During the year, the Group continued to focus on the manufacture and marketing of mould bases and the trading of special mould steel and related products. The Group places its focus on China, Hong Kong and Southeast Asia, while actively explores the Japanese and European markets.
The Group's turnover in 1998 was approximately HK$664 million, up 13.82% when compared with approximately HK$583 million in 1997. The Group's audited consolidated net profit after tax excluding exceptional item and minority interest was approximately HK$131 million compared with approximately HK$118 million earned in 1997, an increase of 11.34%. Due to the dilution effect of the separate listing of mould base business, the Group's audited consolidated net profit after tax before exceptional item was approximately HK$103 million, representing a decease of 6.79%. Last year exceptional gain represented the gain on disposal of mould base business in separate listing.
Earnings excluding exceptional item per share was 27.41 cents, representing a decrease of 8.69% when compared with 30.02 cents (after adjustment of effect of bonus issue in August 1997) in 1997. Earnings including exceptional item per share was 27.41 cents, representing a decrease of 51.87% when compared with last year figure.
Mould base Manufacturing and marketing
The Dongguan plant continued to contribute to the Group this year. It currently fulfilled the requirement from Southern China.
The Shanghai plant started to produce mould base this year. Since it is the first year operation, it has no contribution to the Group. This plant enables the Group to penetrate the Eastern China market.
The Guangzhou plant started its operation in June 1998. It will target at the European market.
Due to the Asia financial turmoil, both of the Group's Malaysian and Japanese operations incurred some losses for the Group. However, it is expected that both operations will pick up soon when economy starts to recover. Besides, the Group acquired the remaining shares of Malaysian operation from the Malaysia partner. So it now becomes a wholly owned subsidiary.
Trading of Metal
The Group continued to focus on the trading of special steel for mould bases and moulds which were less affected by the economic slowdown.
The Group is still the sole distributor of Mitsubishi Mu-series mould steel in China and Hong Kong. The Group is also the distributor of Sweden's ASSAB high quality mould and die steel, Japan's DAIDO special mould and die steel, Germany's SAARSTAHL mould steel, Japan's SAMBO EDM copper and United States MOULDMAX beryllium copper in China and Hong Kong.
Trading of Machinery and Industrial Oil
Due to the general weaken economic environment for machinery business, the machinery and industrial oil trading business were still weaker than last year. However, the loss incurred becomes smaller this year.
Liquidity and Capital Resources
Although there is credit tightening in the industry, the Group's financial position is still good. The Group's total net borrowings level increased from approximately HK$17 million to approximately HK$50 million representing an increase from approximately 4% to approximately 10% of shareholders funds.
During the year, the Group has arranged a syndicated loan of HK$220 million for its subsidiary, Lung Kee Metal Limited. This loan will be used for the Group's future expansions.
Year 2000 Compliance
Since the Group developed most of its computer systems during 1990's, there is little chance of non-compliance for year 2000. However, the Group has set up a working group to study and solve the issue completely. It is expected that the issue will be solved by the end of 1998.
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