Investor Relations

Operations Review

Extracted from Annual Report 2007

Total Revenue achieved this year was $68.12 million, a decrease of 6.8% versus the $73.13 million recorded last year, which was due to a drop in sales revenue for the Construction & Infrastructure customer segment. However the Electronics & Precision Engineering segment continued to grow in business turnover, achieving a record $58.33 million in sales revenue this year, evidence of the success of the Group’s strategy to focus on higher value-added products with better margins, especially in this customer segment.

Profit Before Tax for the year decreased by 22.7% to $5.23 million, down from $6.77 million last year. Profi t After Tax decreased by 17.7% to $4.52 million, versus the $5.50 million achieved last year. The decrease in profi t is attributable mainly to the higher cost of aluminium billets, following the largely upward trend in the LME aluminium price throughout most of the year. The Group was able to pass on some but not all of this cost increase, as the aluminium price followed a volatile path throughout the year.

ELECTRONICS & PRECISION ENGINEERING

This customer segment mainly comprises component manufacturers for the Electronics, Personal Computers, Hard Disk Drive and Consumer Products industries.

Business turnover was good this year, with segment revenue rising by 1.6% to $58.33 million during the year, up from $57.40 million the previous year.

Contribution from this key customer segment continued to climb, reaching a high of 85.6% of total Group business turnover this year. The Group remains confi dent in the growth opportunities this segment represents, as more companies choose to outsource their production to this region of the world.

CONSTRUCTION & INFRASTRUCTURE

This customer segment comprises mainly of fabricators, contractors and stockists who serve the construction, civil engineering and infrastructure building industries.

Business turnover for this customer decreased by 37.8% to $9.78 million this year, compared with $15.73 million the previous year. The contribution from this segment to total Group business turnover continued to fall, reaching a low of 14.4% during the year. However the Group no longer relies on this customer segment to provide the “bread and butter” of business volume, unlike other extruders. We have the latitude to be more discerning in evaluating the viability of new orders before deciding whether to accept the prices offered by our customers. This is evident in the proportion of profi t we achieved for this customer segment, which more than doubled this year despite the drop in business turnover.

AEI ENGINEERING PTE. LTD.

This subsidiary offers a range of downstream value-added services which complement our existing extrusion business, such as precision machining, surface fi nishing, sub-assembly and packaging.

This year, this subsidiary saw a decrease in business turnover as we experienced a lower level of orders from our major customer in this segment, as a product came to the end of its life cycle. However the subsidiary continued to bring in new customers who are beginning to compensate for the drop in revenue. We continued to see good capacity utilization towards the end of the year.

ALUMINIUM PRICE

Throughout 2007 the LME Aluminium price remained largely at high levels. The price rose from US$2,830 at the beginning of the year to a high of US$2,953 on 24 January, before moderating towards the end of the year, closing at $2,350 on 31 December.

Throughout the year the Group took steps to renegotiate higher selling prices with its customers. We were not able to pass the full extent of the aluminium price increase to all customers, particularly those within the larger Electronics & Precision Engineering customer segment, who are operating in an ultra-competitive environment. This inevitably resulted in margin erosion, which was the main cause of the decrease in Group profit for 2007.

As at the end of 2007, the aluminium market remains tight on the supply side with analysts forecasting a pickup in demand in 2008. Meanwhile energy and crude oil prices continue to rise. The severe winter weather in China and power cutbacks in South Africa resulted in further curtailment of supply, placing upward pressure on aluminium price going into the fi rst month of 2008.

The ongoing aluminium price will continue to refl ect the demand and supply situation, which in turn is related to the condition of the global economy. Likewise, global energy prices will continue to affect production costs. Some industry analysts are forecasting a gradual buildup of supply surplus towards end 2008, which could potentially ease the upward pressure on price. Whatever the case, ongoing fl uctuations in the aluminium price and energy costs could potentially have a signifi cant impact on the Group’s future fi nancial results.