Second Quarter Financial Statements and Dividend Announcement for Financial Period Ended 30 June 2018
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Statement of Comprehensive Income
Review of Performance
Review of Performance
Results for 2Q2018 versus 2Q2017
Revenue and Gross Profit
The Group recorded revenue of S$44.1 million in 2Q2018 as compared to S$38.2 million in 2Q2017. This was driven by a 24% increase in average selling price which more than compensated a 7% reduction in sales volume. Despite intense competition and pricing pressure, the Group managed to achieve a 37% growth in its local trade volume in 2Q2018 as compared to 2Q2017. The overall sales volume however was dragged down by the decline in export volume as compared to previous corresponding quarter.
The Group achieved higher gross profit of S$2.6 million in 2Q2018 compared to gross profit of S$1.8 million in 2Q2017, contributed by higher revenue and improved gross profit margin in 2Q2018.
Other Operating Income
Other operating income declined to S$1.9 million in 2Q2018 from S$2.0 million in 2Q2017 mainly due to the decline in warehousing and rental income after partially offsetting foreign exchange gain in 2Q2018.
Distribution, Administrative, Other Operating and Finance Expenses
The Group's distribution expenses increased by S$0.1 million in 2Q2018 due to higher demand for outsourced logistics services in tandem with the growth in local sales volume.
There were no significant changes in administrative expenses and other operating expenses in 2Q2018 as compared to previous corresponding quarter.
The increase of finance costs in 2Q2018 was due to higher borrowing cost incurred on trade financing.
The Group posted a net profit after tax of S$0.02 million in 2Q2018 compared to a net loss after tax of S$0.8 million in 2Q2017 due to reasons afore-mentioned.
Results for 1H 2018 versus 1H 2017
Revenue and Gross Profit
The Group achieved revenue of S$91.0 million in 1H2018 as compared to S$83.8 million in 1H2017, contributed by 22% increase in average selling price sales which more than compensated a 11% reduction in sales volume.
Gross profit increased to S$5.2 million in 1H2018 from S$4.3 million in 1H2017, driven by higher revenue and slight improvement in gross profit margin in 1H2018.
Other Operating Income
Other operating income decreased from S$4.5 million in 1H2017 to S$3.9 million in 1H2018. This was mainly due to lower warehousing and rental income, reduced fair value gain on forward currency contracts and other miscellaneous income amounted to S$1.0 million. These reductions were partially offset by higher foreign exchange gain of S$0.4million.
Distribution, Administrative Expenses, Other Operating and Finance Expenses
The Group's distribution expenses increased to S$0.4 million in 1H2018 from S$0.2 million in 1H2017. The increase was mainly attributed to higher demand for out-sourced logistics services to support volume growth for local sales in 1H2018.
There was no significant increase in administrative expenses as compared to previous corresponding period.
Other operating expenses reduced from S$5.5 million in 1H2017 to S$4.7 million in 1H2018, primarily due to the absence of foreign exchange loss of S$1.4 million, but partially offset by the increase in other miscellaneous expenses of S$0.6 million. .
The finance costs increased to S$0.02 million in 1H2018 due to higher borrowing on trade financing.
The Group recorded a net loss after tax of S$0.4 million in 1H2018, compared to a net loss after tax of S$1.2 million in 1H2017.
The Group's non-current assets increased to S$19.6 million as at 30 June 2018 compared to S$12.5 million as at 31 December 2017. The increase was mainly attributed to the investment in bonds of S$7.0 million which is pledged as security for trade facilities granted by a bank. These are bonds issued by statutory board and government linked companies listed in SGX.
As at 30 June 2018, the Group's inventory on hand increased to S$30.3 million as compared to S$17.6 million as at 31 December 2017. This was a result of stock replenishment to support the projected growth in sales volume.
Trade and other receivables increased to S$49.7 million as at 30 June 2018 as compared to S$44.3 million as at 31 December 2017 in line with increase in revenue.
Trade and other payables increased to S$23.4 million as at 30 June 2018 compared to S$14.5 million as at 31 December 2017 in line with increase in inventory volume.
The bank borrowings stood at S$0.6 million as at 30 June 2018.
Statement of Cash Flows
Net cash flows used in operating activities was S$9.8 million in 1H2018 as compared to net cash flows used in operating activities of S$15.5 million in 1H2017. This was mainly attributable to the increase in trade and other receivables and inventories of S$4.8 million and S$13.7 million respectively, offset by increase in trade and other payables of S$8.8 million.
Net cash flows used in investing activities for 1H2018 was S$0.6 million, mainly due to the purchase of investment securities of S$7.1 million after offsetting bank deposits withdrawn from banks of S$6.6 million.
Net cash flows generated from financing activities for 1H2018 was S$0.5 million. This relates mainly to net proceed from bank borrowings.
The Group's cash and cash equivalents was S$19.0 million as at 30 June 2018 in comparison to S$15.8 million as at 30 June 2017.
The implementation of import tariffs on steel by the US has led to higher steel price in the US and increasing inconsistency in steel prices across the globe. While the current export price for Chinese steel remains supported due to China's ongoing supply reform, the global steel price movements however may hinge on whether any re-directed imports arising from the trade tension between US and its key trading partners may cause market imbalance.
In Singapore, while the advance estimates released by the Ministry of Trade and Industry indicated that the economy grew by 3.8% on a year-on-year (Y-O-Y) basis in the 2nd quarter of 2018, the construction industry on the other hand continued to shrink at a slightly easing rate of 4.4% on a Y-O-Y basis compared to a negative growth of 5.2% in previous quarter. The performance of the construction sector was weighed down by the continued weakness in the private sector construction activities. The sector is expected to be further hit by the recent cooling measures announced by the government.
The Group expects the outlook for the steel industry to remain challenging due to the uncertainty over global growth outlook and its spillover effect on Singapore economy amid the slow recovery of the construction, marine and oil and gas sectors. Besides this, the appreciation of the US dollar has pushed the cost of our inventories higher and suppressed business margin.
In view of challenging business landscape, the Group will continue to seek to optimise its inventory holding in line with expected business activities and to place higher focus on the trade for back-to-back orders to reduce risk. The Group will be vigilant in monitoring the risk exposures faced by the business and if necessary, take required corrective action.
The Group is continuing its efforts to explore new business opportunities to expand its business. The Board will make necessary announcement as and when there is any material development on this matter.