Condensed Interim Financial Statements for the Half Year Ended 30 June 2024

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

Condensed interim statements of financial position

* 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 trade receivables and purchases.

Review of Performance

• Review of Performance

  Financial performance of the Group (1H2024 vs 1H2023)

  Revenue and Gross Profit

  The Group achieved revenue of S$73.1 million in 1H2024, which was 10% higher than the revenue of S$66.3 million reported in 1H2023. The increase in revenue was mainly due to a 27% increase in the sales volume but negatively impacted by a 13% reduction in the average selling price on a year-on-year basis in tandem with the decline in market steel prices.

  The overall gross profit margin for 1H2024 improved to 13.6% from 6.2% in 1H2023. This was mainly due to a lower weighted-average cost of materials as the Group took proactive steps to deplete the highcost inventory on hand since 2H2023.

  Due to reasons aforementioned, the Group recorded an increase in gross profit to S$9.9 million in 1H2024 from S$4.1 million in 1H2023.

  Other Operating Income

  Other operating income increased marginally by S$19,000 in 1H2024 compared to 1H2023. This was mainly due to an increase in gain from foreign exchange of S$0.3 million that was substantially offset by S$0.2 million in fair value loss for foreign currency contracts and approximately S$0.1 million in reduction in rental and other miscellaneous income.

  Selling and Distribution, Administrative, Other Operating and Finance Expenses

  The Group’s selling and distribution expenses in 1H2024 increased by 125% to S$0.6 million in comparison with S$0.3 million in 1H2023 in line with an increase in sales volume with more out-sourced logistics services engaged.

  There was a slight decrease in administrative expenses of approximately S$0.1 million in 1H2024. This was mainly attributed to change in management structure since 2H2023 that led to lower salary cost of S$0.3 million. However, a S$0.2 million increase in other administrative costs (such as share placement and insurance) offset a portion of this saving.

  Other operating expenses incurred in 1H2024 declined to S$1.6 million, from S$2.8 million in 1H2023. The decrease was mainly due to the following reasons:

  1. (i) S$0.7 million reduction in impairment provision for inventories;
  2. (ii) Absence of rental expense for a third-party warehouse of S$0.4 million;
  3. (iii) S$0.1 million reduction in foreign exchange loss;

  Total finance costs incurred were primarily related to borrowing for trade financing, term loans from banks, construction loans and leases for properties redevelopment. Total finance cost incurred in 1H2024 decreased in comparison with 1H2023 mainly due to reduced borrowing on trade financing and repayment of term loan.

  Profitability

  Continuing operations

  Due to reasons stated above, the Group reported an improvement in net profit before tax to S$4.4 million in 1H2024 from a loss before tax of S$2.7 million in 1H2023 for the continuing operations.

  Total taxation expense was S$0.7 million for 1H2024 as compared to S$10,000 for 1H2023. A higher tax expense provision was required in tandem with the Group’s improved profitability position in 1H2024 for the continuing operations.

  The Group recorded a net profit after tax of S$3.7 million in 1H2024 compared to a net loss after tax of S$2.7 million in 1H2023 for the continuing operations.

  Discontinued operations

  The Group recorded a net loss after tax of S$264k in 1H2024 from a discontinued operation. The discontinued operation was disposed of on 13 February 2024.

• Balance Sheet

  The Group’s non-current assets, which comprised mainly property, plant and equipment and right-of-use assets were S$25.6 million as of 30 June 2024 compared to S$26.0 million as at 31 December 2023.

  As of 30 June 2024, the Group’s inventory on hand reduced to S$20.1 million from S$24.2 million as at 31 December 2023 which is in line with the Group’s strategy to optimize its inventory holding.

  Trade and other receivables amounted to S$58.5 million as of 30 June 2024 as compared to S$50.4 million as at 31 December 2023. The increase of S$8.1 million was mainly attributed to an increase in trade receivables in tandem with higher revenue generated in 1H2024.

  Trade and other payables decreased to S$8.6 million as of 30 June 2024, down from S$10.4 million as of 31 December 2023 mainly due to repayment for suppliers’ invoices.

  Total bank borrowings increased to S$10.1 million as of 30 June 2024 from S$8.7 million as of 31 December 2023 mainly due to an increase in trade financing borrowings by the Group during the current financial period.

• Statement of Cash Flows

  The Group recorded net cash outflows from operating activities of S$0.6 million in the current period. This was due to profit from operations, offset by net decrease in working capital, mainly attributed to an increase in trade and other receivables.

  Net cash flows used in investing activities for 1H2024 was S$2.1 million, mainly due to purchase of noncurrent assets of S$0.7 million and S$1.4 million in net cash outflow from disposal of a subsidiary.

  Net cash flows generated from financing activities for 1H2024 was S$5.4 million, mainly due to proceeds of S$4.3 million from share placement and net proceeds of S$1.4 million from bank borrowings after offsetting principal lease repayments of S$0.3 million.

  The Group’s cash and cash equivalents were S$19.1 million as at 30 June 2024 in comparison to S$18.6 million as at 30 June 2023.

• Commentary

  On 12 July 2024, the Ministry of Trade and Industries (“MTI”) released the Advance GDP estimate for Q2 2024. The Singapore's economy posted a 2.9% growth in the second quarter of 2024 from a year earlier, extending the 3.0% growth in the previous quarter. On a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 0.4%, up from the previous quarter’s revised 0.3 % growth figure.

  The growth in 2Q 2024 was bolstered by a 0.5 % year-on-year rebound in manufacturing, reversing from a 1.7% contraction in the first three months of the year. Meanwhile, the Construction sector continued the grew momentum. It reported a growth of 4.3% in 2Q 2024, extending the growth of 4.1% reported in Q1 2024. Growth for the sector was supported by an increase in public sector construction output.

  On 26 July 2024, the Monetary Authority of Singapore released its policy statement and indicated that it expects the economy to strengthen over the rest of 2024, with growth coming in closer to its potential rate of 2–3%. Notwithstanding this optimism, uncertainties over the changes in global geopolitical landscape and ongoing global battle against inflation will continue to pose challenges to the global economy. On the other hand, steel price remains under pressure and has not shown signs of recovery since declining from a multi-year high in 2021. Steel demand from China, which consumes more than half of global output remains weak due to the slowdown in China’s real estate and construction market.

  The Group’s sales volume and revenue for the continuing business operations increased by 27% and 10% respectively in 1H2024 compared to same period last year, driven by positive volume growth for the Construction Steel business segment and partially offset by decline in average selling price of steel over the period. Overall financial performance improved considerably compared to 1H 2023 as we stemmed the loss caused by the cessation of business in a Myanmar subsidiary that was subsequently disposed in February 2024 and depleted the high-cost inventory that was in the book of the Group in FY2023.

  During the six months ended 30 June 2024, the Group’s construction steel business segment continued to made efforts to win new contracts and maintain existing contracts. With the positive outlook for the Singapore economy and construction industry, we will continue to work hard to improve our sales order book.

  On 27 June 2024, the Company’s shareholders approved the placement of 50,103,000 new ordinary shares to its substantial shareholder Green Esteel Pte Ltd. The first tranche of the placement of 16,130,000 shares was concluded on 28 June 2024. We welcome Green Esteel as a strategic investor of the Company. With Green Esteel's strong financials, extensive networks and familiarity with the regional business environment, these will make them a valuable partner to implement the Group’s business strategy.