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Condensed Interim Financial Statements for the Six Months and Full Year Ended 31 December 2023

Financials Archive
Condensed interim consolidated statement of profit or loss and other comprehensive income

Financials

Condensed interim statements of financial position

Financials

* The derivative financial instruments relate to fair value adjustments of forward currency contracts entered into by the Group to hedge foreign currency exposure on the Group’s sales and purchases.

Review of Performance
  • Review of Performance

    Financial performance of the Group (2H2023 vs 2H2022)

    Continuing operations

    Revenue and Gross Profit

    The Group recorded revenue of S$83.5 million in 2H2023 as compared to S$70.6 million in 2H2022, representing an increase of 18%. The growth in revenue was mainly due to a 51% increase in the sales volume on a year-on-year basis. The increase was partially offset by the drop in average selling price of steel in 2H2023.

    The overall gross profit margin for 2H2023 improved to 10.4% from 8.3% in 2H2022 mainly due to lower weighted average cost of material on hand. As a result, the Group recorded gross profit of S$8.7 million in 2H2023 compared to S$5.8 million in 2H2022.

    Other Operating Income

    Other operating income increased by S$0.1 million in 2H2023 compared to 2H2022 mainly due to a fair value gain in forward currency contracts.

    Selling and Distribution, Administrative, Other Operating and Finance Expenses

    The Group’s selling and distribution expenses in 2H2023 were higher than 2H2022 mainly due to more out-sourced logistic services in tandem with increase in sales volume.

    Administrative expenses decreased by 21% to S$3.4 million in 2H2023 from S$4.3 million in 2H2022. This was mainly due to reduction in salary cost of S$0.9 million.

    Other operating expenses incurred in 2H2023 decreased to S$1.9 million in comparison with S$2.8 million in 2H2022, mainly due to reduced depreciation expenses.

    Total finance costs incurred related mainly to borrowing for trade financing and term loans from banks as well as construction loans and leases for properties redevelopment. Total finance cost incurred in 2H2023 decreased in comparison with 2H2022 mainly due to lesser borrowing from banks.

    The Group recorded a small amount of an impairment loss on financial assets in 2H2023 as compared to S$0.1 million in 2H2022.

    Profitability

    The Group reported net profit before tax of S$2.9 million in 2H2023 from continuing operations in contrast to loss before tax of S$2.1 million in 2H2022 mainly due to increase in gross profit generated and lower operating expenses incurred in 2H2023.

    There was a tax refund of S$0.3 million for 2H2023 due to tax overpaid for FY2022. The income tax expense for 2H2022 was S$0.7 million.

    The Group recorded a net profit after tax of S$3.2 million in 2H2023 compared to a net loss after tax of S$1.4 million in 2H2022 from continuing operations.

    Discontinued operations

    The Group incurred a net loss of S$1.2 million after tax in 2H2023 for the discontinued operations.

    Results for FY2023 versus FY2022

    Continuing operations

    Revenue and Gross Profit

    The Group delivered revenue of S$149.8 million in FY2023, slightly lower than revenue of S$152.6 million in FY2022. This was mainly due to change in sales mix and decline in average selling prices in tandem with softening of global steel prices compared to same period last year. The overall gross profit margin for FY2023 declined to 8.5% from 13.4% in FY2022 mainly due to average selling price reduced by 21% despite the sales volume increased by 23% in FY2023. In addition, the higher weighted average cost of material on hand also dragged down financial performance.

    The Group recorded lower gross profit of S$12.8 million in FY2023 as compared to S$20.5 million in FY2022.

    Other Operating Income

    Other operating income declined to S$1.0 million in FY2023 from S$2.3 million in FY2022. This was mainly attributed to reduction in warehouse and rental income of S$1.0 million due to reduced warehousing space and absence of one-off income from termination of right-of-use asset of S$0.3 million.

    Selling and distribution, Administrative, Other Operating and Finance Costs

    Total selling and distribution costs incurred in FY2023 were higher than FY2022, in tandem with increased delivery volumes and more out-sourced logistic services engaged in FY2023.

    Administrative expenses decreased by 28% to S$7.4 million in FY2023 from S$10.3 million in FY2022. This was mainly resulted from reduction in salary cost.

    Other operating expenses incurred in FY2023 decreased to S$4.2 million in comparison with S$5.0 million in the prior financial year, mainly due to reduced depreciation expenses.

    Total finance costs incurred amounted to S$1.0 million in FY2023 in comparison with S$1.4 million in FY2022. The decrease in finance costs was mainly due to reduced borrowings from banks.

    The Group recorded an impairment loss on financial assets of S$0.08 million in FY2023 as compared to S$0.2 million in FY2022.

    Profitability

    The Group reported a net profit before tax of S$0.1 million in FY2023 from continuing operations in comparison to profit before tax of S$5.5 million in FY2022 mainly due to decrease in gross profit generated in FY2023.

    The Group recorded a tax refund for the previous year’s tax overpaid of S$0.3 million in FY2023 in contrast to tax expenses of S$0.5 million for FY2022.

    The Group recorded a net profit after tax of S$0.5 million in FY2023 in comparison to a net profit after tax of S$4.9 million in FY2022 from continuing operations.

