(extracted from Annual Report 2025)

DEAR SHAREHOLDERS,

On behalf of the Board of Directors (“Board”), I am pleased once again to present the Annual Report of HG Metal Manufacturing Limited (“HG Metal”, the “Company” and together with its subsidiaries, the “Group”).

As you are aware, on 6 August 2025, the Group announced a change in the financial year end from 31 December to 30 September (“FYE Change”), which is why this Annual Report will cover a period of nine months from 1 January 2025 to 30 September 2025 (“FP2025”). The reason for the FYE Change was to align our financial year with that of our controlling shareholder, Green Esteel Pte. Ltd. (“Esteel”).

REVIEW OF FP2025 PERFORMANCE

The Group continued to operate in an uncertain global macroeconomic environment in FP2025, with geopolitical tensions and ongoing conflicts additionally contributing to global instability, disrupted trade flows and volatility in commodity prices, such as steel. Despite these challenges, the Group achieved a revenue of S$130.3 million in FP2025, compared to S$157.9 million in the financial year ended 31 December 2024 (“FY2024”). The lower revenue was primarily due to the shorter reporting period of nine months, following the FYE Change as well as the continued decline in steel prices which impacted the average selling price.

Despite the lower revenue, the Group’s gross profit margin improved slightly to 14.7% in FP2025 as compared to 14.0% in FY2024. This was mainly attributable to a reduction in cost of sales, driven by the lower average cost of materials during the financial period.

For FP2025, the Group reported a net profit before tax of S$8.7 million, compared to a net profit before tax of S$10.3 million in FY2024. Although the reported figure was lower in absolute terms, the nine-month FP2025 result represented stronger underlying profitability on an annualised basis. With a slightly lower income tax expense for FP2025 of S$1.4 million (FY2024: S$1.5 million), the Group achieved a creditable net profit after tax of S$7.3 million in FP2025, compared to a net profit after tax of S$8.8 million in FY2024.

The Group’s operating cash flow continues to remain very healthy, with cash and cash equivalents at approximately S$68.5 million as at 30 September 2025, compared with approximately S$55.4 million as at 31 December 2024.

UPDATE ON STRATEGIC BUSINESS TRANSFORMATION

We are making excellent progress in our strategic business transformation to become a leaner, more efficient, and forward-looking company as we pursue various corporate strategies to enhance growth and overall shareholder value. We remain focused on enhancing our market share, sales and profitability and this includes the development and application of steel products for the built environment in Singapore and overseas, either by acquisitions or organic growth, so as to broaden our product offerings, while strengthening our competitive position in the market by enhancing our production capacity and managing costs.

The two share placements and rights issue exercise conducted in FY2024 which raised a total of approximately S$33.1 million has strengthened our balance sheet, and together with our operating cash flow, has provided us with the financial resources to undertake our business transformation, expand our core business, and make strategic investments, as and when such opportunities arise.

Strategic Upstream Investment

On 10 December 2025, we have announced the proposed subscription of Class B Preference Shares in Eden Flame Sdn. Bhd. (“Eden Flame”) for a total consideration of RM18 million or approximately S$5.68 million. These Class B Shares are convertible into ordinary shares based on 1:1 ratio and will represent approximately 4.4% of Eden Flames post-completion enlarged shares on an as converted basis.

Eden Flame is a Malaysian steel manufacturer and a wholly-owned subsidiary of Esteel, with a plant in Pasir Gudang, Johor Bahru. Targeted to commence operations by the third quarter of 2026, the plant will have a specialisation in low-carbon electric arc furnace (“EAF”) steel¹ and has an estimated annual production capacity of approximately 500,000 metric tonnes. Its initial product focus will be on 10mm – 40mm rebars, which is a high-demand segment in Southeast Asia.

The proposed subscription is part of our broader strategic initiative to strengthen our supply chain position in the regional steel market. It will also support a transition towards low-carbon steel solutions, given Singapore’s carbon tax trajectory and its regulatory direction under the Singapore Green Plan 2030 which have accelerated market demand for greener construction materials. We believe that our equity stake in Eden Flame will provide us with a source of reliable and competitive low-carbon steel, particularly for small-diameter rebars.

Expanding Production Capacity

The Group’s current facilities at 28 Jalan Buroh, Singapore 619484 with a gross floor area of 22,017.90 square metres, is already operating near full capacity, limiting our ability to scale and meet growing customer demand. To address this, the Group’s wholly-owned subsidiary, HG Construction Steel Pte Ltd, has exercised an Option-To-Purchase (“OTP”) granted by Hai Leck Engineering (Private) Limited (the “Vendor”) to acquire an industrial property at 47 Tuas View Circuit, Singapore 637357 (the “Property”) for a consideration of S$20.8 million (the “Proposed Acquisition”) as announced on 16 December 2025.

The Property has 12 years remaining on its tenure and comprises a 3-storey ancillary office building, two 3-storey production buildings and a single-storey single-users industrial development comprising two factories, with a land area of approximately 24,163.8 square metres. The Property is being sold with vacant possession together with its existing plant and equipment.

