Chairman's Message
Extracted from Annual Report 2008
Dear Shareholders,
To say that FY08 was challenging would be an understatement.
The price of oil rose to US$140 per barrel in June 2008 and the
US dollar was at it weakest also in 2Q08. While the pressure
from these two factors abated in the 2H08, the damage was
done, and then towards the end of the year, orders began to fall
as the financial crisis extended into the real economy.
The Group's revenue for FY08 declined 5.2% to $365.0 million
from $385.1 million for FY07. Except for the Mould Fabrication
business segment, contribution from all other business
segments, on parts sales, had declined.
During the year, the Group faced rising resin cost, increases in
operating costs, an increase in minimum wages in the China,
lower capacity utilisation as a result of lower orders and
significant weakening of the US Dollar. As a result, the Group's
gross margin for the year declined from 15.6% for FY07 to
12.0% for FY08.
The Group recorded a net loss of $97.5 million for FY08
compared to a net profit of $12.1 million in FY07. The loss
was due to the impairment of goodwill and foreign exchange
loss. Without these factors, the Group would have achieved
net profit attributable to shareholders of approximately $5.2
million.
The Group had $8.4 million of net cash from operating
activities for the year under review compared to $36.8 million
a year earlier. This was due to payment of capital expenditure
for a new plant in Johor and an increase in work-in-progress for
Mould Fabrication due to higher year end orders.
Our capital expenditure incurred for the year was $28.1
million compared to $23.1 million in FY07. This was due to the
acquisition of assets in Mexico to support an existing customer
in the Consumer/IT segment, construction of a new factory in
Zhongshan which was approved in FY07 and the acquisition
of machines to support the Healthcare, Consumer/IT as well as
Tooling businesses.
The Group closed the year with a cash balance of $41.9 million,
compared to $70.3 million at 31 December 2007.
The Group's net tangible asset value per share rose to 28.24
cents as at 31 December 2008 as compared to 27.49 cents as
at 31 December 2007 and closed with working capital of $36.9
million, slightly down from $37.7 million for FY07.
Business Outlook
2009 will be an even more challenging year as the global financial crisis makes its impact felt in the real economy. However, two factors provide some relief. First, the price of oil has fallen, taking pressure off resin prices. Second, US dollar weakening has abated.Demand for Automobiles is expected to be the lowest in several decades. Automakers, especially in the US, are cutting back production. We expect the orders from the Automotive business segment to be significantly lower than FY08.
The Consumer/IT business segment will continue to be steady as the Group was awarded several projects in the last quarter of 2008 and first quarter of 2009. In addition, the Group had acquired certain assets in the last quarter of 2008 in Mexico which we expect to contribute in FY09. Many of these projects kick off in the second half, so we expect the first half to be relatively weak, and the second half to be stronger. To manage cost better, the Group is moving all production, except for some precision components, from Singapore to Johor.
In the Healthcare segment, new projects from two customers were launched in the last quarter of 2008. The tainted milk scandal in China has resulted in increase in orders for foreign manufacturers of infant formula. This in turn has resulted in increased orders from our customers. We expect growth in this business segment. We also continue to receive enquiries for Mould Fabrication from customers in Healthcare.
Acknowledgements
On behalf of the Board, I would like to take this opportunity to thank our business partners for their support, and our management and staff for their continued commitment and hard work.I would also like to thank my fellow directors for their guidance and advice.
Koh Boon Hwee
Chairman
April 2009
