the business) cheaply and I didn't' agree. Also, selling Perwaja to any party who does not share the same nationalist goals is risky. They could change the entire focus, change the management, have foreigners running entirely for their shareholders benefit, which is good for them, but how would that benefit Malaysia. Every developing country needs its own steel industry.

So they must have seen potential in Perwaja ?

Of course! If Perwaja does not have potential, I won't be talking to you. I would be hiding under the table! I am not a corporate player.

They (corporate players) always make money buying and selling assets and they disappear . Can you update us about Perwaja's bonds, which are seemingly in trouble?

We have already repaid over RM200mil of bonds, out of the close to RM400mil issued, and there is over RM100mil left to be repaid.

Yes, we have cash flow problems, but it's not like we are going to die.

But are bondholders concerned about one of the tranches that is maturing this Septe mber?

We have been in active discussion with them and they are in agreement with our business plans. Look, the tranche coming due is only RM50mil. This is a company with a turnover of some RM2bil. We can easily find that kind of money to repay it.

But going forward, will Perwaja survive this tough period?

Of course! They are a number of banks that are supporting us because they know our plans and our asset base. I can show you how much (steel billet) stock we have. One piece costs about RM3,000.

I have RM700mil to RM800mil worth of stock. I'm not selling it (now) because it is selling at US$520 (RM1,647) per tonne and my cost is higher than that. In the worse case, yes we can sell some of this stock to repay our bondholders. However, we have not defaulted on the bonds. So at this point in time, we are not selling the billets at that kind of loss. There are other plans and options ava ilable.

Is there likely to be a fresh capital injection from shareholders?

If Perwaja does not have money, yes we can always get the fresh capital from shareholders. We (the shareholders) don't want to see the company go underwater. But the fact is, we don't need to go to shareholders yet for money. The company still has assets and there is a plan in action to raise margins and profitability.

What exactly are the headwinds impact ing Perwaja?

This is cyclical industry, with cycles lasting for as long as 12 years. During the down-cycle, you upgrade your equipment and plants. As it moves upward, you start producing more and selling. Technology improvements are another area. There are new technologies like gas injection and the use of furnaces that come about in the steel business every year. Things also change with the new government policies, globalisation and changes taking place in China. In recent years, China had bought a lot of building materials because it wanted to build up its infrastructure.

It had bought up virtually all the raw material available for industries such as steel, naturally pushing the prices upward. Small players like Malaysia, don't have the negotiating power, so we have to queue up and follow what the Chinese have set. As prices were high, we could no longer go on buying our raw material from them. (Steel plants like Perwaja use palletise d iron ore as raw material to make steel billet.)

So we made a drastic decision to build our own palleting plant in Malaysia, sourcing iron ore locally. This will be the country's first palletizing plant. Malaysia does not have such a plant because in those days, it would have cost around RM1bil to build such a plant and with a relatively small steel industry, it did not make economic sense for anyone to do it. Now though,

with new technology, the palletizing plant costs only RM400mil and we took the challenge of building it. By having this plant, we can bring down our costs by US$70 (RM221.79) per tonne, which should push up our margins. The plant was supposed to be ready by July but there was a bit of a delay. It should be ready within the next two to three months. With this plant in operations, you will see positive changes in the next quarter (4Q13) or the quarter after that (1Q14).

Can you comment about steel dumping and the measures that have been put in to stop that.

Why are there still two Chinese companies and one Indonesian company exempted from the antidumping laws? They can sell their products (in the country) without paying taxes. Why out of all the companies in the world, these three companies enjoy zero tax?

Are you looking for another strategic partner?

It is nice to have a strategic partner. We are not totally closed to this but at the moment nothing has happened to lead us down that path. However, if there is a party with the right technology capabilities, there could be a possibility. We already have Kinsteel as a partner. It is tiring to do t his work alone.

How is your relationship with the Ph eng family like?

Tan Sri Pheng Yin Huah is my partner. The CEO (Tan Sri Pheng's son Datuk Henry Pheng) is like my own kid. They (Pheng family includin g three children of Pheng) hold positions in the company but my children are not. So if they make mistakes, I would scold them… just like how a father would repri mand his children.

Can you tell us about the dry gas supply issue with Petronas?

Everybody in the world thinks that Perwaja gets good gas price (from Petronas). Let me tell you, today, Perwaja pays the highest gas price in this country! I tell you, we pay RM18.35 per million metric British thermal unit or mmbtu. Why do people think that Perwaja gets subsidies (from the Government)?

Maersk Signs US$54mil Rig Contract With Petronas

Posted:

COPENHAGEN: Danish oil and shipping group A.P. Moller-Maersk has signed a jack-up rig contract worth about US$54 million with a unit of Malaysia's Petronas.

Maersk Drilling, a unit of the Maersk group, said on Friday that Petronas Carigali, the exploration and production subsidiary of Malaysia's national oil company, had exercised a right to extend the contract for the Maersk Convincer rig by one year.

Consequently, the rig will be on contract with Petronas until mid-November 2014, and with the signing of the extension, Maersk Drilling's forward contract coverage for 2013 is now 100 percent, it said. - Reuters

Kredit: www.thestar.com.my

Jumaat, 12 Julai 2013

The Star Online: Business

The Star Online: Business

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