Unitrade resets after bruising years

UNITRADE Industries Bhd is repositioning itself beyond its long-standing identity as a steel and building materials trader, as recycling and solar distribution emerge as core earnings pillars alongside its traditional wholesale business.

For decades, the group was best known as a large-scale distributor of pipes, fittings and construction materials, supplying infrastructure and property projects across Malaysia, including KLIA and Merdeka 118.

But after a bruising stretch marked by falling steel prices, weak margins and credit impairments, management is deliberately reshaping how the company is perceived and how it generates profits.

“Unitrade should ultimately be viewed as a building materials group that supports the construction ecosystem, with a growing emphasis on sustainability and circularity,” group managing director Nomis Sim Siang Leng tells StarBiz 7.

“Distribution remains at the core of our business, while recycling and renewable energy allow us to add value along the materials value chain by supporting how materials are sourced, reused and decarbonised,” he adds.

The shift is already visible in the group’s revenue mix.

By the first half of the financial year ending March 31, 2026 (FY26), wholesale and distribution accounted for about 51% of group revenue, metal recycling 42.5% and renewable energy 3.7%, with the balance from manufacturing and equipment rental.

Sim now categorises recycling and solar as “green businesses”, together contributing roughly half of revenue, a stark contrast to just a few years ago, when Unitrade’s fortunes rose and

fell largely in tandem with steel prices.

The strategy follows a difficult period in FY24 and FY25, when declining steel prices, sub-optimal product mix and rising credit issues weighed heavily on earnings, culminating in losses and balance-sheet strain.

Sim says the move into new segments was not simply a defensive response to a cyclical downturn.

“The expansion into metal recycling and solar is a deliberate strategic move that serves as a long-term growth engine. It enhances our earnings base, improves earnings quality and cash conversion, while remaining synergistic with our core capabilities,” he says.

Rather than abandoning steel altogether, Unitrade is embedding itself deeper into the materials value chain.

In recycling, the group collects, segregates and processes scrap metal into feedstock for steel mills, effectively positioning itself upstream of traditional steel distribution.

“In metal recycling, we support the circular economy of metals by supplying recycled metal as raw material to steel mills, while continuing to distribute steel products sourced from these steel manufacturers,” Sim explains.

The model allows Unitrade to participate in both ends of the steel ecosystem, raw material recovery and finished product distribution, while aligning with rising environmental standards.

The scale of the recycling business is already significant.

The group recycled more than 430,000 tonnes of metal in FY25 through 15 yards nationwide, and has expanded into Sabah and Sarawak via its Intergreen and Kien San acquisitions, giving it a footprint across Peninsular Malaysia, Sabah and Sarawak.

Resetting the margin profile

Beyond diversification, the strategic reset is also about changing the quality of earnings.

“Our overall focus is on building a higher-quality and more resilient earnings profile,” Sim points out, adding “recycling and solar may not deliver materially higher margin percentages than traditional distribution, but they enhance the revenue mix with ESG (environmental, social, and governance)-aligned, future-ready offerings.”

Unlike steel trading, where margins are thin and volatile, recycling offers a different economic structure.

“Metal recycling operates on a high-velocity model, where absolute earnings contribution can be significant due to the scale of operations. In addition, its shorter cash cycle helps lower credit and impairment risks,” he shares.

That shorter cash conversion cycle – buying scrap and selling processed metal quickly to mills – reduces the working-capital drag that typically burdens distribution businesses and helps stabilise cash flow.

At the same time, Unitrade is tightening discipline in its legacy wholesale segment. “We continue to improve product mix in the wholesale distribution segment under a profitability-focused distribution model,” Sim says.

The group is deliberately moving away from high-volume, low-margin products and tightening credit exposure to customers, after heavy impairments in prior years.

The long-term ambition is to lift group-wide margins structurally. Collectively, management is targeting a gross profit margin closer to 10% over time, compared with mid-single-digit levels historically typical of building materials distribution.

Carbon tax and ‘green steel’

Policy developments could further reinforce the recycling business. Malaysia plans to introduce a carbon tax from 2026 for high-emission sectors including iron, steel and energy, while encouraging electric arc furnace (EAF) steel-making, which relies heavily on recycled scrap.

“Under Budget 2026, Malaysia plans to introduce carbon tax from 2026, initially covering the iron, steel, and energy sectors at RM35 to RM45 (US$8–US$11) per tonne,” Sim says.

The government is also discouraging new blast-furnace steel plants and actively promoting EAFs and induction furnaces, which use scrap metal as their primary raw material.

“The policy shift is structurally significant for the recycled metals market,” Sim says, noting that traditional steel-making emits about 1.85 tonnes of carbon dioxide per tonne of crude steel produced.

He pointed to projections under the Steel Industry Roadmap that demand for green steel could grow 2.5 times over the next five years, potentially accounting for more than 40% of total steel purchases by 2030.

For Unitrade, this translates into structurally rising demand for recycled feedstock and potentially stronger pricing power over time.

The group’s early move to build scale in recycling, including its expansion into Sabah and Sarawak, may give it a first-mover advantage as steelmakers accelerate the transition to lower-carbon production methods.

The other leg of Unitrade’s green strategy is solar distribution. The group now supplies photovoltaic panels, inverters, batteries and related components to residential, commercial and industrial projects, leveraging its nationwide logistics network and long-standing relationships with construction players.

This business only began contributing meaningfully from late FY24 and became a standalone segment in FY26, but management sees it as a multi-year growth avenue.

The backdrop is Malaysia’s aggressive renewable-energy agenda, which targets 35% of generation capacity from renewables by 2030 and 70% by 2050, with solar expected to account for the bulk of new capacity.

Rising electricity tariffs, corporate decarbonisation targets and new schemes such as the Solar Accelerated Transition Action Programme, which allows households and businesses to export excess power to the grid, are also expected to drive rooftop adoption.

Financial recovery underway

Operationally, the strategic reset is beginning to show results.

Unitrade returned to profitability in the six months ended Sept 30, 2025, posting RM11.64mil in net profit from a net loss of RM10.29mil, helped by improved product mix, higher gross margins and reversals of some impairments.

The balance sheet, however, remains geared, with a gearing ratio of about 1.5 times and borrowings above RM600mil as at end-September 2025.

Sim argues this is manageable for a working-capital-intensive distributor, where most borrowings are short-term trade financing linked to inventory and receivables rather than long-term structural debt.

He adds that the recycling business, with its faster cash cycle, is helping improve overall cash conversion and reduce reliance on incremental borrowing.

After several painful years, Unitrade’s strategy marks a clear break from the past, a bid to move from cyclical steel trader to an integrated, sustainability-aligned supplier to Malaysia’s construction and infrastructure economy.