ANNUAL REPORT YEAR 2014

Executive Chairman cum CEO of AnnAik Limited lends insights into factors driving
the Company’s performance in 2014, and shares his vision for the year forward.

Q – Question
A – Answer from Mr. Ow Chin Seng

Q- How has 2014 been for the Group?
A- While the global economy continues to be shrouded by weak market demand fuelled by the impact of the sharp oil prices contraction, the Group performed reasonably well in 2014. We are pleased to announce a net profit attributable to owners of the Company at $0.72 million as compared to a loss of $0.27 million in 2013. Gross profit margin of 23.57% was also higher than the 22.44% achieved in 2013 while the gross profit was maintained at the 2013 level despite lower turnover.

Q- What factors drive the Group performance in 2014?
A- Primarily, the higher contributions from the Distribution and Environmental and Engineering Divisions positively impacted the Group’s performance. The hike in nickel price at the beginning of 2014 also boosted the Distribution Division’s gross profit. This was, however, partially offset by the gross loss registered for the Manufacturing Division due to higher production cost and preoperating expenses arising from initial low production volume in Shinsei Industry Sdn Bhd.
The commencement of commercial production by Shinsei Industry Sdn Bhd in third quarter of 2014 and the higher revenues generated by the distribution division from newly incorporated companies – Metal Wang Pte Ltd and Ichinose Emico Valves (S) Pte Ltd – saw the Group recording revenues of $6.00 million for the three operations. However, the divestment of Shinsei Taizhou operations in June 2013 resulted in no revenue contribution from Shinsei Taizhou in 2014 as opposed to the $9.60 million recorded in 2013. Consequently, the Group’s turnover decreased marginally from $52.41 million in 2013to $49.04 million in 2014.

Q- Is the Group’s restructuring efforts still ongoing?
A-The Group’s restructuring efforts in the past years had refocused our business
strategy to leverage the strong expertise of the Group. The relocation of the Group’s headquarters to the current site and the divestment of manufacturing operations in China had also further streamlined the Group’s operations to bring about greater efficiency and productivity. These initiatives result in strengthened business focus and a more cohesive team that is poised to capitalise on opportunities. Beyond building on positive momentum, the Group had also embarked on business continuity planning in 2014. Through the nurturing of a team of young capable leaders, the Group paves the way for AnnAik to advance with strength and fortitude into the future.

Q- What is the outlook for AnnAik in 2015?
A- 2015 brings a mix bag of challenges and business opportunities. The sharp drop
in oil prices has caused the general business sentiment to be lacklustre. Given that the Southeast Asia region is characteristically made up of net oil importers, the lower oil prices bolster investment in infrastructure projects, which in turn translate into higher demand for steel piping products. Locally, it is expected that there will be a continuous stream of power and water related infrastructure projects as the nation renews and improves efficiency and adequacy in these areas. Being a steel piping solution provider that services nearly every industry that requires steel piping, the Group is expected to experience volatility as the industries locally and regionally adjust to the new normal of low oil price. To counter the volatility of the steel piping industry, the Group is actively developing the water and waste
recovery management business, which is complementary to our core business.
As Singapore and the rest of the World become increasingly environmentally
conscientious, it is expected that the Engineering and Environmental Division will not only present growth potential for the Group, it will become
a key engine of growth.

Q- Will the Group declare a dividend for 2014?
A- Yes. The Board of Directors has proposed a first and final one-tier exempt dividend of 0.20 cent per share for the year ended 31 December 2014. The payout is subject to shareholders’ approval at the annual general meeting. We are deeply grateful to the shareholders for their unwavering support over the years. Their trust has empowered us to come this far. Of course, the synergistic partnerships we enjoyed with our customers, employees, business associates and Board of Directors are equally instrumental. Their continued support and commitment has given us the confidence that the Group will be able to rise up to any challenges on the horizon and collectively bring the business to the next level.

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