We are extremely pleased to report a good set of fi nancial results for FY2007. FY2007 marks a record year for HG Metal. Net profi t after income tax grew 32.0% to $18.3 million, compared to $13.9 million in FY2006, and revenue rose 20.8% to $438.1 million. This is the Group’s fi fth straight year of revenue growth since HG Metal was listed in 2002. Earnings growth was driven by strong demand from key customers, higher steel prices, and increased demands from both the construction and the shipbuilding and ship-repair sectors.

With demand for steel products expected to remain strong, the Group has embarked on capacity expansion. The Group has just completed the construction of 3 new warehouses at its existing premises at Jalan Buroh which will provide additional covered storage space for our steel products. In January 2007, the Group also leased additional land of approximately 30,235 square metres at Jurong Port Road for 28 years. The Group will begin construction of 3 new warehouses in the new calendar year.

In February 2007, the Group has acquired 26.18 acres industrial land in the Nusajaya Industrial Park, which is part of the Iskandar Development Region in Johor, Malaysia. The Group is currently evaluating various options on how best to utilize the land to complement the future expansion of the Group.

For our manufacturing arm , Oriental Metals, with the success of our fi rst sandblasting facility at Oriental Metals, we have added a second sandblasting line which has already started full operations. At the same time, to cater to strong growth in the contruction sector, we have reconfigured our existing pipe line to produce scaffolding pipes and scaffolding decks for use in the construction sector.

INDUSTRY TRENDS

Singapore’s construction cycle is still powering strong, driven by Singapore’s strong economic growth. Within the next few years major projects such as the Integrated Resorts, Marina Business Financial Centre, Downtown MRT Line and petrochemical plants are expected to be completed. Plans to redevelop Orchard Road, Bras Basah Road and Bugis are also taking place. Many new condominium and housing developments are underway, as developers appear increasingly optimistic about Singapore’s property market. According to the Building and Construction Authority (“BCA”) of Singapore, annual construction demand is expected to reach between S$19 and S$22 billion in 2007, and likely to sustain at this high level in 2008 and 2009.

Based on various industry reports, the offshore & marine industries are booming, with shipyards around the region enjoying record order books on the back of high oil prices. Shipyards and ship repair projects are lined up till 2010 and beyond, which should translate to continued strong demand for steel products in related marine industries.

With regards to steel supply, there is concerted effort by major steel makers around the world to shift rising energy and raw materials by increasing steel prices by 6% to 12% in the fi rst half of next year. Currently, there is a shortage in iron ore supply. Iron ore, the main ingredient in steel, is expected to rise 30% to 50% in prices.

FUTURE PLANS

HG Metal is looking to widen its range of steel products and enhance its capabilities to offer a broader range of services.

During the year, Galaxia has started the business of leasing steel plates. The Group has plans to expand its steel leasing business to include sheet piles, I-beams and H-beams in 2008. Galaxia will be well-positioned to take advantage of the many new constructions projects kicking in during 2008.

We remain open to further acquisitions and investments that will be complementary to current core businesses. Value-adding acquisitions and continued organic growth will propel us toward our goal of achieving annual sales of at least S$500 million on or before 2009.

Ultimately, HG Metal’s long-term business model is to achieve balanced revenue streams from distribution, manufacturing, and services. In achieving such a balance, we aim to become one of the leading steel companies in Singapore and South East Asia.

REWARDING OUR SHAREHOLDERS

In appreciation of the shareholders’ faith in the Company, the Directors are recommending a fi nal dividend of 1 cent per share on top of a special dividend of 0.25 cent per share, or 22.0% of FY2007 net earnings. The Directors are also proposing 1-for-3 bonus share issue to reward shareholders and enhance the liquidity of the shares.

The year 2007 was a satisfying and encouraging year for HG Metal. I would like to take this opportunity to thank our employees, bankers, suppliers and loyal shareholders for their continued support.

Tan Chan Too
Executive Chairman