A story of rust setting in …

Lee Weng Khue, The Sun Daily

Perwaja Holdings Bhd, a brainchild of former prime minister Tun Mahathir Mohamad to push Malaysia towards becoming a heavy engineering-led country, is a story of rust setting in.

Despite numerous attempts, and billions of ringgit pumped in by the government, nothing deterred the rust from corroding the group’s fortunes.

Recall that Perwaja, which was established in 1982, was a joint venture between Perwaja Terengganu Sdn Bhd, Nippon Steel and government-owned Hicom Holdings. The steel maker started to make losses at the end of the 1980s due to inefficient production and mismanagement.

Over the years, efforts were made to put Perwaja back on the right track, including bringing in new shareholders, with the likes of Tan Sri Abu Sahid Mohamed, who now owns a 60.21% interest through his holdings in Kinsteel Bhd and other companies.

Perwaja was put under Abu Sahid’s investment vehicle Maju Holdings, which is involved in construction, infrastructure, property, services and manufacturing.

However, Perwaja faced a big challenge in August 2013 when it had to halt operations at its Kemaman plant due to the curtailment of gas and electricity supply by Petroliam Nasional Bhd (Petronas) and Tenaga Nasional Bhd. Since then, its steel business has not been in operation.

Following that, Perwaja triggered Practice Note 1 (PN1) and PN17 status in November 2013 due to doubts over its ability to carry on as a going concern and its inability to provide a solvency declaration to the stock exchange.

The steel maker incurred a widened net loss RM62.39 million for the first quarter ended Sept 30, 2016 against RM62.09 million in the previous corresponding period, derived mainly from interest expense of RM37.2 million, and depreciation charges of RM18.7 million.

As of end-September 2016, Perwaja’s total liabilities stood at RM2.87 billion, far exceeding its total assets of RM907.32 million. Its accumulated losses ballooned to RM2.92 billion as at Sept 30, 2016, with a negative cash flow of RM34.85 million.