Financials

Financial Statements and Dividend Announcement for Financial Year Ended 31 December 2009 ("1Q FY2010")

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Financial Statements and Dividend Announcement for Financial Year Ended 31 December 2009 ("1Q FY2010")

Balance Sheet

Review of Performance

The Group's revenue for 1Q FY2010 declined by 50% from $182.0 million in 1Q FY2009 to $90.7 million because of lower trading activities and weak demand for steel products.

The Group's gross profit increased from $7.0 million in 1Q FY2009 to $13.8 million in 1Q FY2010 due to increase in gross profit margin from 4% in 1Q FY2009 to 15% in 1Q FY2010. Increase in gross profit margin was attributable to the recovery of steel prices and lower inventory costs.

Due to the recognition of a gain of $6.4 million from the deemed disposal of BRC Asia as a result of the transfer of BRC Asia's shares to HGMPL's shareholders, the Group's other operating income in 1Q FY2010 increased by 698% from $0.9 million in 1Q FY2009 to $7.2 million in the current financial period.

Distribution expenses of the Group decreased by 42% from $0.9 million in 1Q FY2009 to $0.5 million in 1Q FY2010, in line with lower revenue.

Administrative expenses of the Group increased by 25% from $3.2 million in 1Q FY2009 to $4.0 million in 1Q FY2010. The increase was mainly due to provision of directors' profit sharing in current financial period.

Other operating expenses of the Group for the year decreased by 52% from $6.6 million in 1Q FY2009 to $3.1 million in 1Q FY2010. The decrease was mainly due to the reduction in foreign exchange loss as a result of depreciation of United States Dollar against Singapore Dollar.

Finance expenses decreased by 66% from $4.1 million in 1Q FY2009 to $1.4 million in 1Q FY2010. Decrease was a result of lower borrowings due to the decrease in purchasing activities and repayment of bank borrowings.

The Group made a profit before tax of $12.7 million in 1Q FY2010 as compared to a loss before tax of $6.2 million in 1Q FY2009. This was mainly due to the gain of $6.4 million recognised as a result of the deemed disposal of BRC Asia and contribution from the Group's manufacturing arm.

As at 31 December 2009, the shareholders fund stood at $109.8 million. As a result of the deemed disposal of BRC Asia, the net assets of BRC Asia was not consolidated in the Group's balance sheet as at 31 December 2009 on a line by line basis.

The Group took steps to reduce its inventory levels significantly from $140.5 million to $88.7 million. Trade and other receivables were reduced from $84.7 million as at 30 September 2009 to $33.3 million as at 31 December 2009 due to deconsolidation of BRC Asia on a line by line basis.

With the significant decline in bank borrowings and trade and other payables, current liabilities reduced from $177.8 million as at 30 September 2009 to $94.8 million as at 31 December 2009.

The Group's gearing improved from 1.26 times as at 30 September 2009 to 0.59 times as at 31 December 2009.

The Group's cash and cash equivalents was $6.2 million as at 31 December 2009 as compared to $20.3 million as at 31 December 2008. The significant decrease was mainly due to lower trading activities and the net cash outflow from deemed disposal of BRC Asia of $9.5 million.

Due to the uncertain economic outlook, the Group continues to adopt a prudent and conservative approach on inventory management.

Since the middle of 2009, steel prices have improved. However, the demand for construction steel and demand from shipyards are likely to remain sluggish.

On 5 January 2010, the Company announced that it had sold 80,641,080 shares in BRC Asia for a total consideration of $11.7 million. This will result in a loss of approximately $1.2 million.