The oil supply-demand imbalance continues to linger on three years into the global oil crisis. Amid the prolonged economic downturn, Sin Ghee Huat (the “Group” or “Company”) slipped into the red with a net loss of $274,000 for the financial year ended 30 June 2017 (“FY2017”). Group revenue shrank 36% to $33.13 million compared with $51.43 million recorded in the preceding financial year ended 30 June 2016 (“FY2016”).
Many of our customers are part of the network of supply chains for the offshore and marine sectors. So is the Group, which has thrived on stainless steel as its core business for several decades. The dampening effects of the oil price slump sweeping across oil- related industries inevitably cascade down to almost all of our geographical segments in varying magnitudes.
The Group’s domestic market in Singapore suffered a 24% cut in revenue for the year. Yet hardest hit were the segments beyond the Singapore shores. Rising trade protectionism posed another challenge besides competition.
The Suzhou subsidiary managed to trim its loss to $138,000 (FY2016: $370,000) for FY2017. It was an improvement, albeit small in quantum and still a loss. More importantly, it has secured sales contracts from certain established and reputable customers for the supply of stainless steel materials for their production needs. These sales contracts will progressively translate to an increase in revenue stream beginning in the ensuing year. They provide a much needed impetus to the entity to recover lost ground and get on to a turnaround track.
The Board of Directors (the “Board”) had, in the preceding year, signified that the continued presence of the Suzhou operations in China would be contingent upon achieving tangible results. Having given due consideration to the foregoing development, the Board decides that the Suzhou entity will continue with its business operations at this crucial juncture.
First Break SG Metals, our joint venture in New Zealand, did not fare as well as it did in its first two years of operations. The market demand turned soft in FY2017. Nevertheless, the joint venture entity is gearing up to expand its customer base and strengthen its business model moving forward.
The Group’s business plan for specialty metals, which is to be part of the supply chain for the offshore subsea and oilfield sub -segments of the oil and gas sector, will take a longer time to bear fruits in light of the prolonged headwinds brewing in the industry.
We are delighted that the Group has obtained approval from Jurong Town Corporation for an extension of the lease for the warehouse located at 32 Gul Crescent. The lease extension is for a 20 -year period commencing May 2021 when the present lease term expires. Following the approval of the lease extension, the warehouse will be redeveloped. When completed in about two years’ time, the warehouse facility will provide enhanced storage capacity for our materials. Coupled with automation to ramp up productivity, the facility will augur well for the Group.
The Group is blessed with a healthy balance sheet even as the equity decreased slightly to $84.47 million from $85.86 million a year ago. Net asset value was 38.1 cents (FY2016:38.7 cents) per share.
The pace of business activities, by and large, hinges on the conditions and sentiments prevailing in the market. It will be a while before the market recovers from the current doldrums. Even then, the reality is that economic uncertainties and challenges are not g o in g away any time soon. Come what may, the Group will stay vigilant and be resilient and responsive to the challenges ahead.
The Group has so far focused on the implementation of management systems pertaining to occupational health and safety and the environment under the ISO 14001:2004 and OHSAS 18001:2007 Standards. Going forward, our plan is to move on to the next level of sustainability governance that will dovetail with the new reporting framework as applicable to the Group’s business operations.
The Company’s dividend policy is to distribute not less than 50% of its net profit after tax as dividends, taking into considerations such factors as projected capital expenditure requirements, investment plans, cash balances and financial performance of the Group.
In view of the healthy cash position, the Board has recommended the payment of a Final one-tier tax exempt dividend of 0.2 cents per share in respect of the financial year ended 30 June 2017. If approved by the shareholders at the forthcoming Annual General Meeting to be held on 19 October 2017, the proposed dividend amounting to $444,000 will be paid out entirely from accumulated past earnings.
On behalf of the Board, we would like to thank all our valued shareholders for your understanding and continued support. We also thank our customers and business associates for their support and patronage. To the management and staff of the Group, we express our sincere appreciation for their dedication and hard work during this difficult time. With the understanding and support of all stakeholders, we will together ride out the storm.
Goh Chee Wee
Kua Ghim Siong
Chief Executive Officer