Executive Chairman’s Statement
FY2018 has been a year encapsulated in uncertainty and volatility underpinned by the ongoing trade tensions between two of the world’s major economies – The United States of America and China.
Even though FY2018 was a very challenging year, the Group achieved total revenue of S$501.55 million, an increase of 8.09% or S$37.54 million compared to FY2017. The increase was mainly attributable to stronger demand in Packaging Business (Tat Seng Group), with both Singapore and China sectors experiencing growth. Additionally, Consumer Business in Malaysia achieved higher revenue as a result of new agency products, more aggressive promotions and working closely with various distribution channels to drive sales.
Gross profit margin decreased by 2.02% from 22.58% to 20.56%, mainly due to reduced margin from Packaging Business and Singapore Consumer Business. This is partially offset by improved margin from Malaysia Consumer Business for new agency products. As a result of the reduction in the gross profit margin, gross profit for the Group decreased by 1.61% from S$104.78 million to S$103.10 million despite registering higher revenue.
The Group’s net profit after tax for FY2018 was S$22.23 million as compared to S$20.92 million reported for FY2017. The net profit attributable to shareholders was S$13.43 million for FY2018 as compared to S$11.10 million reported for FY2017.
DEVELOPMENTS IN FY2018
Notwithstanding an increasingly challenging FMCG operating environment, the Company continues to pursue opportunities to diversify its core retail business. Alongside the Group’s business strategy of redeploying capital into potentially higher return real estate opportunities, we have acquired an overseas property in 2018. The property is located at Kyoto City, Higashiyama-ku, Gion Machikitagawa 305, Japan. It has a land area of 90.53 sqm and a total buildable area of 72 sqm for a 5-storey commercial building.
This property is strategically located in Kyoto’s tourist destination with close proximity to major shopping malls, restaurants and the Yasaka Shrine. We plan to develop the property into a boutique hotel with food and beverage (F&B) outlets, which is estimated to cost JPY170 million (equivalent to approximately SGD2.08 million). Key milestones for this development are targeted for completion within the next 12 to 18 months, subjected to the relevant authorities’ approval.
We view this acquisition as a stepping stone to expand our food business into the Japan market, thereby enlarging our footprint globally.
Tat Seng’s overseas subsidiary, Nantong Tat Seng Packaging Co., Ltd. (“Nantong Tat Seng”) acquired a property in Tongzhou District, Nantong, Jiangsu Province that comprises a 50 year leasehold land with an area of about 74,115 sqm. The new plant of Nantong Tat Seng is ready to commence its operations and management is confident the new state-of-the- art plant will help the Group to seize new business opportunities and further accelerate the strengthening and expansion of its market share in Nantong and surrounding area.
Apart from this, one of the top selling brands under Topseller Pte Ltd (“Topseller”), Royal Umbrella continues to dominate and has secured top spot as the best-selling rice brand in Singapore (based on Nielsen Retail Audit moving annual totals (MAT) conducted in September 2018). As testament to the brand’s long-standing popularity, it has been a continual winner of the Reader’s Digest Trusted Brands platinum award in 2017 and 2018.
Fortune Food Manufacturing Pte Ltd (“Fortune Food”) saw its new tofu manufacturing facility garner the Food Safety System Certification 22000 (FSSC
22000) qualification in December 2018. This further reinforces and strengthens the high food safety and quality standards of our tofu products and notably, this demonstrates Fortune Food’s capability to meet the International Food Safety Standards and our facility is now poised to distribute its products overseas; thereby deepening and widening Fortune Food’s product outreach. Some of the countries that we are able to export our chilled products include the European Union (EU), which is well known for its strict quality standards and regulations.
Moreover, Tipex Pte. Ltd. (“Tipex”) has being organizing its trademark Life’s Beautiful Art Competition under the Beautex brand for the tenth year running. Winning artworks were printed on box tissue with donations totalling more than S$30,000 and collections from the sales of the box tissues were donated to the Straits Times School Pocket Money Fund. The competition theme for 2018 was Healthy Living, echoing the nation’s focus on healthy living and keeping fit.
We expect the business environment to remain competitive attributable to escalating raw materials and labour cost. On the foreign exchange front, margins from overseas purchases that are denominated in USD will continue to remain under pressure as the USD is forecasted to stay strong against domestic currencies of our major markets as there is no indication of rate- lowering from the Federal Reserve.
Meanwhile, our Packaging Business is perceived to face challenges presented by volatile raw material prices coupled with trade tension between the US and China. As such, we will continue to enhance operational efficiencies and implement measures through automation for efficient production whilst managing costs prudently and effectively.
We foresee FMCG retail sales growth to remain muted in FY2019 against the backdrop of rising costs and changing consumer demographics and spending patterns. Online business is likely to grow positively spiraled by progressive consumers’ preference and business partners’ inclination to trade on various e-commerce platforms.
In this light, our business strategy in 2019 would be to forge ahead with new product launches coupled with greater diversification whilst exploring more markets to boost our exports and sales; thereby seeking more opportunities to improve our margins, particularly in the chilled tofu business segment.
More importantly, we strive to improve costs efficiency so as to keep our price competitive without compromising on the quality of our products.
On behalf of the Board, I would like to extend my gratitude to Mr Lien Kait Long, a past director who has retired on 20 April 2018. I wish to express appreciation for Mr Lien’s invaluable contribution to the Company during the tenure of his directorship.
At the same time, we would like to take this opportunity to extend a warm welcome to our new directors Mr Kong WeiLi and Mr Siu Wai Kam, who joined us in June 2018, as well as Mr Goh Yang Jun, Jasper that came onboard in December 2018. We certainly look forward to working cohesively with them so as to bring the Group to greater heights and I firmly believe that together we can manage obstacles in this fiercely competitive environment and find the key to deal with the challenges that we face for a more sustainable future for the Group.
On this note, I would like to thank our customers, business partners, management and staff for their contribution and dedication over the past year; enabling the Group to forge ahead despite current headwinds. Last but not least, I would like to express my appreciation to our shareholders, who have supported us over the years.
Thank you again for the trust you have placed upon us and we certainly look forward to steadfastly striving towards achieving better results in the years to come.
Dr. Allan Yap