Operation Reviews
Company Overview
Cheung Woh is a global leader in the manufacture and supply of precision HDD components. The Group's mission is to continuously improve the quality of our products and services so that we can meet the needs of our customers, achieve good growth and maximise returns for our shareholders.
Listed on the Singapore Exchange in December 2002, Cheung Woh provides high-precision engineering products to the HDD, communications, data storage, electrical and electronics, semiconductor and automotive industries. The Group's core products are categorised as follows: HDD components including voice coil motor (VCM) plates, disk clamps and air combs; precision metal stamping components including sheet metal machined parts and computer numerical controlled (CNC) machined parts; automotive components including car seat track adjusters and car seat recliners; and precision cold-rolled steel.
Cheung Woh has a wide range of fully integrated manufacturing facilities in Zhuhai, China, as well as operations in Singapore, Malaysia and Suzhou, China servicing local, regional and international markets. The Group also has a technologically advanced in-house precision tool and die manufacturing capabilities.
From a small operation staffed by around 10 persons more than 30 years ago, Cheung Woh has progressed to what it is today - a regional group employing some 2600 staff over 6 locations.
FY 2009 Results In Summary
For FY2009, Cheung Woh remained profitable despite decreases in both the top and bottom line. Group revenue decreased to $90.9 million from $96.3 million, reflecting the impact of weak global demand for the Group's products.
Net profit after taxation, however, dropped substantially to $4.9 million from $12.4 million, due mainly to lower sales caused by global softening of demand, increased costs of raw materials, higher production costs, as well as increased depreciation charges. Group net profit margin was 5%, and earnings before interest, tax, depreciation and amortization stood at $14.7 million.
Operating Review
HDD Components
Sales of HDD-related components eased 11 % from $58.6 million to $52.4 million, which accounted for 58% of Group sales, making it the largest revenue contributor.
Cheung Woh is proud to have clinched the Best Vendor Award from one of our key customers, Western Digital, in 2008. This achievement underscores the high quality of our products and services to this particular client.
Automotive Components
Our automotive components segment achieved sales of $23.7 million in FY2009, slightly higher than the $22.7 million recorded in FY2008 despite the global economic slowdown in the second half of year 2008. This stable performance by Tysan Precision reflects the strong growth in China's automotive industry. This segment contributed 26% to Group revenue.
Precision Metal Stamping Components
The precision metal stamping components segment registered sales of $14.3 million, down slightly by 4% from $14.9 million in FY2008. However, its operating results improved by 11 3% to $ 3.4 million in FY2009.
Re-rolling Steel
This segment remained relatively stable with an operating profit of $358,000 compared to $400,000 in FY2008. External sales of this segment have increased by $321,000 due to the addition of new customers, while intercompany revenue remained stable at $11 .8 million, similar to that achieved in the preceding financial year.
Risk Management
The management makes regular reviews of the Group's operations and business activities as well as industry trends to identify areas of significant business risk. Once these factors are determined, the top management reports to the Board and appropriate measures to control and mitigate these risks are formulated. The Group identifies volatile and sudden changes in economic and business environment as a possible threat to the Group's profitability. While the current vertical integration has brought about lower manufacturing costs, any inevitable rise in costs would partially reverse cost savings.
Gearing
As at 28 February 2009, the debt to equity ratio was 69%, slightly higher than FY2008's figure of 44%. Interest coverage ratio was 11 x compared to 19x for the last financial year.
Net cash generated from operating activities in FY 2009 decreased which was mainly due a decrease in profit before taxation and trade payables and an increase in trade receivables, bills receivable and income tax paid.
Net cash used in investing activities increased due to purchase of property plant and equipment.
Net cash used in financial activities decreased mainly due to the payment of short-term and long term borrowings undertaken by Cheung Woh and the payment of dividends to shareholders.
