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SEE HUP SENG LIMITED
Annual Report 2012
7
Managing Director’s Message
Dear Shareholders,
Our Group delivered a creditable performance for the
financial year ended 31 December 2012 (“FY2012”), with
marginal increases in revenue and gross profit despite
the difficult operating environment and cautious business
sentiment. Group net profit in FY2012 however declined
from FY2011 as a result of lower net profit contributions from
the refined petroleum (“RP”) and corrosion prevention (“CP”)
businesses.
Group Financial Performance
For the year in review, Group revenue gained 5% to S$256.9
million, from S$245.4 million in the previous year, as higher
sales of the RP business more than compensated for a slight
sales decline of the CP business. The Group witnessed
steady improvement in quarter-on-quarter revenue during
the year, from S$59.9 million in 1Q12 to S$69.2 million
in 4Q12. As a percentage of total revenue in FY2012, RP
continued to account for a dominant 85% share while CP
made up around 14%.
In FY2012, the Group’s gross profit (GP) increased 5% to
S$37.8 million from S$36.1 million previously, lifted primarily
by the CP segment. The Group’s GP margin in FY2012
remained unchanged at 14.7%, compared to the year ago,
as softer GP margin of RP segment was offset by higher GP
margin of the CP business.
The Group’s total operating expenses (selling and
distribution, administrative and other operating expenses)
in FY2012 increased 16% to S$30.9 million, from S$26.6
million the year before.
The increase in selling and distribution, and administrative
expenses was attributable primarily to higher distribution
costs in tandem with the increases in RP’s sales volume and
transportation costs; higher headcount, staff salaries and
workers’ levy; increased depreciation costs; higher repair
and maintenance as well as rental costs for land, office and
storage tank. Other operating expenses were also higher
in FY2012, due mainly to legal and professional expenses
related to the Group’s corporate activities and business
expansion initiatives; increase in provisions for stock
obsolescence; impairment of goodwill for a subsidiary and
write-off of fixed assets.
The Group’s finance costs increased to S$1.2 million in
FY2012, from S$1.1 million previously, due to higher utilisation
of trust receipts by the RP business.
As a result, the Group posted a net profit of S$5.2 million in
FY2012, a decline of 34% from S$8.0 million in FY2011.
The Group ended the year with a stable financial position.
As at the end of December 2012, cash and cash equivalents
totalled S$34.6 million while total debt (comprising primarily
of trust receipts) stood at S$64.0 million. The Group’s
net gearing1 at the end of FY2012 was around 0.3 times.
Shareholders’ equity as at 31 December 2012 increased to
S$85.6 million from S$77.7 million as at 31 December 2011.
Accordingly, the Group’s net asset value per share at the
end of FY2012 improved to 20.0 cents as compared to 18.9
cents at the end of FY2011.
Refined Petroleum Segment
The RP business continued to show encouraging growth in
FY2012 as it achieved a 12% year-on-year increase in sales
volume amid heightened competitive conditions and lower
industrial activities in the region. Revenue of the segment
however grew at a slower pace of 4% to S$217.8 million,
from S$208.9 million in FY2011, due to the impact of lower
average selling prices during the year in review.
RP’s revenue growth was driven primarily by higher sales
volume of industrial and wholesale products, thanks
to demand generated from construction and industrial
activities in Singapore. Revenue derived from industrial and
wholesale products included a maiden, albeit still small,
sales contribution from asphalt product which RP began
distributing for its principal supplier in the second quarter of
FY2012. This followed the commencement of operations in
March 2012 of a new automated filling station and storage
yard for asphalt products at TAT Petroleum’s premises in
Singapore.
1 Net gearing is computed based on (Total Borrowings less Cash and Cash Equivalents)/(Total Equity)
Group Segment breakdown (FY2012)
S$ million FY2012 FY2011 change RP CP Others*
Revenue 256.9 245.4 5% 217.8 35.3 3.8
Gross profit 37.8 36.1 5% 26.1 11.2 0.5
GP margin 14.7% 14.7% – 12.0% 31.8% 12.4%
Profit after tax 5.2 8.0 (34%) 2.8 2.0 0.4
*Others comprise the consolidated revenue and profit of Eastern Tankstore (S) Pte Ltd (ETS) which has become a 51%-owned subsidiary of See Hup Seng in
April 2012, and equity accounting of Serangoon EC Pte Ltd.