EXECUTIVE DEPUTY CHAIRMAN’S MESSAGE
Creating and Delivering Value to Our Shareholders
In the 12 months ended 31 December 2016, we managed to achieve an operating profit before taxation of RM2.09 million as compared to an operating loss of RM19.82 million in the previous year. This result is achieved on the back of better product margins and a more stable steel market environment in the first half of 2016 with the recovery of steel price after a difficult year in 2015.
The turnover of 2016 was RM399.62 million, lower by 18.72% than RM491.63 million achieved in the previous financial year. The lower turnover was primarily due to cessation of pipe mill business. This is part of the realignment exercise to focus on the core products.
On the earnings before interest, tax, depreciation and amortisation (“EBITDA”), the Group registered a much improved EBITDA of RM32.41 million compared to RM12.97 million in the previous year, an increase of 149.88%.
As part of on-going efforts to improve the financial performance of the Group, the Group remains committed to carry through the turnaround plan and to stay focused on the following areas :-
i. Core coated products;
ii. Strengthen balance sheet to improve working capitals and cashflow;
iii. Human resources right-sizing;
iv. Plant operation improvement on yield, quality and cost; and
v. Cost – effective procurement and inventory management.
In relation to the above, the Group had implemented a few strategic initiatives in 2016 such as accelerating efforts on the branding and marketing of premium coated steel products, more focus on down-stream products and strategic alliances with other steel players.
We will remain steadfast in our focus to create and deliver value to our shareholders, our customers and we realign our businesses to take it to the next level.
In 2016, the steel industry in Malaysia experienced turbulence following steel prices bottomed out in January and registered strong growth in March coupled with iron ore, raw material and, Hot Rolled Coils (“HRC”) prices rallied in March and April. The rapid rise of HRC price since March 2016 has affected the product profit margins, as the increase in HRC cost could not be fully factored into the higher selling price. As a result, the gross margin turned soft in the second half of 2016.
Domestically, YKGI faced price competition and some production inefficiency that did not allow us to operate as we would have desired. As a result, we could not fully capitalise on all potential opportunities. That being said, we must commend our team for having shown great resilience by staying the course during the challenging year and delivered a positive financial result despite the turbulence and challenges encountered.
Our Aspiration of Making Sustainability A Way of Doing Business
YKGI is committed to being part of the solution in ensuring that sustainability is embedded in every part of our business. We have embedded ISO practices and all the best practices in our operations.
Our human capital development has progressed another level with the implementation of competency and leadership skills training across the board. Towards this end, we have engaged an external consultant to provide comprehensive training programs which cover all aspects on enhancing the effectiveness of human resources.
We strive to have a greater coherence among employees through restarting our Recreation Organising Committee with activities to promote greater interaction and communication between all departments. We also embraced industrial business technology to improve the efficiency of doing business.
On the environmental issue, we are committed to protecting the environment and have recently implemented the Japanese 5S practices in our operation.
Health and Safety are our all-embracing values as we firmly believe that everyone associated with our operations should be able to go home unharmed to their families and friends. Our aim of zero harm continues to drive our actions and performance. We are pleased to report that in 2016, we had no major fatalities and the incidences of accident remained low. As part of our continuous process to create awareness of health and safety, we have created a culture of “Safety First” among our employees and it is embedded in all our communication channels. We have also conducted Road Safety talks for our employees as part of the continuous education on safety.
The health of the steel industry in Malaysia, especially the mid-stream manufacturers like us depends on the continuous support and commitment from the Malaysian Government to protect and shield the local market from the influx of cheap steel imports from other low cost producing countries or unfair trade practices. The trade remedial measures implemented by the Ministry of International Trade and Industry Malaysia in early 2016 are vital steps moving forward but we need more longer term approaches such as, enhancing the use of local steel content in all public and private projects.
Going forward, the domestic demand will continue to be the main driver of growth for YKGI. The consumption by the private and public sectors will be the key driver to stimulate growth in the industry.
For 2017, Malaysia’s economy is still subject to the headwinds namely, a weak Ringgit against US Dollar, inflationary pressure and global trade uncertainty post US Presidential Election. These factors pose the pertinent risks which may affect our country’s GDP growth rate. However, we are taking cues that the Malaysian Government will continue to pour more development budget into mega infrastructure projects, such as the Pan-Borneo Highway, East Coast Rail Link and the Kuala Lumpur – Singapore High-Speed Rail which will largely contribute and induce demand growth for local steel products and building materials.
On behalf of the Board, I would like to express my heartfelt appreciation and thanks to all our Management and Staff of YKGI Group for the hard work and dedication.
To our shareholders and stakeholders, I deeply appreciate your support despite the ups and downs the Company has gone through in 2016. Your continuous support of our vision and belief is of paramount importance for us to strive for excellence in the coming years.
I would like to thank the existing board members and Mr Yoshiki Kaneko who has left the Board in 2016 for their contribution to the Company. I am also grateful to our Chairman Mr Lim Pang Kiam and all the board members for the support and strategic direction in steering the Company to the right path of sustainability. Last but not least, I would like to thank all our customers for their support and belief in us.
Dato’ Soh Thian Lai
Executive Deputy Chairman
20 April 2017