Operations Review

Email This Print This Operations Review

Extracted from Annual Report 2016

Recap of Financial Year ended 31 December 2016

Worldwide demand for personal computer and hard disk drive products remained poor. The Group's core Electronics & Precision Engineering segment, faced lower customer orders in the financial year ended 31 December 2016. Outlook for personal computer and hard disk drive industries is expected to continue to be subdued.

For FY2016, the Group registered total business turnover of $12.2 million, a decrease of 36.5% compared to $19.2 million reported in the previous year. Despite sales declining by 36.5%, the Group managed to record a higher gross profit of $0.2 million for FY2016, compared with $0.05 million achieved in the previous year. This was mainly due to lower inventory cost in FY2016 after impairing inventories to net realizable value as a result of soft aluminium prices, as well as lower depreciation expenses after disposal of old extrusion machines.

At the pre-tax level however, the Group's continuing operations reported a loss of $2.5 million, compared with a profit of $0.8 million in FY2015, after taking into account a fair value assessment of the Tuas South property, of which an impairment of $1.6 million was recorded.

Other major items include a $1.8 million segment loss arising from the de-consolidation of disposed subsidiaries.

Electronics & Precision Engineering

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

Revenue from this segment decreased by 36.2% from $17.8 million to $11.3 million for the year ended 31 December 2016. Ongoing slowdown in worldwide personal computer demand and sluggish hard disk drive shipment resulted in lower customer order level during the financial year. Segment results decreased as a result of lower sales contributions.

Construction & Infrastructure

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

Revenue from this segment decreased by 40.9% to $0.8 million during the year, compared with $1.4 million in the previous year. Segment results decreased as a result of lower sales and lower contribution margin as the Group continued to take a prudent stance in taking new customer orders, in the midst of intense competition and low selling prices faced in this segment.

Others Segment

Revenue from this segment relates to service fee income from associated company.

Segment loss in FY2016 mainly relates to operating expenses of a subsidiary company.

Discontinued Operation

This segment previously consisted of the Group's China subsidiary which was in the business of producing forged metal components.

The Group had on 16 December 2015 announced that its subsidiary had entered into a sale and purchase agreement to dispose an indirect subsidiary. The agreement for the proposed disposal had been completed on 2 February 2016. The $1.8 million segment loss arose from the de-consolidation of disposed subsidiaries.

Aluminium Price

LME Aluminium price started the year at a low level of US$1,466.50, and had been on a steady uptrend to reach the price point of $1,713.50 at the close of the year.

Ongoing aluminium price will depend on industry demand and supply situations, ongoing global economic conditions as well as energy prices. Fluctuations in aluminium price and billet premiums will continue to have significant impact on the Group's operating margin and financial results.