Investor Relations

Financials

Unaudited Financial Statements and Dividend Announcement for the Financial Year Ended 31 December 2020

Financials Archive

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For the 6 months ended 31 December 2020 ("2H2020") and financial year ended 31 December 2020 ("FY2020")

Consolidated Statements of Comprehensive Income

Comprehensive Income Statement

Balance Sheet

Balance Sheet

Review of Performance

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Review of Group's performance for 6 months ended 31 December 2020 ("2H2020") as compared to the 6 months ended 31 December 2019 ("2H2019")

Revenue

The Group's revenue decreased by approximately RM11.7 million, or 8.2%. This was mainly attributable to a decrease in the number of containers loaded with products ("40- ft container") sold from 2,720 40-ft containers in 2H2019 to 2,350 40-ft containers in 2H2020 as most of our major customers in the United States of America ("US") have only progressively resumed their operations with the gradual lifting of the lockdown measures in the US imposed due to COVID-19 and the shortages of containers have impeded the delivery of finished goods to the Group's customers.

However, this was partially offset by an increase in the average selling price per 40- ft container from approximately RM53,000 in 2H2019 to approximately RM56,000 in 2H2020 as a result of the different product mix sold by the Group.

Cost of sales and gross profits

The cost of sales decreased by approximately RM8.5 million, or 6.6%, mainly due to the decrease in raw materials purchased, labour costs as a result of reduced overtime and subcontractors' costs in tandem with the decrease in revenue.

As a result of the above, the gross profit decreased by approximately RM3.2 million, or 22.3%. The overall gross profit margin also decreased from 10.0% in 2H2019 to 8.5% in 2H2020.

Interest income

Interest income decreased by approximately RM0.3 million, or 85.3%, mainly due to lower cash placements in short term fixed deposits in the bank account maintained in Malaysia and coupled with the reduced overnight interest rate offered.

Distributions from investment security

Distributions from investment security of approximately RM5,000 were income received for funds placed with a Money Market Fund during 2H2020.

Other income

Other income comprised mainly sale of timber, boards, hardware and scrap as well as charges for services provided such as transportation and rental received.

Other income increased by approximately RM1.0 million, or 92.2% mainly due to the increase in the sale of timber arising from the new millwork products which commenced shipment in January 2020.

Selling and administrative expenses

Selling and administrative expenses increased by approximately RM0.5 million, or 6.4% mainly due to the increase in wastage disposal cost, insurance costs and upkeep and maintenance costs.

Depreciation expenses

Depreciation expenses increased by approximately RM1.1 million, or 23.2% mainly due to additional machineries acquired. Plant and equipment acquired in 2H2020 amount to approximately RM15.0 million.

Finance costs

Finance costs increased by approximately RM17,000, or 5.3% mainly due to the drawdown of new term loans during 2H2020.

Other expense

The Group incurred higher net foreign exchange loss in 2H2020 as compared to 2H2019 due mainly to the weakening of US dollars against the Malaysian Ringgit in 2H2020. However, this was offset by a net foreign exchange gain in the first half of FY2020 which was reclassified to other expense from other income in 2H2020. As a result, other expense decreased by approximately RM0.5 million, or 69.9% in 2H2020 as compared to 2H2019.

Profit for the period

As a result of the foregoing, the Group reported net profit of approximately RM2.1 million for 2H2020 as compared to approximately RM4.5 million for 2H2019 due principally to the lower gross profit as stated above.

Review of Group's performance for FY2020 as compared to the financial year ended 31 December 2019 ("FY2019")

Revenue

The Group's revenue decreased by approximately RM7.3 million, or 3.0%. This was mainly attributable to the decrease in the number of 40-ft containers sold from 4,866 40-ft containers in FY2019 to 4,298 40-ft containers in FY2020 as a result of the following:

  1. Movement Control Order as announced by the Prime Minister of Malaysia on 16 March 2020 to contain the spread of COVID-19 in Malaysia which led to the temporary closure of the Group's operations on 18 March 2020. Subsequently, the subsidiaries of the Company resumed partial operations on 30 March 2020 upon receiving the approval from the Malaysian Timber Industry Board which allowed subsidiaries of the Company to operate, subject to certain terms and conditions. As of 31 December 2020, the subsidiaries of the Company have resumed normal operations;

  2. most of our major customers in the US have only progressively resumed their operations with the gradual lifting of the lockdown in the US imposed due to COVID-19 in 2H2020; and

  3. the shortages of containers have impeded the delivery of finished goods to the Group's customers in the US. However, the decrease in the Group's revenue was offset by an increase in revenue from Hong Kong.

