Extracted from Annual Report 2015
Dear Fellow Shareholders,
Global business climate in the year 2015 continued to be challenging, not only for the electronics and personal computer industries, but for many other sectors in the global market as well. Worries of ongoing economic slowdown in China, the world's manufacturing hub for all sorts of products, from consumer products to the latest high-tech electronic products, continued to plaque the global markets. In addition, prospects of rising interest rate in the US posed further uncertainty and volatility to an already nervous world market.
Amid a subdued business year, the Group registered total business turnover of $19.2 million for FY2015 (from continuing operations), 20.2% lower than the previous year. In this financial year, the Group also posted profit before tax of $753,000 (from continuing operations), compared to loss before tax of $5.3 million in the previous year.
Going forward, the Group will continue its approach to improve top line by actively managing its strategic product mix and pricing, at the same time working on enhancing its bottom line through effective operational execution, ef ficiency improvements and costs controls, in order to achieve optimal contribution to the Company and returns to our shareholders.
The Year 2015 in Summary
In FY2015, global demand for personal computers and hard disk drive products continued its weak trend. Consequently, the Group's core business segment, the Electronic and Precision Engineering segment, faced lower business turnover in FY2015. As of this writing, outlook for the personal computers and hard disk drive industries is expected to remain muted.
In second half of FY2015, the Group was able to get qualified for certain customer programs with more stringent new material specifications which it was not able to take part in last year. We hope to eventually target to bring back some of the lost sales revenue in this customer segment.
The Group intends to continue to invest in strengthening our capability as well as human resource development, in order to position ourselves as a leading player, so that we will be in the best position for the recovery of this key industry which continues to play an important role in this age of social media and connectivity. AEI will continue to provide our customers with the best quality product offering that meets the future of their material needs.
Completion of Share Consolidation Exercise
In April 2015, the Group received approval from SGX for the consolidation of every 10 existing issued ordinary shares in the capital of the Group into 1 ordinary share. The share consolidation exercise was completed and effective 11 May 2015.
Completion of Business Transfer Agreement to AEI Corporat ion (Singapore) Pte. Ltd. / Increase of Issued and Paid Up Capital in AEI (Singapore) Pte. Ltd.
The Group also completed a sale and transfer agreement of its extrusion business and assets of AEI Corporation Ltd. to AEI Corporation (Singapore) Pte. Ltd. (AEICS), a wholly owned subsidiary of the Group in October 2015, by issuance of 16,346,581 fully paid ordinary shares by AEICS of $1 each to the Group.
At the same time, the Group further increased its investment in AEICS by subscribing for an additional 3,653,417 shares of $1 each in its share capital, paid fully in cash.
The transfer represents an internal restructuring involving transfer of business, assets and property from the Group to wholly-owned subsidiaries, and is expected to present the Group with a more efficient corporate structure, by creating distinct business units, each with its distinct business focus within the Group.
Divestment of Our Regional Business –Form Tecknik Shanghai Co., Ltd.
Form Tecknik (Shanghai) Co., Ltd. (FTS), a former subsidiary of the Group in China, produced precision forged metal components for the automotive and industrial sectors.
The Group had on 2 February 2016 completed the sales and purchase agreement to divest all shareholding interest in FTS, having earlier entered into the agreement with Lik Sang Industrial Company Limited back in December 2015.
Total consideration for the transaction was RMB 3,000,000 which was arrived at after negotiation between the Group and the purchaser, fully settled by payment in cash.
The automotive industry in China continues to be challenging. At the same time, as with many other Chinese business sectors, FTS faced headwind in the midst of slowdown in China's economy, while at the same time rising operating and labour costs. The divestment represented part of the Group's plan to reduce underperforming assets.
New Manufacturing Site
The development of the Group's new factory at Tuas South Street 13 is ongoing, and is expected to complete later this year. Preparation is now underway for the relocation of our main extrusion operation. The Group is actively managing all efforts involved in the moving of plant machinery, equipment and office. We are making all necessary arrangements to minimize disruptions to daily business and production downtime.
The manufacturing environment in Singapore remains challenging, with continuing tight control on labour market, as well as high operating costs.
The global economy and industries are expected to continue to face fresh challenges and uncertainties in the year 2016.
Energy prices continued to see volatility as we entered the first quarter of 2016, as the world continues to grapple with historical demand and supply situation and inventory levels, amidst political maneuvering.
Aluminium prices and processing premium have eased to some extent in line with broad retreat in commodities market, after elevating to record high levels in 2014. They will continue to be a factor to be monitored and managed carefully. Ongoing volatility may have an impact on the Group's profitability.
The HDD industry may not be expected to see sharp growth this year, however it still presents the Group with attractive business prospects, given its high volume as it remains the favourable and lowest cost medium of storage for both personal and enterprise storage needs.
I am confident that the Group's strong and experienced Board and Management will continue to help the Group remain resilient, and do a good job in leading the Group through the challenges ahead.
On behalf of the team at AEI Corp, I would like to express my heartfelt appreciation to all our customers, suppliers, bus iness associates, shareholders and board members for all their generous support and I look forward to our continued partnership for the exciting years ahead.