Press Metal's Resilient Revenue Amid Earnings Dip: A Long-Term Play on Structural Demand

In the second quarter of 2025, Press Metal Aluminium Holdings Bhd reported a 4.4% decline in net profit to RM484 million, a dip attributed to higher input costs, weaker London Metal Exchange (LME) prices, and currency volatility. Yet, beneath this near-term headwind lies a compelling story of resilience and strategic positioning. With revenue rising 5.9% year-on-year to RM4.19 billion, driven by stronger aluminium prices and higher sales volumes, the company's financials underscore a critical truth: Press Metal is navigating a volatile macroeconomic landscape while laying the groundwork for long-term value creation.

Short-Term Pain, Long-Term Gain

The earnings contraction in Q2 2025 was primarily a function of cost pressures. Alumina prices, though down 19% year-on-year to USD350 per tonne, were offset by weaker LME prices (US$2,446 per tonne) and rising carbon anode costs. Meanwhile, the ringgit's potential appreciation—a side effect of the 90-day U.S. tariff delay on Chinese goods—threatens to erode margins further, as over 90% of Press Metal's products are exported. RHB Investment Bank revised its earnings forecasts for 2025–2027 downward by 11%, 9%, and 11%, respectively, reflecting these challenges.

However, these headwinds mask a broader structural trend: the global demand for aluminium is being reshaped by the energy transition and technological innovation. Press Metal's recent initiatives—such as its low-carbon GEM aluminium brand (with a carbon footprint of <4.0 tonnes CO₂e per tonne of aluminium) and a planned 80,000-tonne solar frame extrusion facility in Bintulu—position it to capitalize on these megatrends.

Aluminium as the Backbone of the Energy Transition

The renewable energy sector is a key growth driver for aluminium demand. According to the World Bank, over 85% of solar photovoltaic (PV) frames are made of aluminium, leveraging its lightweight, corrosion resistance, and thermal conductivity. CRU International projects that global aluminium demand will grow by nearly 40% by 2030, with solar PV and wind energy accounting for a significant share.

Press Metal is already embedded in this transition. Its solar frame production, coupled with a 100,000-tonne expansion of value-added products like wire rods and billets, aligns with the surging demand for materials in renewable infrastructure. The company's MoU with the Bintulu Development Authority to build a solar frame facility by mid-2026 is a strategic move to capture market share in a sector expected to grow at a compound annual rate of 15% through 2030.

AI and Data Centres: The Next Frontier

Beyond renewables, aluminium's role in AI infrastructure is gaining traction. The metal's properties—lightweight, non-magnetic, and high thermal conductivity—make it indispensable for data centres, which require efficient heat dissipation and durable materials. While Press Metal has no direct AI projects, its CEO, Tan Sri Paul Koon, has emphasized the sector's potential to drive aluminium demand.

The company's alumina refinery in Indonesia, which powers Qili Aluminum's production, is a critical node in the supply chain for high-purity aluminium used in advanced technologies. As global investments in AI and data centres accelerate, Press Metal's integrated production capabilities and low-carbon profile position it to benefit from this structural shift.

Investment Implications

Despite near-term margin compression, Press Metal's long-term outlook is robust. RHB's “Buy” rating and revised target price of RM6.26 reflect confidence in the company's ability to navigate cost pressures while capitalizing on structural demand. The firm's sensitivity analysis suggests that a 2% ringgit appreciation could reduce earnings by 5%, but this risk is mitigated by the company's hedging strategies and its focus on low-carbon products, which command premium pricing.

For investors, the key takeaway is clear: Press Metal is a long-term play on the energy transition and technological innovation. While short-term volatility is inevitable, the company's strategic investments in renewable infrastructure and its alignment with global decarbonization goals make it a compelling candidate for those seeking exposure to structural growth.

Conclusion

Press Metal's Q2 earnings dip is a temporary setback in a broader narrative of resilience and transformation. By leveraging its low-carbon credentials, expanding into high-growth sectors like solar energy, and positioning itself at the intersection of AI and data centre infrastructure, the company is well-placed to deliver value over the next decade. For investors with a multi-year horizon, the current dip in earnings may present an opportunity to buy into a business that is not just surviving but thriving in the new energy economy.