Chairman's Statement
Extracted from Annual Report 2023
Dear Shareholders,
On behalf of the Board of Directors, we are pleased to present the Annual Report of LY Corporation Limited (“LY” or the “Company”, and together with its subsidiaries, the “Group”) for the financial year ended 31 December 2023 (“FY2023”).
The Group continued to face headwinds amidst a challenging business landscape. Global economic growth slowed as we entered 2023. It was weighed down further during the year by rising interest rates and inflationary pressures, which weakened consumer purchasing power, adding further strain to the Group.
During the year, we experienced a decline in demand for our products, primarily attributed to a high inventory surplus among furniture importers in the United States of America during the pandemic years. Despite anticipating a gradual reduction in our customers’ inventory levels, the lingering effect of this surplus continued to impact the overall demand for the Group’s products.
Against this backdrop, the Group recorded a net loss attributable to the Company’s shareholders of RM8.1 million in FY2023. Revenue dropped by 15.2% to RM198.9 million due to a decrease in the number of laden containers (“40-ft containers”) sold from 3,220 40-ft containers in FY2022 to 2,346 40-ft containers in FY2023. However, the overall decrease was partially offset by an increase in average selling price per 40-ft container, from RM73,000 in FY2022 to RM85,000 in FY2023, as a result of a different product mix sold and stronger United States dollars against the Ringgit Malaysia in FY2023 compared to the previous year. We were also encouraged to see a slight pickup in business from the second half of the year, with more purchases from our customers in the United States of America.
In FY2023, the Group registered a substantial improvement in operating cash flows and overall cash balance. At the end of the year, the Group’s net cash balance soared to RM54.2 million, slightly more than a two-fold increase from the year-end balance of RM25.8 million in FY2022. Such improvement is mainly attributed to a reduction in raw material purchases throughout FY2023. In the previous year, the Group had stocked up on raw materials as a precautionary measure to mitigate potential disruptions in the global supply chain. The substantial increase in cash reserves strengthens our financial position, providing us with the continued flexibility to pursue growth opportunities and buffer against uncertainties.
Driven by intensified marketing efforts, our millwork segment, which accounted for 29.4% of the Group’s revenue in FY2023 as compared to 22.1% in FY2022, has maintained steady and consistent growth. We have successfully secured new and recurring orders from customers, capitalising on increased demand for millwork products amidst rising building construction and renovation activities in the United States of America. This growth indicates promising prospects for this segment.
We have proactively implemented measures to drive growth in our new furniture product line, specifically kitchen cabinets, since commencing manufacturing and direct export to an overseas customer last year. These measures include upgrading our kitchen cabinet production line to accommodate the diverse component requirements of our customers and leveraging our extensive network in the United States of America to promote and distribute this new product.
THE WAY AHEAD
As we look to the year ahead, we are hopeful for a gradual global economic recovery while staying vigilant on the ongoing geopolitical developments and macroeconomic challenges. We will continue to stay the course in pursuing our long-term strategic goals, maintaining a balance between growth and stability at all times. With the ongoing Israel-Palestine conflict and the recent escalation of attacks in the Red Sea region, we are mindful of potential disruptions to our supply chains. We will monitor transportation costs closely and address logistical hurdles promptly as they arise.
To drive sustainable growth and boost sales and profitability, we will persist in enhancing our product innovation to align with evolving trends and satisfy the changing needs of our customers. We are committed to forging strong partnerships with our core customers to drive forward new product development and secure a larger share of the market. With an unwavering focus on innovation, we continually explore new materials to develop innovative new models.
We also plan to seek new business opportunities within our key markets and explore new geographical areas to grow our customer base. To enhance our market presence, we will continue to ramp up marketing initiatives through constant participation in local and international trade shows and exhibition fairs. By actively engaging in these events, we aim to connect with potential customers, enhance the visibility of our products, and stay well-informed on emerging market trends and industry developments.
In this challenging business environment, we will remain focused on maintaining prudence in financial management and discipline in controlling costs while increasing operational efficiencies through improvements in manufacturing processes and efficient capacity utilisation.
Notwithstanding the uncertainties ahead, we intend to press on, executing our growth strategy with determination and hard work as we seek to strengthen our businesses. LY is well-positioned for growth opportunities with our diversified product range, and we are confident of delivering steady and sustainable returns to our shareholders. At the same time, we will continue to actively pursue new opportunities to further diversify and expand our core businesses to tap into new customers and markets, positioning the Group for future growth.
APPRECIATION
As always, we extend our gratitude to our staff and management team for their hard work and continued dedication to the Group throughout the years. We would also like to thank our fellow Board members for their guidance and invaluable advice as we strategise and chart new growth paths for the Group.
Mr Oh Seong Lye, who had served on the Board of Directors since 20 December 2017, stepped down as the Independent Non-Executive Chairman of the Group on 1 December 2023. We wish to convey our appreciation to Mr Oh Seong Lye for his significant contributions over the past six years as a valued member of the Board and wish him well in his future endeavours.
Mr Yeo Kian Wee Andy, who has served as an Independent Non-Executive Director of the Group since 20 December 2017, has graciously accepted the additional responsibilities as the newly designated Independent Non-Executive Chairman of the Group, effective from 1 February 2024. We express our gratitude to Mr Yeo Kian Wee Andy for his ongoing commitment and welcome his continued valuable contributions in his expanded role.
We would also like to take this opportunity to welcome Mr Choo Chee Beng, who joined as an Independent Non-Executive Director and Chairman of the Audit and Risk Committee on 1 February 2024 and brings with him new experiences and perspectives to our Board.
Finally, our appreciation goes to our shareholders, business partners, customers, and stakeholders for your confidence in us. We are grateful to have you on our journey throughout these years, and we look forward to your support as we continue to achieve new milestones together.
Yeo Kian Wee Andy
Chairman/Independent Non-Executive Director
Tan Yong Chuan
Executive Director and Chief Executive Officer