However, this was partially offset by an increase in the average selling price per 40- ft container from approximately RM51,000 in FY2019 to approximately RM56,000 in FY2020 as a result of the different product mix sold by the Group.

Cost of sales and gross profits

Cost of sales decreased by approximately RM6.8 million, or 3.0%, mainly due to the decrease in raw materials purchased, labour costs as a result of reduced overtime and subcontractors' costs in tandem with the decrease in revenue.

As a result of the decrease in the Group's revenue, the gross profit decreased by approximately RM0.4 million, or 2.0%. However, as the percentage decrease in the cost of sales is in line with the percentage decrease in revenue, the overall gross profit margin remained at 8.7% in FY2019 and FY2020.

Interest income

Interest income decreased by approximately RM0.5 million, or 74.3%, mainly due to lower cash placement in short term fixed deposits in the bank account maintained in Malaysia and coupled with the reduced overnight interest rate offered.

Distributions from investment security

Distributions from investment security of approximately RM5,000 were income received for funds placed with a Money Market Fund during FY2020.

Other income

Other income comprised mainly sale of timber, boards, hardware and scrap as well as charges for services provided such as transportation and rental received.

Other income increased by approximately RM2.6 million, or 130.1% mainly due to the increase in the sale of timber arising from the new millwork products which commenced shipment in January 2020.

Selling and administrative expenses

Selling and administrative expenses decreased by approximately RM0.6 million, or 3.1%, mainly due to the decrease in directors' remuneration, staff costs, upkeep and maintenance costs, travelling expenses, promotional expenses and professional fees.

Depreciation expenses

Depreciation expenses increased by approximately RM2.5 million, or 29.9% mainly due additional machineries acquired. Plant and equipment acquired in FY2020 amount to approximately RM22.7 million.

Finance costs

Finance costs increased by approximately RM0.1 million, or 30.2% mainly due to the drawdown of new term loans during the year.

Other expense

Other expense decreased by approximately RM0.5 million, or 69.6% due to lesser net foreign exchange loss recorded in the books of the Group in FY2020 as compared to FY2019.

Profit for the period

As a result of the foregoing, the Group reported net profit of approximately RM3.4 million for FY2020 as compared to approximately RM1.7 million for FY2019.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Review of the Group's financial position as at 31 December 2020 as compared to 31 December 2019

Non-current assets

Property, plant and equipment increased by approximately RM13.1 million, or 9.2% mainly due to the purchase of new and used machineries during FY2020.

Intangible assets of approximately RM3.0 million consists of trademarks and goodwill arising from business combination as announced on 28 January 2019.

Right-of-use assets of approximately RM21.6 million comprised the right to use the properties and land use rights of by the Group over the respective lease period.

Current assets

Inventories increased by approximately RM55.6 million, or 136.0% mainly due to:

  1. increase in finished goods due to shortages of containers which impeded the delivery of finished goods to the Group's customers. This included finished goods which required further improvements on customers' request and pending the customers' acceptance for which the Group has already received consideration from such customers totalling RM13.2 million as at 31 December 2020. The consideration is classified as contract liabilities under current liabilities. The container shortage situation has affected the Group's delivery of finished goods since the last quarter of FY2020.
  2. increase in raw materials and work-in-progress as (i) the Group purchased more raw materials to meet the orders received in respect of the following year; (ii) the Group has also stocked up more raw materials in case of delay in receipt of raw materials due to container shortages; and (iii) a higher work-in-progress due to longer production lead time as shipments from suppliers were also affected by the container shortages.