The Proposed Acquisition will deliver tangible benefits by allowing the Group to expand its production facilities and capabilities, as well as to increase its storage capacity. Not only will we have the space and infrastructure to support future growth and enhance operational efficiency, but the existing plant and equipment to be transferred will also enable us to introduce additional value-added services without significant incremental investment.

BUSINESS OUTLOOK

Looking ahead, we continue to operate in an uncertain and challenging macroeconomic environment, with global growth is projected to slow down to 3.1% in 2026. Despite emerging challenges that include trade policy uncertainties and less severe-than-expected tariff disruptions, medium-term downside risks remain with continued inflationary pressures, geopolitical tensions, rising protectionism, and policy uncertainty.²

In the third quarter of 2025, the Singapore economy expanded by 4.2% on a year-on-year (“YoY”) basis, extending the 4.7% growth in the previous quarter. Growth in the construction sector came in at 3.6% YoY, moderating from the 6.2% expansion in the second quarter. This growth was supported by expansions in both public sector and private sector construction works. For the first three quarters of 2025, Singapore’s GDP growth averaged 4.3% YoY. With this better-than-expected performance in the third quarter of 2025, Singapore’s GDP growth forecast for 2025 has been upgraded from 1.5% to 2.5% to around 4.0%, with Singapore’s GDP growth for 2026 projected to be between 1.0% to 3.0%.³

Singapore’s construction sector is expected to grow steadily, supported by the Urban Redevelopment Authority’s Master Plan 2025 which prioritises sustainable growth, enhanced transport connectivity, and the creation of vibrant mixed-use districts.⁴ Aligned with these strategic priorities, the Building and Construction Authority projects annual construction demand to range between S$39 billion and S$46 billion from 2026 to 2029. This demand will be driven by public housing, MRT extensions, and major infrastructure developments such as Changi Airport Terminal 5, the Integrated Waste Management Facility, and Tengah General Hospital. While sustained public-sector investment, a robust housing pipeline, and renewed private development activity will reinforce the sector’s momentum, global uncertainties and potential delays in large-scale projects may affect timelines and overall performance.⁵

As a key player in Singapore’s construction steel supply chain, the Group is strategically positioned to benefit from the country’s accelerating infrastructure development and large-scale project rollouts. This advantage supported a sales volume increase of approximately 29% in FP2025, compared to the same nine-month period in FY2024. However, China’s subdued property market conditions have significantly dampened domestic steel demand, resulting in a global oversupply of steel rebar and downward pressure on prices, which has impacted profit margins and reduced contract competitiveness. To address these challenges, the Group will implement agile procurement strategies, deepen client engagement, and secure long-term contracts to build a resilient order book and maintain its financial stability.

We will continue our efforts to improve raw material procurement and closely monitoring steel prices fluctuations to dynamically adjust our inventory management and pricing strategies. We have also been actively working towards broadening our customer base to diversify beyond our current projects which are mainly focused on MRT and infrastructure, to new projects like Resorts World Sentosa. The Group has also been actively pursuing other significant projects including MRT network expansion, private residential projects, high-specification industrial buildings, and educational facilities. These projects, once secured, are expected to contribute to both our top and bottom lines once they materialise in the coming years.

Barring unforeseen circumstances and taking into the account all the above, we remain cautiously optimistic for the financial year ending 30 September 2026.

IN APPRECIATION

To reward our loyal shareholders for their continued trust and support, the Board of Directors has recommended a Final Dividend of 1.5 Singapore cents per share for FP2025, which is subject to the approval of shareholders at the forthcoming annual general meeting of the Company. The Final Dividend represents approximately 56.2% of the net profit after tax of the Company for FP2025.

I would like to also extend my appreciation to our Board of Directors for their stewardship and guidance, and to our management and staff for their continued hard work and dedication in achieving a creditable set of results for FP2025 even as we navigate a continued challenging operating environment.

Lastly, I want to thank our valued customers, business associates and suppliers for their strong support over the years, and to many more years of partnership ahead. Together with the support of all our stakeholders, we look forward to another year of progress and performance as we embark on our next phase of growth.

MR ONG HWEE LI

Independent Non-Executive Chairman

1. EAF steel is produced using an electric arc furnace (“EAF”) and a feedstock of recycled steel scrap, resulting in significantly lower greenhouse gas emissions compared to traditional blast furnace steelmaking. The resulting steel is considered low carbon because of the reduced carbon intensity of the process, making EAF steel a more sustainable and environmentally friendly alternative for a wide range of applications.
2. https://www.imf.org/en/Publications/WEO/Issues/2025/10/14/world-economic-outlook-october-2025
3. https://isomer-user-content.by.gov.sg/166/d90a2738-4f15-4452-a87d-949eba6a1c56/PR_3Q25.pdf
4. https://www.uradraftmasterplan.gov.sg/regional-plans/central-region/vibrant-city-living-for-all/?utm
5. https://www1.bca.gov.sg/about-us/news-and-publications/media-releases/2025/01/23/construction-demand-to-remain-strong-for-2025