Extracted from Annual Report 2019
2019 has been another challenging year for us. With trade tensions between the United States of America ("US") and China persisting throughout the year, we have had to remain prudent when navigating the unpredictable global economic climate. Nevertheless, we have continued to remain steady in our operations.
The Year in Review
Despite the difficult operating conditions, the Group achieved net profit attributable to shareholders of RM3.1 million in financial year ended 31 December 2019 ("FY2019"). Revenue declined slightly by 6.6% to RM245.9 million, mainly due to lower demand from our US-based customers. However, this dip was partially offset by an increase in average selling price per container as a result of the strengthening of the US dollar against Malaysian Ringgit ("RM"). We were also heartened to see a slight pickup in business from the second half of the year, with more purchases from our customers in the US starting in July 2019.
This year, we diversified into the manufacturing of millworks products which are categorised as building materials. In the second half of 2019, we invested more than RM5.0 million in refurbishing two of our existing factories and building a production line dedicated towards the manufacturing of millwork products in Batu Pahat, Malaysia. Our first container of millwork products was shipped in January 2020.
We have also expanded into the original brand manufacturing ("OBM") business following our acquisition of Cubo Sdn. Bhd.'s business and assets in January 2019 through our subsidiary, Leyo Holdings Sdn. Bhd. ("Leyo Holdings"). Consequently, we now own the production and brand names of the EZBO easy-to-assemble and space-saving furniture line, as well as the CUBO custom-made line. During the year, we invested more than RM4.0 million in purchasing and upgrading machinery and equipment for the OBM business, and also recently moved to a new production facility located in Batu Pahat, Malaysia which has more than double the space of our previous factory. Moving forward, these enhancements will allow us to further increase our production capacity, optimise our operations, and grow our OBM business. The EZBO line, in particular, has gained traction among consumers in Japan, spurred by our marketing efforts via wholesale, retail, and online channels.
Initiatives for Growth
Moving forward, our key growth driver will be our core original design manufacturer ("ODM") business. Leveraging on the expertise of our subsidiary, Leyo Manufacturing Sdn. Bhd., we hope to incorporate elements of ready-to-assemble furniture into our signature wooden bedroom furniture products. Adding ready-to-assemble elements will make our bedroom furniture sets more portable and easier to assemble, and we are hopeful that this will appeal to a new customer segment of shoppers who purchase easy-to-assemble furniture online.
Additionally, we are also looking to expand our ODM product offerings to include kitchen cabinets with the refurbishing of one of our existing factories and building a production line with a total investment cost of more than RM5.0 million. We expect to commence production in the third quarter of 2020. Our expansion was motivated by recent anti-dumping laws passed by the US against China-made kitchen cabinets, as we expect an opportunity to take over some of the market share previously held by China manufacturers.
We also intend to explore more avenues for growth for our OBM segment, in particular, the Asia Pacific region. We plan to intensify our marketing efforts for Japan and South Korea, with the view of expanding our customer base for our existing EZBO line, as we believe these markets are ripe with potential.
While US-China trade tensions seem to have abated slightly, the global economy has been noticeably affected by the recent COVID-19 outbreak. The current outbreak of COVID-19 has cast uncertainty to the general economic environment which may then affect our Group's short-term performance, especially on the potential disruption to our supply chain, manpower and demand from our customers.
In mid-March 2020, in adherence with the Government of Malaysia's Movement Control Order, the Group suspended our operations in Malaysia. However, upon receiving conditional approval from the Malaysian Timber Industry Board on 27 March 2020, we were able to resume operations on 30 March 2020. At this juncture, the Group is still assessing the financial impact of both the temporary suspension of operations, and the overall impact of the COVID-19 pandemic. As the effects of the pandemic are ever-evolving, we will continue to monitor the situation closely.
Meanwhile, we will remain vigilant and resilient by cautiously exploring new initiatives that will allow the Group to grow sustainably in the midst of volatile global economic conditions.
For our shareholders, the Board of Directors ("Board") has recommended a first and final dividend of 0.083 Singapore cent per ordinary share, which is subject to shareholders' approval at the upcoming Annual General Meeting. This represents a dividend payout of 40.0% of our net profit attributable to shareholders.
On behalf of the Board, we would like to express our gratitude to our stakeholders, customers, and business partners, for their continued support. Additionally, we would also like to extend our appreciation to our fellow Board members, as well as the management team and employees at LY, for their continued dedication and commitment to the Group. As always, we remain committed towards delivering sustainable returns for our shareholders, and we thank you for your continued confidence.
Tan Kwee Chai
Tan Yong Chuan
Executive Director and Chief Executive Officer