Chairman's Statement
Dear Shareholders
Despite the tough macro business environment which prevailed in the second half of year 2008, for the financial year ended 28 February 2009 ("FY2009"), Cheung Woh delivered a profitable set of results, albeit less satisfactory compared to that for FY2008.
While our top line eased slightly by 6% to $90.9 million in FY2009, our bottom line (net profit after tax) decreased by 60% from $12.4 million in FY2008 to $4.9 million in FY2009. This was due mainly to lower sales, increased costs of raw materials and higher production costs such as fuel, utilities and staff cost. Depreciation has also increased due to the addition of new machineries and equipment.
However, we have managed to stay profitable, and this is due largely to the speedy actions taken to realign the Group's cost structure. Manufacturing working hours have been reduced and a voluntary pay cut at the Directors and management level has been implemented. In addition, Tysan Precision and Tysan Steel have scaled down headcount to further pare down costs.
Overall, our financial performance reflects our agility in responding to the challenging times, and the success of restructuring by aligning costs with the softer demand for the Group's products experienced at the end of 2008.
Sales of HDD-related components decreased 11 % from $58.6 million to $52.4 million, while sales of precision metal stamping components eased by 4.9% as compared to FY2008. The performance of these two segments reflects the impact of the global economic slowdown which has led to lower demand.
Sales of automotive components generated from Tysan Precision have remained relatively unchanged. External sales of re-rolling steel have increased by $321,000 due to the addition of new customers.
Proposed Dividend
To reward loyal shareholders for their continued support, we are recommending a final tax-exempt (one-tier) dividend of 0.2 cents per share for the financial year ended 28 February 2009.
Advancing Ahead
For the current financial year (FY2010), the general market environment in which Cheung Woh operates will continue to be challenging. The macro business dynamics will be affected by the global recession, and especially the weak US economy, which may likely translate into uncertainty in demand.
Going forward, we expect the Group to do well in the HDD components business segment in the coming financial year. Customer forecast so far has shown improvement in demand for both VCM plates and air combs for the hard disk drive industry. We will continue to grow our HDD business in tandem with our customers' demand.
Our automotive components segment has been benefiting from the stimulus package given by the government of the People's Republic of China (PRC). A beneficiary of this package is the 1.6 litre engine capacity car category, for which Tysan Precision is engaged in the production of seat tracks and seat recliners. While our exports to the USA are expected to remain weak, the growth in domestic business should offset the slowdown in the export market. We remain optimistic about the outlook of the PRC automotive industry, and our automotive components business is well poised to capture the exciting market growth potential of the PRC once the economy shows firm recovery.
The car audio, fibre optics connectors and semiconductor components business will continue to face low demand. However, the business for solar energy panel components is expected to do well.
A key cornerstone of Cheung Woh's business philosophy is formulating the right business strategy or model which will give us a competitive edge. We believe that our current business model enables us to develop a market niche with high barriers to entry. With the right execution of strategies, coupled with continued prudence in cost and efficient operational management, we are confident that Cheung Woh should be able to ride out the storm and deliver a creditable performance in FY2010.
Acknowledgements
I wish to record our appreciation to my fellow board members, our shareholders, management team members, customers, business partners and employees for their unyielding support for, and commitment to, the company. With your solid support, we look forward to scaling greater heights in the coming year.
ChairmanLaw Kung Ying
