Investor Relations
Online Q&A
Dated 11 February 2004
Dear investors,
We appreciate the interest you have shown in AEI, and we are pleased to provide our answers to your queries.
Your questions will be reposted in blue followed by our replies in black.
Regards,
Ian Tan and the AEI management team
Ipocity, you wrote;
Dear management,
Some questions.
What is the main difference in steel components and aluminium components in the electronics industry? If the item for eg heatsinks are made of alum, can it also be made using steel or other iron alloys?
Am I right to say that steel components players like Unisteel and Cheung Woh are not able to compete with u because they do not mfg aluminium prts?
Who are your main competitors here in the region and which global company do u aspire to be one day.
Thank you for your answers in advance. You have taken a good move to answer questions early in the IPO.
Hi Ipocity,
Thanks for your questions.
In the electronics industry, steel and aluminium are used for different components in conjunction with their own unique purposes. For example, heatsinks are made from aluminium given their excellent heat conductivity as compared to steel. Many electronics parts are made from aluminium due to its light weight and corrosion resistance.
As far as we understand, AEI does not have any direct listed comparable on the SGX with aluminium extrusion facilities in Singapore. Currently, AEI is the only aluminium extruder that has extrusion production facilities located in Singapore.
We manufacture precision extruded profiles, serving mainly the electronics and precision engineering segment as well as the construction and infrastructure building segment.
While there are many other aluminium extruders located in the region, we believe that most of them focus on the construction and infrastructure building industries.
At AEI, we serve mainly the component manufacturers of HDDs, computers and computer peripherals and companies whose production process involve precision machining and industrial automation.
Our main competitors in this market are Alexandria Extrusion from USA and Showa Metal from Japan.
We plan to take on a new role as a turnkey aluminium component manufacturer and penetrate new industries such as the automotive and defence industries.
Ipocity, you wrote;
Stockeagle... good comment. Can the management also share with us what is the prospects of their alum prdtion?
For instance, can they switch to other types of products easily? Can they service the automobiles industry in Thailand for instance, w/o making major restructure to their production lines?
Dear Ipocity,
We believe growth opportunities exist for AEI in various industries such as the HDD and the automotive industries as there is a growing trend for the use of aluminium extruded components because of its lightness and durability as compared to other metals.
Presently, we serve mainly the component manufacturers of HDDs, computers and computer peripherals and companies whose production process involve precision machining and industrial automation.
We have completed production trials to produce extruded profiles from specialty aluminium alloys to penetrate the automotive and defence industries. We are presently looking into opportunities to sell our products and services to these industries.
Zeppelin, you wrote ;
Dear sir,
- How much of your costs of sales are raw material costs?
In FY2002, raw material costs, mainly aluminium billets accounted for 72.4% of cost of sales.
- $3m of IPO money is for creating new alloys? What alloys are we expecting? Will they be for the elctronics market??
We have completed production trials to produce extruded profiles from specialty aluminium alloys (2000 Series and 7000 Sseries) to penetrate the automotive and defence industries.
With our enhanced production facilities funded by our IPO proceeds, we are presently looking into opportunities to sell our new products and services. We intend to continue developing other new specialty alloys for extrusion to meet the needs of customers.
- $8m will be to build facilities in the region... where? Will it be just one plant? Which industries and customers will it serve?
We intend to acquire additional manufacturing facilities in the region and are currently identifying locations in China, Thailand or Malaysia.
Besides being within close proximity to our future customers, these additional production facilities will also allow us to expand into the region and further grow our business in the electronics and precision engineering industries.
- Will there be one day that you do not rely on the construction sector? Any internal mgt target when that shld be? sorry, somemore..
- Is it true you need the construction sector to contribute to the sales of your business to keep the factory humming and to enjoy economies of scale via lower bulk purchase cost of the raw materials?
The construction and infrastructure building segment still contributes positively to top and bottomline, and it certainly contributes to covering our overheads.
Besides, we enjoy an established track record in the industry and we would like to continue to tap on our good name to serve our customers.
- Is it also true your do not have any competitors in Singapore? If so, where are they?Thanks.
As mentioned in our answer to A1, we understand, AEI is the only aluminium extruder that has extrusion production facilities located in Singapore.
There are many other aluminium extruders located in the region which serve the construction and infrastructure building industries, but none of these extruders have production facilities in Singapore. Thus, local orders placed with them would require a longer lead time to be fulfilled.
As for the electronics and precision engineering segment, we believe our main competitors are Alexandria Extrusion from USA and Showa Metal from Japan.
Warren, you wrote;
Hello management,
Its strike me as strange that company is raising so much money via IPO ($15.7mil?) when it already has shareholder funds of $27mil as at 30June 2003. Adding the funds raised to the total gives almost $43mil. That is even more than your highest sales turnover in 2001.
Can you help us understand why there is this need? Especially since the company is ungeared? Is there some dynamic perculiar to your industry?
Dear Warren,
Thank you for your questions.
As you know we are on an expansion path. Therefore our IPO proceeds will be used for expansion purposes. From the net proceeds of approximately S$14.4 million, we will use S$11 million to enhance and acquire additional production facilities so that we will be better placed to compete internationally. As for the rest of the funds, we will use them as general working capital and to be in a strong position to move quickly should additional opportunities arise.
Warren, you wrote;
Hi Management,
I just read a report this morning from CLSA which warns: "commodity prices have resumed their bull runs after the lull in PRC trading activity over Chinese New Year. Aluminium, steel and copper are all set to spike higher in the coming weeks...."
They talk about giant Chalco being overdue in raising the alumina price, due to surging mainland demand, which has lowered export volumes. They wrote: "Spot alumina prices have resumed their climb, with the latest Nalco tender settled at US$462/t. This suggests PRC import prices are heading for Rmb4,800-5,000/t versus recent transactions of Rmb4,400-4,600/t."
Can you explain what is the impact of rising raw material prices to your business. Also, do you have ability to push price increases onto customers?
Dear Warren,
There is little impact of raw material prices for us as we practice back to back orders We place orders for materials only upon securing orders from our customers. AS such, we are able to transfer prices of raw materials on to our customers.
Warren, you wrote;
Hi,
I also forgot to ask: what are the forex impact on your business? Do you gain or lose from a weak USD?
thanks
Warren
Dear Warren,
Our reporting currency is in SGD and our revenues and purchases are denominated mainly in SGD & USD. We do not have any formal hedging policy but have in the past used foreign currency forward contracts to manage our forex risk. For HY2003 we had a forex gain of S$22,000. Should the USD weaken & if we have a long position in USD denominated receivables situation, we will lose on the translation to SGD.
Dear investors,
Thank you for your interest in AEI.
We hope this Q&A session has given you a better understanding of the company and we look forward to your continued support.
Regards,
Ian Tan & the AEI Management Team