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SEE HUP SENG LIMITED
Annual Report 2012
3
Chairman’s Message
Dear Shareholders,
On behalf of the Board of Directors, I am pleased to present
See Hup Seng’s annual report for the 12 months ended 31
December 2012 (“FY2012”).
The business environment in FY2012 was in an uncertain
state as economic issues gripped the USA and the Eurozone.
These ongoing macro-economic concerns weighed on
business sentiment which remained cautious and subdued.
In the face of slower demand, keen business rivalry prevailed
and inevitably placed pressure on sales and profit margins.
Notwithstanding the difficult operating conditions, the Group
managed to sustain the revenues of our core businesses –
Corrosion Prevention (“CP”) services and Refined Petroleum
(“RP”) distribution – both of which remained profitable in
FY2012.
We expended much effort to sustain our business volumes
and sales performance during FY2012. Concurrently, the
Group also seized strategic investment opportunities to
build a stronger base for our existing businesses, and to
create alternative earnings sources from diversified business
ventures.
Our financial position remained sound at the end of FY2012,
with cash and cash equivalents totaling S$34.6 million while
net gearing stood at 0.3 times.
To reward shareholders, the Board of Directors has
recommended a final dividend of 0.5 cent per share (one-tier
tax exempt) in respect of FY2012 amounting to S$2.1 million.
This translates to a dividend payout ratio of approximately
41% of the Group’s earnings per share of 1.2 cents for
FY2012. Upon approval by shareholders at the forthcoming
Annual General Meeting on 29 April 2013, the dividend will
be paid on 23 May 2013.
Core Businesses
In FY2012, Group revenue improved 5% to S$256.9 million,
driven by our RP business as revenue of the CP business
remained stable. Net profit however fell 34% to S$5.2 million
compared to S$8.0 million in FY2011 which included a gain
on disposal of plant of around S$1.0 million.
The RP business chalked up 12% growth in sales volume,
fuelled by increased sales of industrial and wholesale
products which benefited from the higher level of construction
and industrial activities in Singapore. In dollar terms however,
sales rose 4% to S$217.8 million due to lower average selling
prices as a result of competitive pressures. Together with
increased operating expenses, RP segment’s net profit
contracted to S$2.8 million from S$5.4 million in FY2011.
RP business faced a tough operating environment last
year as slack market demand gave rise to stiff competition
and considerable pressure on market prices of petroleum-
derived products. Nevertheless, our RP segment continued
to push sales of our products in the market by leveraging on
our reputation and high product quality, as well as ensuring
competitive pricing. Last year, our RP business also started
selling a new product, asphalt, following the award of a new
distribution contract from our principal supplier. Employing
our existing marketing channels, we began making inroads
to gradually grow the sales of our asphalt product in the
region.
Our CP business had fairly stable revenue of S$35.3 million
in FY2012, buoyed by our Plant Operations which registered
sterling sales growth of 36%. Gross profit margin expanded
significantly, thanks to improved capacity utilisation and
our continued focus on cost management. At the bottom
line, CP segment posted a net profit of S$2.0 million, lower
than S$2.6 million in FY2011 due mainly to write-off of fixed
assets and the absence of a gain on disposal of one of the
Plant Operations’ facilities.
The resilient performance of our CP segment in FY2012
underlines our strategy to broaden our customer base to
widen business avenues, and to better defend against a
slowdown in any one industry. Our efforts in this area have
reaped results as our Plant Operations benefited from firm
demand from our construction, industrial, infrastructure
and marine customers in Singapore. As such, the Plant
Operations counterbalanced the weaker performance of
our Site Blasting and Coating unit which is focused on a
narrower market segment and more dependent on foreign
workers.
Strategic Investments
The uncertainties surrounding the global economic situation
did not deter us from exploring and executing strategic
business initiatives in FY2012 as we remain committed
to build for the Group’s future and enhance long term
shareholder value.
To strengthen our RP business, we expanded our product
offering and also embarked on plans to move up the supply
chain within the refined petroleum industry. Besides securing
distributor rights to market asphalt in FY2012, the Group
also acquired Axxmo International to gain access to new
petroleum-derived products. Incorporated in Singapore,
Axxmo is a master distributor of a major petroleum-based
waterproofing product that is widely used in Singapore’s
public housing projects. To further capitalise on the long-