DEAR SHAREHOLDERS,
A STRONG DYNAMIC PLATFORM FOR GROWTH
It is our privilege and pleasure to present you the annual
report of HG Metal Manufacturing Limited for the
financial year 2015.
2015 was a challenging year marked by significant global
and local macroeconomic developments which had
impact on the steel industry and our business.
Our business model transformation from a general
steel stockist to a one-stop steel solutions provider and
the business rationalisation efforts implemented since
FY2014, have enabled us to weather these economic
headwinds. These positive developments and the
Group’s low gearing will provide a viable platform for
the Group to position itself to take advantages of future
growth opportunities when they become available.
FINANCIAL PERFORMANCE
The Group had made credible progress in reducing
its business loss in 2015 despite continuing economic
uncertainties. Following our business model
transformation to a one-stop steel solutions provider
and amidst the industry-wide fluctuation of steel prices,
we reduced significant costs across the majority of our
operations and have substantially reduced the level of
inventory.
During the year in review, the Group reported a revenue
of S$127.9 million as compared to S$187.9 million in
FY2014. The decline in revenue was attributed to falling
steel prices and lower sales volume. As a result, theGroup
recorded 55% reduction in gross profit from S$11.3
million in FY2014 to S$5.0 million in FY2015. Gross profit
margin declined from approximately 6.0% to 3.9%. This
lower gross profit marginwas primarily due to the decline
of steel prices and efforts to clear slow moving stocks at
lower selling prices as well as an increase in export sales
that came with lower gross profit margin.
The Group recorded a net loss after tax of S$5.6 million
compared to a loss of S$16.8 million in FY2014, in
the light of its cost controlling efforts and reduced
provisions for inventory, provision for doubtful debts and
impairment of fixed assets.
Our cash and cash equivalents as at 31 December 2015
was S$50.5 million, a slight decline from S$52.7 million
in FY2014. This was mainly attributed to a decrease in
inventories of S$19.4 million and a decrease in trade and
other receivables of S$3.5 million, which was offset by a
decrease in trade and other payables of S$16.6million, as
well as repayment of bank borrowings of S$5.9 million.
Inventory was significantly reduced to S$5.4 million from
S$28.1 million in FY2014 due to lower purchase activities
during FY2015 as well as stock clearance efforts made by
the Group to convert slowmoving inventory into cash.
OUTLOOK AND BUSINESS STRATEGIES
This financial year has been characterised by continual
business rationalisation efforts and relentless drive
for improved efficiencies. In September 2015, we
successfully obtained the ISO 9001 certification for the
Group’s Construction Steel business with the aim to
improve our productivity and deliver quality services to
our valued customers.
The business outlook for the steel industry is expected
to remain tough and challenging in 2016 due to
continuing fluctuation of steel prices and uncertainties
over the economic climate. In spite of these challenges,
we believe we are entering the new financial year on
a firmer footing after gaining good progress in our
business transformation process. Looking ahead, the
Groupwill remain focused in growing its core businesses,
and to leverage on our brand name, resources and
strategic alliances to pursue new growth opportunities in
Singapore and Myanmar.
Myanmar, having benefited from political reform and
record level of investment, is well-poised to continue
its strong growth track record in the coming years. The
Group has accumulated considerable local operating
capabilities and business network when it expanded its
Distribution business to Myanmar in FY2014. We have
built on the initial momentum to expand our footprints
in Myanmar, and had announced on 12 October 2015
that the Group intends to establish value-adding steel
processing operations by way of a joint venture with an
established Myanmar company. Due to market volatility
and recent political developments in Myanmar, the
Group is still carrying out its due diligence on the joint
venture. To further capitalise on underlying growth
trends within Myanmar, the Group will continue to seek
out relevant value-creating opportunities that will drive
higher growth and better returns.
Today forward, we aim to continue to improve our
customer focus and be a strategic partner in delivering
quality products and services to create value for our
customers.
We will also continue to optimise our business operations
to address the challenging economic environment,
especially in terms of our inventory control.
APPRECIATION
On behalf of the directors, we would like to express our
sinceregratitude toall our shareholders, business partners
and staff for their continued support and considerable
contributions in 2015, particularly to the various
improvement initiatives that have led to substantial
cost reduction across the Group. These required robust
challenge to historical practices, innovation and creativity,
and an absolute determination to succeed. The Group
will continue to seek new growth avenues both locally
and overseas to enhance our shareholders’ value in the
coming year.
CHING CHIAT KWONG
FOO SEY LIANG
Chairman
Executive Director
05
HG METAL MANUFACTURING LIMITED
ANNUAL REPORT 2015
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