KUALA LUMPUR: Steel manufacturer Melewar Industrial Group Bhd (MIG) returned to the black with a net profit of RM23.2 million on the back of a reduced turnover of RM135.76 million in its first quarter in the current year of operations ending June 30, 2010 (1QFY10).

In the corresponding period a year ago, the company was in the red to the tune of RM95.59 million while turnover was higher at RM220.92 million.

According to the company, the return to profitability is principally due to the turnaround from a fair value loss of RM193.7 million on a financial asset — its investments in Gindalbie Metals Ltd — to a fair value gain of RM17.9 million.

The company still has another 42 million shares in the Australian listed mining company. During the current quarter, it disposed of 32 million shares of Gindalbie Metal following a settlement involving a stock broking firm that provided the financing for MIG's purchase of the shares. The disposal was deemed to have settled the loan with the brokerage's creditors.

The group said that the lower revenue in the first quarter, a decrease of 38% over the preceding year's corresponding quarter of RM220.9 million, was due to a lower sales volume and a lower selling price.

For the current quarter under review, its principal subsidiary Mycron Steel Bhd posted a loss before tax of RM3.7 million, compared to a profit before tax of RM3.5 million achieved in the corresponding quarter of the preceding year. The reduced profit in the current quarter is primarily caused by a lower sales volume.

However in the immediate term, the company's performance trend showed improvement. MIG's profit before tax of RM22.8 million in the current quarter is RM13.6 million higher compared to the profit before tax of RM9.2 million in the immediate preceding quarter.

The improved results are mainly due to a higher operating profit contributed by a higher sales volume.

On future prospects, the company is not expecting any significant increase in price and demand in the near term although de-stocking activities have moderated.