Executive Chairman’s Statement
Arising from the uncertainties in FY2019 brought about by the on-going trade tension between the two super powers – China and the United States of America, spat between Japan and South Korea as well as Brexit; growth in the region has been relatively subdued. Notwithstanding these challenges, the Group will continue to look beyond its current market, exercise care and vigilance of its financial and non-financial exposure, leverage more on automation and digital solutions to be manpower smart and lean whilst steering a path through choppy waters so as to stay resilient in the face of a myriad of threats including climate change, protectionism and the recent COVID-19 outbreak.
In financial year 2019 (FY 2019), the Group achieved a total revenue of S$461.11 million, a decrease of 8.06% or S$40.45 million as compared to the financial year 2018 (FY2018). The decrease was mainly attributed to lower revenue generated from the China sector of the Packaging Business (Tat Seng Group) as a result of: (i) competitive selling prices, (ii) weakening of Renminbi against the Singapore dollars as compared to FY 2018; and (iii) the new plant in Packaging business has not reached its full capacity. However, total sales volume (sqm) of China’s operations increased by 3.2% as compared to FY2018. This is partially offset by higher revenue from Malaysia Consumer Business, which has experienced growth from its agency products. The market is receptive to new agency products introduced in Malaysia, which coupled with aggressive promotions, resulted in favorable sales growth. Additionally, Consumer Business has utilised online platforms to expand its reach and improve online sales.
Gross profit for FY 2019 was S$94.82 million, a decrease of 8.03% or S$8.27 million from FY 2018. Gross profit margin was 20.56%, which is consistent with FY 2018. The decrease in Gross Profit is mainly attributed to the decrease in revenue for the Group.
Other income of S$2.91 million in FY2019 was lower than S$3.40 million in FY2018, a decrease of 14.40% or S$0.49 million. This is mainly due to lower foreign exchange gain in FY2019, which is offset by a higher gain on disposal of Property, Plant and Equipment and a one-off insurance compensation received in FY 2019 as compared to FY2018.
Tat Seng Group has registered revenue of S$288.6 million in FY2019, translating to a decrease of 13.4% or S$44.7 million as compared to S$333.3 million in FY 2018.
In FY 2019, Tat Seng Group remains committed on automation efforts to improve production and efficiency. Through new machines and upgrading existing machines, Tat Seng Group has been able to achieve lower production cost per unit new customers whilst retaining existing ones with technology enhancement.
DEVELOPMENTS IN FY2019
In line with the Group’s business strategy of redeploying capital into potentially higher return real estate opportunities, we have acquired an overseas property in 2019. The property is located in the State of Johor, Malaysia.
We view the acquisition as a stepping stone to expand our food business into our neighboring countries; thereby enlarging our footprint in the South East Asia region.
Apart from this, one of the top selling brands under Topseller Pte Ltd (“Topseller”), Royal Umbrella has continued to dominate and secured top spot as the best-selling rice brand in Singapore. As testament to the brand’s long-standing popularity, it was a continual winner of the Reader’s Digest Trusted Brands platinum award in 2019.
Separately, Fortune Food Manufacturing Pte Ltd (“Fortune Food”) saw its new tofu manufacturing facility garner the Food Safety System Certification 22000 (FSSC 22000) qualification further showcasing high food safety and quality standards of our tofu products. This qualification 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 its 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.
Fortune Food has also been actively managing turnover during the year to improve its margins and retain market share in the face of rising costs. In fact, we have participated in the Singapore Manufacturing Federation’s Working in Partnership (WIP) overseas trade fair to introduce our chilled tofu products to the offshore community. We shall continue to make inroads to more markets by participating in such exhibitions and trade fairs in the years to come as part of our business plan to raise awareness of our products so as to gain a foothold in the global market.
Moreover, Tipex Pte. Ltd. (“Tipex”) has been organizing its trademark Life’s Beautiful Art Competition under the Beautex brand for the eleventh year running. Winning artworks were printed on box tissue with donations totalling S$27,635.60, collected from the sales of the box tissues being donated to the Straits Times School Pocket Money Fund. The competition theme for 2019 was ‘Clean is Beautiful’, echoing the nation’s focus on maintaining a clean and beautiful environment.
The world has been shaken with the recent spread of the COVID-19 and we are taking active measures in ensuring business continuity in our human resource management and minimizing the risk of factory premises becoming a medium of transmission. We would like to emphasize to our shareholders, employees and society that our company takes the precautionary measures very seriously and will do everything within our power to ensure the safety of the community.
We expect the business environment to remain competitive attributable to escalating raw materials and labour cost. Although competition is rife in the food industries, such industry is also full of potential and opportunities for innovative and nimble players if we can leverage the industry trends and capitalize on the right IT strategy to capture and enlarge our market share.
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 despite rate-lowering from the Federal Reserve in certain quarters of 2019.
Meanwhile, our Packaging Business continues to face uphill challenges presented by volatile raw material prices and an uncertain economy. As such, we will continue to enhance operational efficiencies and implement measures through automation for efficient production whilst managing costs prudently and effectively.
Looking forward, save for essential items like rice and sanitary products, we expect the retail sales growth to remain muted in FY 2020 against the backdrop of rising costs, changing consumer demographics and spending patterns coupled with the COVID-19 impact. Although traditional brick and mortar trade still make up majority of grocery sales locally and overseas, this will invariably reduce over time as grocery market continues to modernize. Growth will be driven primarily by the expansion of online B to B and B to C, as retailers, wholesalers and suppliers shift their business transactions and consumption patterns towards this channel. Online business is likely to grow exponentially spiraled by progressive consumers’ preference and business partners’ inclination to trade on various e-commerce platforms.
In this light, our business strategy in 2020 would be to forge ahead with new product launches 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 manage costs prudently and effectively 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 Lee Po On Mark, a past director who has retired on 23 April 2019. I wish to express appreciation for Mr Mark Lee’s invaluable contribution to the Company during the tenure of his directorship.
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