    Discontinued operations

    The Group recorded a net loss after tax of S$2.2 million in FY2023 from discontinued operations. This included an impairment loss of S$0.7 million in relation to an asset held for sale that is expected to be disposed in the subsequent financial year.

  • Balance Sheet

    The Group’s non-current assets decreased to S$26.0 million as of 31 December 2023 compared to S$36.6 million as at 31 December 2022, mainly due to reclassification of investment securities and fixed deposits pledged with banks to current asset.

    As of 31 December 2023, the Group’s inventory on hand decreased to S$24.2 million from S$58.9 million as at 31 December 2022 which was in line with the Group’s strategy to optimize its inventory holding.

    Trade and other receivables amounted to S$50.4 million as at 31 December 2023 as compared to S$36.6 million as at 31 December 2022. The increase of S$13.8 million was mainly attributed to the increase in sales activities in 2H2023.

    Trade and other payables decreased slightly to S$10.4 million as at 31 December 2023 from S$11.5 million as at 31 December 2022.

    Bank borrowings reduced to S$8.7 million as at 31 December 2023 from S$35.2 million as at 31 December 2022. This was mainly due to repayments made to the banks as well as lesser borrowings from banks by the Group in the second half of the financial year.

    The Group classified the subsidiary’s operations in Myanmar as discontinued operations, the net assets held for sale was S$3.5 million after the provision of impairment of S$0.7 million and liabilities directly associated with assets held for sale was S$4.8 million as at 31 December 2023.

  • Statement of Cash Flows

    The Group generated net cash flows from operating activities of S$22.3 million in FY2023. This was mainly attributable to a decrease in inventories of S$33.5 million and increase in trade and other payables of S$1.0 million, offset by an increase in trade and other receivables of 14.1 million.

    Net cash flows used in investing activities for FY2023 was S$1.3 million. The net cash used in investing activities in FY2023 comprised mainly fixed deposit pledged with banks of S$3.7 million, purchase of property, plant and equipment and intangible assets of S$1.7 million, partially offset by proceeds from maturity of investment securities of S$3.8 million and proceeds from disposal of property, plant and equipment of S$0.4 million.

    Net cash flows used in financing activities for FY2023 was S$20.0 million, mainly due to net repayment for bank borrowings of S$23.1 million, repayment of lease of S$0.7 million and dividend payment of S$3.1 million, partially offset by net proceeds of S$7.0 million form Share Placement.

    The Group’s cash and cash equivalents was S$16.5 million as at 31 December 2023 in comparison to S$15.4 million as at 31 December 2022.

  • Commentary

    Despite global economy uncertainties, geopolitical upheavals, and sluggish growth in China, Singapore’s economy has shown resilience and averted a recession. Based on the advance estimate from the MTI, the Singapore economy expanded by 1.2% in 2023. The economy is projected to experience growth in 2024 with GDP growth estimated in the range of 1%–3%. Optimism prevails amidst anticipated recovery in the manufacturing and financial sectors that will be supported by the turnaround in the electronics cycle and domestic-oriented sectors to further normalises towards pre-pandemic level2. However, the strength and sustainability of anticipated growth may hinge on external final global demand and geopolitical tensions that may inject unpredictable elements into the equation.

    According to the Building and Construction Authority ("BCA"), Singapore’s projected total construction demand is expected to range between $32 billion and $38 billion in nominal terms in 2024, above 2023's figure of $33.8 billion. The public sector is expected to drive growth and contribute to 55% of total construction demand in 2024. Total value of construction demand for public sector is estimated at between $18 billion and $21 billion, mainly bolstered by the continued strong pipeline of public sector projects for public housing and infrastructure projects, such as the Housing and Development Board’s (HDB) new Built-To-Order (BTO) developments, additional Cross Island MRT Line contracts (Phase 2), infrastructure works for the future Changi Airport Terminal 5 (T5) and Tuas Port developments. The Private sector construction demand is forecasted to contribute between $14 billion and $17 billion in 2024. Projects poised to drive growth include residential developments under the Government Land Sales programme, expansion of the two integrated resorts and redevelopment of commercial premises, as well as the development of mixed-used properties and industrial facilities.

    Beyond 2024, the BCA forecasted a steady improvement in construction demand over the medium term. Total construction demand is projected to range between S$31 billion and S$38 billion per year from 2025 to 2028.

    The Group perceives that the local structural steel industry is expected to continue facing headwinds and challenges in view of intensified competitions and weak recovery in steel prices that stemmed mainly from China’s debt crisis, tepid domestic demand and steel production overcapacity. Elsewhere, the emerging markets in Southeast Asia and India are also witnessing capacity growth which may make steel prices more competitive.

    On 13 February 2024 the Group divested its 51.04% investment in a Myanmar subsidiary, First Fortune International Ltd ("FFI"). FFI had ceased business operations since February 2023 and the business was reclassified as assets held for sale in the Group’s financial statement in 1H 2023.

    Further to the divestment, the Group will pursue business growth in expanding its cut and bend reinforcing steel business, propelled by the positive outlook for the construction industry in Singapore.

    The Group remains cautious for 2024 in light of current global economy and geopolitical uncertainties.