ANNUAL REPORT YEAR 2017

Dear Shareholders,

2017 proved to be a year where the global economy had largely bottomed out. While protectionism policies and sentiments persisted in some parts of the world, economies in other parts showed signs of stabilisation with the gradual recovery of oil prices. Correspondingly, the Singapore economy grew by 3.6% in 2017. However, the performance of business sectors remained uneven. Particularly, the oil and gas, shipbuilding and marine sectors which have significant impact on the manufacturing and distribution business worsened.

Proactive Measures Paid off

For AnnAik, the absence of impairment of available-forsale financial assets for the Dalian Shicheng project, and the successful restructuring of the manufacturing business and implementation of costcutting measures since 2016 had started to pay off – despite continued challenging operating environment. In addition, the gain that resulted from the dilution of shares of associate, amounting to $4.58 million, through the roping in of a strategic investor in one of the Group’s environmental businesses in China, Onway Group, empowered AnnAik to achieve $2.62 million of profit attributable to owners of the company for the financial year ended 31 December 2017 as compared to a loss of $4.57 million in the prior year. A marginal increase of 2.75% was also recorded in the Group’s turnover, from $48.02 million in 2016 to $49.34 million in 2017. Increased sales activities for the trading of flat steel products in the India and Philippines markets as well as successful market penetration into Korea had contributed to a higher turnover for the Group. This was, however, partially offset by the lacklustre demand for steel piping products and flanges in Singapore and the region.

Poised to Leverage Opportunities

In 2017, AnnAik’s environmental business kept up the growth momentum. The Group registered positive gain from the full year performance of ChangXing Annyi. Beyond which, the Group also capitalised on the growing emphasis in sustainability practices worldwide by actively exploring ways to increase its wastewater treatment capacity in China as well as the securing of new environmental projects on all fronts. This led to the acquisition of 85% of shares in LinXing Water Supply Co., Ltd during the year. With the acquisition, AnnAik’s business in China expanded to include the fresh water supply business, broadening the scope of our environmental business from the existing treatment of industrial and municipal wastewater business. This development, together with the new wastewater treatment plant that the Group is currently building, is expected to reinforce the Group’s positioning in the environmental industry going forward. Consistent with AnnAik’s aspiration for the environmental business, the Group welcomed an investment of RMB125 million for a 51% stake in Onway group in July 2017 from a strategic investor. In the short run, this dilution of shares in associate reduced the profit contribution from the associate to the Group. In the long run, the investment strengthens the Group’s position in China, enabling it to tap on available opportunities such as funds and public-private partnership (“PPP”) projects in the market.

On Course to Deliver Value

With the market condition looking to keep up its upward trend in 2018, it is foreseeable that aborted projects might be reactivated and more new projects, both upstream and downstream of the supply chain, will become available. For steel piping products and flanges distributors and manufacturers who have pulled through the unprecedented challenging times – like AnnAik, we have grown to become more resilient and efficient. Notably, our competitive strength in stock management, and service and product quality will set us in good stead to take advantage of the recovering industry. Based on the recent market demand, 2018 appears to be a better year for our steel distribution and manufacturing business. Just as exciting are the prospects for AnnAik’s environmental management and engineering business. This segment has shaped up well to exceed the Group’s strategic and financial objectives. Furthermore, new investments and opportunities with the potential to elevate the segment’s position and profitability for the next few years are currently being evaluated and adopted. The realisation of these prospects not only augur well for AnnAik’s development in the segment, but also add value to stakeholders.

Dividend

The Board of Directors is pleased to propose a first and final one-tier tax-exempt dividend of 0.2 cent per share for the year ended 31 December 2017. The dividend will be paid out to shareholders upon approval at the annual general meeting.

Acknowledgement

The past few years had proven to be tumultuous for AnnAik. Tough operating  environments and weak market demand negatively impacted our manufacturing and distribution business. Thanks to the opportune diversification of our core business to the environmental management and engineering segment, we were able to hold strong and weather the storm well. We are mindful that the fruitful journey was made possible with the unwavering support of our shareholders, customers and business partners. Their trust and confidence in us have bolstered our courage and determination to stay the course. Similarly, the astute leadership of our Board and management, and enduring contributions from our staff have inspired us to continue to explore new areas of business. In the way forward, we are committed to invest prudently and wisely towards the long term progress and sustainability of the Group.

James Ow Chin Seng
Executive Chairman cum CEO

Download Annual report file