Trade and other receivables of approximately RM18.8 million comprised trade receivables, receivables from related parties, deposit and other receivables. The decreased in trade and other receivables by approximately RM7.9 million, or 29.5% was mainly due to the decrease of sales towards the end of FY2020.

Contract assets of approximately RM4.8 million comprised the right to consideration for goods produced but not yet billed as at 31 December 2020 for sale of goods. The decreased in contract assets by approximately RM1.5 million, or 24.0% was mainly due to higher amount of finished goods as at 31 December 2019 which were delivered in the first quarter of 2020.

Prepaid operating expense of approximately RM1.3 million comprised mainly expenses paid in advance as at 31 December 2020.

Tax recoverable, being prepaid current income tax of approximately RM2.8 million comprised tax paid in advance by the Malaysian subsidiaries for the Year of Assessment 2020.

Current liabilities and non-current liabilities

Loans and borrowings comprised financing arrangements, short-term trade financing, bankers' acceptance and long-term loans. The increased in loans and borrowings by approximately RM36.6 million, or 547.6% was mainly due to the increased in the usage of short-term financing and drawdown of new term loans of approximately RM11.5 million and approximately RM23.7 million respectively towards the end of FY2020.

Trade and other payables of approximately RM39.3 million comprised trade payables, amount due to related parties and sundry payables. The increase in trade payables and other payables of approximately RM10.2 million, or 35.1% was mainly due to the increase in purchase of raw materials towards the end of FY2020.

Contract liabilities of approximately RM13.2 million comprised the Group's obligation to transfer finished goods or services to customers for which the Group has received consideration from customers in advance as at 31 December 2020.

Lease liabilities of approximately RM6.2 million comprised the liabilities that the Group has to pay over the life of the leases for the use of the properties.

Accrued expenses of approximately RM0.7 million comprised accrued operating expenses.

REVIEW OF THE GROUP'S CASH FLOW STATEMENT

Review of the Group's cash flow statement for FY2020 as compared to FY2019

The Group recorded net cash flows used in operating activities of approximately RM9.3 million in FY2020 which was higher as compared to net cash flow from operating activities of approximately RM8.8 million in FY2019 mainly due to the increase in inventories of the Group during FY2020.

The Group recorded net cash flows used in investing activities of approximately RM21.6 million in FY2020 mainly due to the purchase of new and used machineries.

The Group recorded net cash flows from financing activities of approximately RM32.0 million in FY2020 mainly due to proceeds from short term and long term loans and borrowings offset by the repayment of loans and borrowings.

Commentary

  1. Since the last quarter of FY2020, there has been a worldwide container shortage problem that has affected international container cargo shipments. This has also affected the Group in the following ways:

    1. The Group's ability to export its manufactured products on time has been affected.
    2. There is an increase need for warehouses for storage to keep the unshipped finished goods.
    3. There are difficulties in planning and maintaining an efficient production schedules.
    4. Our import of raw materials from overseas have been delayed.

    The above has resulted in the decrease in revenue and increase in costs for the Group. In addition, the recent blockage at the Suez Canal has further worsened the container shortage situation. As a result, we expect the container shortage to continue for at least the next few months.

    Accordingly, while there has been increased demand from our customers in view of the lifting of the lockdown in the US imposed due to COVID-19 pandemic and the availability of vaccines for the COVID-19 virus, we expect the Group to be affected by the worldwide container shortage at least in the short term.

  2. Apart from the sale of our bedroom furniture, we have begun the expansion of our revenue base to include other categories of wooden products such as the millwork products in FY2020. Nevertheless, such expansion is also currently affected by the worldwide container shortage as mentioned above.

  3. As disclosed in the Company's announcement dated 23 February 2021, the Group's operations in the first quarter of the current financial year have been disrupted by (i) the two-week closure of the Group's factories/warehouses in January 2021; and (ii) the movement control order imposed by the Malaysian government between 13 January 2021 and 4 March 2021 ("MCO") to curb the soaring number of COVID-19 cases in Malaysia. While operations have returned to normalcy by end January 2021, the two-week closure and MCO have also resulted in backlogs in delivery of orders.