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SEE HUP SENG LIMITED
Annual Report 2012
8
Managing Director’s Message
Revenue derived from industrial and wholesale products
increased by 23% and accounted for 48% of the segment’s
revenue in FY2012, compared to the contribution of 40%
in FY2011. This more than offset a 10% decline in sales
of petroleum-intermediates which are generally used as
feedstock in manufacturing processes. Market demand for
petroleum-intermediates slowed during FY2012 in tandem
with the region’s lower industrial activities as manufacturers’
export volumes were affected by the Eurozone crisis and
slow recovery of the USA economy. As such, petroleum-
intermediates accounted for a lower 52% of RP revenue in
FY2012, down from 60% in the previous year.
RP’s gross profit in FY2012 was flat compared to the
previous year. This was due to a slight contraction in GP
margin to 12.0%, from 12.6% in FY2011, as a result of lower
average selling prices and a shift in its sales mix. Industrial
and wholesale products, which command lower profit
margins compared to petroleum-intermediates, accounted
for a larger proportion of RP’s revenue in FY2012.
For FY2012, RP posted a net profit of S$2.8 million, a
decrease of 48% from S$5.4 million in FY2011. This was
due to higher operational costs which rose in tandem with
sales volume growth, provision for stock obsolescence
and impairment charges related to goodwill of an overseas
subsidiary.
The Group has been working actively to grow the RP
business by adding new revenue sources. Besides securing
the distribution rights for asphalt, RP also stands to benefit
from the addition of a petroleum-based waterproofing
product of a major producer following the completion of the
acquisition of Axxmo International in December 2012.
In addition to expanding RP’s product range, the Group
has taken steps to move this business up the supply chain
through a joint venture to build an Integrated Chemical
Hub that will offer toll-blending, chemical warehousing and
logistics services. The present blueprint is to build a four-
storey plant on a 13,500 square metre property at Penjuru
Lane in Singapore. The Group is presently in the process of
extending the lease of the property for a term of 30 years.
With its established presence in five countries in Asia, RP also
plans to grow further by increasing its market penetration in
existing markets while developing new potential markets in
South Asia and Southeast Asia.
Corrosion Prevention Segment
CP business delivered a respectable performance in
FY2012 with a double-digit increase in GP and expansion
in GP margin despite slower demand conditions which
dampened its revenue. The improvements are attributable
to management’s continuous efforts since 2009 to contain
costs and enhance operational efficiency such as capacity
streamlining and business process improvements.
Revenue of the CP business dipped 3% to S$35.3 million
in FY2012, owing mainly to lesser project volume at the
Site Blasting & Coating unit which faced keen competition
from alternative corrosion prevention services, as well as a
shortage of foreign workers. This was partially mitigated by
the Plant Operations unit which saw sales grow by 36% in
FY2012, thanks to the management’s continued efforts to
capitalise on the sustained marine, industrial, infrastructure
and construction activities in Singapore. As a result, Plant
Operations accounted for a higher 47% share of CP’s
revenue in FY2012, compared to 34% in FY2011.
Despite lower revenue, GP of CP segment increased 15%
to S$11.2 million in FY2012. Higher GP margins of the
Plant Operations unit which benefited from higher capacity
utilisation, and of the Trading unit more than compensated
for weaker GP margin of the Site Blasting & Coating unit. As
such, the gross profit margin of the CP business expanded
to 31.8% from 26.7% a year ago.
The CP business however posted a lower net profit of S$2.0
million in FY2012, compared to S$2.6 million in FY2011.
This was due mainly to write-down of fixed assets and the
absence of a gain on disposal of one of the Plant Operations
unit’s facilities. Excluding the asset write-down and the gain
on disposal of plant of S$1.0 million in FY2011, CP would
have recorded an increase in net profit on the back of higher
GP margin in FY2012.
Going forward, CP segment will continue to push ahead with
its efforts to further enhance operational and cost efficiencies.
As the leading provider of corrosion prevention services in
Singapore, the Group will also be leveraging CP’s strong
competitive position in the industry to strengthen existing
customer relationships and build a broader customer base
across a diverse range of industries.
A Note of Thanks
On behalf of the Board, I would like to thank the Group’s
customers, suppliers and business partners for their support
and continued patronage. I would also like to express my
appreciation to management and staff for their dedication
and valuable contributions. We are confident that working
together, the Group can achieve greater heights in the years
to come.
Jimmy Tan Thoo Chye
Managing Director