We are pleased to report a good set of financial results for FY2008, having attained our goal of achieving annual sales of at least S$500 million on or before FY 2009. We have been successful in leveraging on rising steel prices in early 2008 by stocking up on inventory amid strong demand from construction and marine sectors. This has resulted in the Group’s strong performance during the year. In brief, we accomplished record sales revenue of S$732.9 million, a 67% increase from FY2007. Since September 2008, global steel prices have corrected very sharply. As a result, we decided to adopt a conservative stance on our profi tability by writing down $47 million worth of inventory to net realizable value. Despite this write-down, we were still able to achieve record net profi t attributable to equity holders of S$22.6 million in FY2008.

To complement our core steel stockist business, the Group successfully acquired a 70.28% stake in BRC Asia Limited (BRC) through our 51% owned subsidiary, HG Metal Pte Ltd. At the close of the mandatory unconditional cash offer on 30 October 2008, we have successfully raised our stake in BRC to 85.02%.

Being the largest steel reinforcing solution provider in Singapore, BRC would provide an additional leg of growth with its exposure to Singapore’s government infrastructure and HDB projects. Furthermore, we foresee synergistic opportunities through bulk sourcing and selling of steel products to enhance our cost competitiveness. The Group will start consolidating BRC’s earnings from the first quarter of FY2009.

In August 2008, HG Metal announced a joint venture with Amalgamated Industrial Steel Berhad (AISB) to establish Nusajaya Steel Sdn Bhd in Malaysia. The principal activity of the joint venture is to manufacture spiral pipes for the water and construction industries in both Singapore and Malaysia. Approximately 16 acres of land in Nusajaya Industrial Park (3 plots of 5 plots of land previously acquired by HG Metal) was to be set aside for the joint venture. However, due to the current volatile economic conditions, we have decided to postpone the construction till better visibility in market conditions.

The Group has also commenced construction of its new warehouse/office complex at Jurong Port Road and expects the project to be completed within 3 years. The new facility will add about 150,000 sq feet of covered warehouse space at Jalan Buroh.

INDUSTRY TRENDS
Global economic conditions have deteriorated sharply in the recent months. With fears of contracting demand due to the economic slowdown, almost all commodities, including steel, saw a sharp correction in prices. The tightening of credit also adds downward pressure on the industry and resulted in cash flow squeeze in many steel mills. Many steel mills including the Mittal Group and mills in China have either shut down or cut production capacities.

The marine sector has not been spared the effect of the economic crisis as we are seeing some shipbuilders’ customers either requesting for a delay in delivery or canceling orders with the shipyards. Nevertheless, demand for steel from the marine sector is expected to remain steady in the mid-term as ships typically have to come in for repairs every 2 ½ years and order books remain filled.

According to statistics from Ministry of Trade and Industry, Singapore’s GDP contracted by 0.6% in the third quarter of 2008. However, contrary to declining growth rates in other sectors, the construction sector continued to grow at 12.8% year-on-year in the quarter, after surging by more than 19.0% year-on-year in the preceding quarter. We see support for the industry coming from a backlog of projects awarded in the previous quarters and largescale private sector contracts such as the 2 Integrated Resorts which will keep the construction sector busy till 2010.

FUTURE PLANS
HG Metal holds the goal of building a long-term business model with balanced revenue streams from distribution, manufacturing and services. The strategic acquisition of BRC provides a value-adding service to complement our core business. We are optimistic on BRC’s exposure to Singapore government’s infrastructure and HDB projects, which National Development Minister Mah Bow Tan recently assured would proceed as planned despite the down turn. HG Metal will work closely with our newly acquired subsidiary in unlocking synergistic value.

We anticipate a challenging year ahead in 2009 and are adopting a cautious approach toward our business. We will work towards a lower inventory level until market conditions turn for the better. Expansion plans will slow down and the construction of the steel pipe project in Nusayaja will also be put on hold until market conditions are more stable.

REWARDING OUR SHAREHOLDERS
In appreciation of the shareholders’ faith in the Company, the Directors are recommending a fi nal dividend of 0.25 cent per share.

In addition, we are also proposing to undertake a renounceable non-underwritten rights issue at an issue price of S$0.09 for each Rights Share on the basis of one Rights Share for every two existing ordinary shares held by entitled shareholders. The Rights Issue would improve the Group’s fi nancial position and serve working capital requirements.

2008 was an eventful year in which HG metal achieved a sterling performance. 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