Dear Shareholders

The year in review

The global financial system was severely jolted in 2008. The unravelling of complex financial derivatives caused huge losses in the financial sector forcing banks and financial institutions to scale back their lending activities drastically. Liquidity dried up quickly causing a worldwide credit crunch.

Global trade was affected severely following the meltdown in the financial markets, and the Singapore economy, like that of many other countries, slipped into recession. Demand for steel products suddenly diminished, and while supply and production took time to respond, prices of steel products corrected significantly starting from the last quarter of calendar year 2008.

As a result of the poor economic climate, the Group reported a significant drop in revenue during the last three quarters of FY09 with corresponding decrease in its net profit after tax. In response to the market conditions, the Group took immediate steps to reduce its inventory holding by curtailing its purchasing programme and selling from existing stock. This reduced our need for bank borrowings to support purchases, and management concentrated its efforts on collection of accounts receivables. Adequate provisions for the diminution in value of inventory were made in the accounts as a result of falling market prices.

Various cost cutting measures were implemented to maintain competitiveness while not compromising our operational effectiveness. Even during these challenging times, the Group took pride that it did not retrench any of its staff other than reduction due to natural attrition and resignations.

The Group was able to find strength from its long history to operate under such uncertain and chaotic market conditions. For the 12 months ended 30 June 2009 (‘FY09’), the Group reported a revenue of $321.7 million (FY08: $433.7 million) with net profit after tax of $14.1 million (FY08: $45.1 million). Although revenue and net profit after tax had declined by 26% and 69% respectively compared to the previous financial year ended 30 June 2008, nevertheless the results were commendable in the face of such unfavourable economic circumstances.

In the last few years, the Group had strengthened its equity base by issuing new shares through a rights issue of shares and a private placement to individual and institutional investors. At the end of 30 June 2009, the Group’s shareholders’ fund was $200.9 million (FY08: $203 million) with net assets per share standing at $0.32 (FY08: $0.32). This strong equity base will keep the Group in good stead to weather the raging global financial storm.

Relationship with our bankers remained strong amidst the credit crunch as the Group constantly updated them on its situation so as to provide comfort and thereby maintaining confidence in its operation. This had resulted in the continuous support rendered by the banks.

During the period, and as a result of prudent financial management, the Group’s cash position had greatly improved with a net operating cash inflow of $106.5 million for FY09 compared to a net operating cash utilization of $22.2 million for FY08. This had enabled the Group to reduce its total borrowings substantially from $68.4 million to $6.9 million. Its balances of cash and cash equivalent of $53.6 million now exceeded its short term bank borrowings of $4.2 million.

Outlook

The Singapore economy fell into recession as we began calendar year 2009. Demand for our steel products contracted significantly while prices also fell sharply during the first half of calendar year 2009.

Like many governments around the world, the Singapore government responded to this steep contraction by meting out a fiscal stimulus package as part of its annual budget for 2009. The Group benefited from the job credit scheme in the way of reduced wage cost and it also helped the Group to retain the manpower needed to maintain an efficient operation. At the same time, government infrastructure projects like the Marina Coastal
Expressway and others will stimulate demand for steel products when construction begins.

With a more subdued economy outlook for the rest of calendar year 2009, the management will continue to exercise due care and caution in its stocking decisions to avoid carrying excess inventories and to take advantage of any offers when opportunities arise. The Group is looking forward to calendar year 2010 for a
more sustained recovery in the world economy to generate demand for its products.

As the Group has maintained a healthy cash flow thus far, we expect to grow stronger as the world emerges from the current crisis. This economic downturn may also present the Group with some excellent acquisition opportunities and we will evaluate them carefully as and when they arise.

Dividend

The Directors are pleased to recommend a final tax exempt dividend of 1.0 cent per share for FY09 (FY08: 1.0 cent) to express our appreciation for the support of our shareholders.

Acknowledgement

I would like to thank my fellow Directors for their support and wise counsel and the Management and staff for their loyalty, dedication and contributions to the Group.
I would also like to express the Group’s appreciation to our customers, suppliers and business associates for their continuing support.

Finally, I would like to thank all of you, our shareholders, for your commitment, support and loyalty to the Group.

Tang See Chim
Non-executive Chairman

24 September 2009