In 2015, the world economy experienced strong headwinds as a result of the weakening Chinese economy, plummeting oil and commodity prices. These negative developments coupled with persistent flat growth in Europe and Japan offset the moderate growth
in the U.S market, and adversely impacted the overall economy outlook in Singapore.
Navigating a Challenging Landscape
Against this challenging economic backdrop, AnnAik’s turnover increased 8.22% from $49.04 million in 2014 to $53.07 million in 2015 due to higher sales achieved by newly incorporated subsidiaries in the distribution division – Metal Wang Pte Ltd and Ichinose Emico Valves (S) Pte Ltd – which are in the businesses of trading primary and secondary flat products and the supply of valves respectively. The Group’s newly setup plant – Shinsei Industry Sdn Bhd –also contributed to the Group’s revenue following its first full year of operation.
Despite registering an increase in turnover, the Group recorded a loss attributed to owners of the Company at $5.76 million for the financial year ended 31 December 2015 as compared to a profit of $0.72 million in the prior year. The sluggish global steel industry, coupled with excess capacity in the steel supply chain, depressed the selling prices of steel products. As a result, the Group had to confront a stiffer competitive environment as well as a decrease in gross profit margin from $11.56 million in 2014 to $9.16 million in 2015.
To compile the problem, rising distribution and administrative expenses, as well as increasing finance costs also impacted the Group’s performance adversely in 2015. Furthermore, the Group exercised prudence, and made additional provisions for inventories and doubtful debts to be consistent with the challenging market conditions.
Building a Growing Presence
In 2015, the Group’s environmental business accounted for a steady revenue stream and contributed positively to the Group’s results. The share of profit from joint venture under rural wastewater treatment business – Shanghai Onway Group of Companies – amounted to $0.64 million. Generating profits since the commencement of EPC in the second half of 2015, the rural wastewater treatment business proved to have significant growth potential in the future.
While the investment of $3.73 million in a patented technology in the environmental business in 2015 is expected to enhance the competitive advantage of the Group’s environmental business, an increased investment of $2.15 million in the construction of wastewater treatment plants strengthened the Group’s presence in China.
Transforming the Group’s Business
2015 ended on a note of dismay, and the economy entered an era of uncertainty in 2016. Problems of excess supply, weak global demand, suppressed oil and commodity prices are compounded by devaluation of the Chinese Renminbi, lacklustre Chinese stock prices and increase in the U.S exchange and interest rates.
These factors have not only altered the dynamics of the global economy, but also affected the Group, which is a global player. Although sectors such as pharmaceutical, biomedical technology and renewal natural resources may experience moderate growth, and have a demand for product and services of the Group, it is expected that fierce competition will persist until general conditions improves. Therefore, wary of the uncertain market conditions, the Group had put in place various cost control measures and a focussed cash flow monitoring mechanism to prepare for the challenges ahead. The Group’s proactive strategy to transform ourselves to find new growth, over the last few years, had given rise to new opportunities for the Group. Today, beyond our traditional core business of trading, stocking Annual Report 2015 03 and manufacturing of steel products, AnnAik has developed a strong foothold in the environmental industry.
Particularly, we have established ourselves in the conservation and reclamation of water resources. This business focus of AnnAik aligns with the increasing emphasis on environmentally sustainable practices globally. Being a pioneer in this sunrise industry has presented AnnAik with positive possibilities. Nonetheless, as part of our enduring strategy, the Group will continue to monitor the business environment closely with the aim of positioning the business for growth.
Caring for the Community
Recognising that the well-being of our community has a strong correlation to ours, AnnAik sustained our community engagement in 2015. Through sponsoring the Singapore Wushu Dragon and Lion Dance Federation, the Group hopes to do our part in promoting and preserving traditional Chinese sport and dances.
In a challenging year like this one, we are especially thankful for the unwavering support we get from our shareholders, customers and business partners. Their staying with us has given us the determination to triumph the challenges ahead. Similarly, Our Board of Directors and employees’ commitment and dedication have boosted our confidence and empowered us to push ahead with our initiatives. For that, I will like to offer my heartfelt appreciation to them.
Together, no matter how tough the circumstances may be, we will make AnnAik resilient.
James Ow Chin Seng
Executive Chairman cum CEO