It is my pleasure to present the annual results of Lung Kee (Bermuda) Holdings Limited and its subsidiaries (the "Group") for the year ended 31st March, 1998. The 1998 financial year was an exception year for every Asian company. The Group continued to post a record consolidated net profit after tax excluding exceptional gain and minority interest of approximately HK$131 million on a record turnover of approximately HK$664 million. These figures represented a growth of 11.34% and 13.82% respectively.
Due to the full year dilution effect of the separate listing of Lung Kee Metal Holdings Limited on the Stock Exchange of Singapore ("Separate Listing"), the net profit after tax after minority interest excluding exceptional gain posted a slight decrease of 6.79% compared with last year.
The exceptional gain recorded last year represented the gain on separate listing. So the profit attributable to shareholders posted a 50.87% decrease compared with last year.
Business Review
During the financial year, the Asia financial turmoil occurred. This widespread crisis affected every company in Asia. However, the Group's business could still achieve a record turnover. This was mainly due to the Group's continuous expansion in its production capacity and improving its ability in manufacturing high quality and higher value-added products.
The Shanghai, People's Republic of China ("PRC") plant started production during this financial year. It now sells mould bases in the Eastern China region. Although there is currently no contribution from this plant, it is expected that it will contribute to the Group in the coming future.
Due to the Asia financial turmoil, the operations in Japan and Malaysia incurred losses. However, the operation in these counties are small and therefore the effect on the Group is not significant.
The Group is optimised for South East Asia economy, the Group acquired all the shares from the Malaysian partner after the year end. The operation is wholly owned by the Group.
The turnover and profit of mould steel trading business continued to grow. There is some pressure on the pricing of the mould steel. However, the increased varieties of mould steel products will bring the steady contribution to the Group in future.
The machinery and industrial oil trading business were still weaker than last year. This is due to the tough macro economic environment which discourages customers to have capital investment.
Prospects
The Group's Shanghai (PRC) plant is expected to start contribution this year. It enables the Group to penetrate the Eastern China.
The Group's Guangzhou (PRC) plant started this month. It is expected that it will contribute to the Group this year. It is for European Market.
In order to further increase the production efficiency and lower the cost of manufacturing, the Group is going to build a new plant in Heyuan (PRC), which will specialized in producing standard products. It is projected to be completed within two years.
The recent Asia financial turmoil definitely has a negative effect on the Asian economy. However, it is expected that it will start recovery next year. Due to the Group's conservative strategies adopted, it will overcome any difficulties arising from the turmoil. It is still expected that the Group can maintain its market leader position in the moulding industry strengthen further in future.
On behalf of the Directors, I would like to thank our employees for their loyal services and our suppliers, bankers, business associates and customers for their continued supports.
Siu Tit Lung
Chairman
Hong Kong, 26th June, 1998
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