As a long-established company, we have weathered many global and regional financial upheavals and through them, we have learnt invaluable lessons which have been translated into sound corporate policies that have permeated and been entrenched in our organisation

History will record 2018 as a year of great economic and political uncertainty. According to the International Monetary Fund, industrial production and trade slowed down, with business confidence falling, after the upswing in 2017. One of the reasons for this slowdown was the implementation of tariffs by major countries as the protectionist rhetoric gained momentum globally.

In particular, the trade dispute between China and the United States continued to adversely affect investor confidence and rattle stock markets. Europe faced an uncertain future, with the outcome of Brexit still unsettled, while Asian economic growth was uneven,impacted by the slowdown in the Chinese economy. As an open economy,Singapore was impacted by the global economic slowdown.

YHI International Limited (or “the Group”), is no stranger to the vagaries of economics and politics. As a long established company, we have weathered many global and regional financial upheavals and through them, we have learnt invaluable lessons which have been translated into
sound corporate policies that have permeated and been entrenched in our organisation. As a direct consequence of these policies, chief among them being our 3R policy - Reduce inventory, Reduce accounts receivable, Reduce operating cost – we have turned in a respectable performance despite market challenges, rising business costs and margin pressures.

Our inventories are well managed, our accounts receivable within healthy limits and our operating costs tightly controlled despite the subdued market conditions, which have contributed significantly to our financial performance. While cost control, healthy cash flow and a strong balance sheet are imperative to the financial well being of an organisation, revenues are the determinant factors for growth. On this front, we improved overall sales through concerted and determined business development efforts by all our divisions, which is evidenced by our financial results.

The revenue for the year ended 31 December 2018 (“FY2018”) was S$455.6million, representing a 2.9% increase over revenue of S$442.9 million for the financial year ended 31 December 2017 (“FY2017”). Net profit attributable to equity holders of the Company (“net profit”) stood at S$13.7 million, which is an increase of 56.8% over FY2017’s net profit of S$8.8 million.

The revenue increase was attributed to higher turnover in the both the Group’s distribution and manufacturing businesses, while the net profit position was on account of higher profit contribution from the manufacturing business compared to FY2017.

Profitability-wise, gross profit and gross profit margin fell by 5.0% to S$97.5 million and by 1.8 percentage points to 21.4%, respectively, from S$102.5 million and 23.2% in FY2017.

The lower gross profit margin was on the back of lower gross profit margin from both the distribution and
manufacturing businesses. Lower gross profit margin from the distribution business was due to intense price competition in the market while that of the manufacturing business stemmed largely from higher aluminium prices and other production costs.

The main contributor to Group revenue continued to be our distribution business which accounted for 73% of the Group’s revenue. While the overall distribution business recorded an increase in sales of 3.1% to S$332.3 million from S$322.4 million in the previous financial period, the tyre distribution business which accounted for 41% of total group revenue recorded lower sales.

Tyre distribution continued to face price pressures, a
confluence of low rubber prices and prevailing excess capacity in the market which has yet to be absorbed. The impact from the lower performance of the tyre distribution business was mitigated by our industrial product and automotive battery business (“Energy Solutions”) which
achieved positive growth due to higher sales achieved by the industrial battery business while the wheels division turned in a consistent performance.

Another positive financial highlight was the performance of the Group’s wheel manufacturing business which achieved sales of S$123.3 million, a 2.4% increase as compared to FY2017. Our wheel manufacturing factory in Suzhou, China, registered increased orders from the United States, while our facility in Malacca, Malaysia, also experienced higher sales to Germany; our Taiwan facility recorded a marginal improvement in sales as well.

Additionally, the division’s restructuring of manufacturing assets has contributed to its healthy showing; costs savings on labour and other manufacturing overheads from its discontinued operations in Shanghai as well as the lease rental income of the premises there, have positively impacted the Group’s financial performance, despite the increase in raw material prices and higher business costs, particularly in China.

On our balance sheet, we maintained cash and cash equivalents of S$50.8 million as compared to S$54.0 million as at December 2017. Net cash generated from operations was S$15.2 million, with S$8.7 million used in investing activities, mainly for the purchase of an industrial land in Malaysia for future consolidation of the Group’s warehousing and logistics services for the distribution business in Malaysia. A total of S$9.2 million was raised from financing activities to pay trade suppliers.

Our net gearing for the period under review is 13%. With nets assets attributable to shareholders of S$252.9 million, net asset value per share was 86.54 cents based on 292.3 million issued shares, while earnings per share as
at 31 December 2018 was 4.70 cents.

In light of our performance and in line with our commitment to shareholders to generate stable returns, the Board is recommending a one-tier tax-exempt final dividend of 2.35 cents per share.

If approved at the forthcoming Annual General Meeting, the dividend will be paid in May
2019. Based on the closing share price of S$0.395 as at the last practicable date before printing of the Annual Report, this represents a dividend yield of 5.9% and a dividend payout ratio of 50% of our profit.

While the past financial year was challenging, especially following the Group’s strong showing in FY2017, our best in three years riding on the positive global conditions then, we have managed to sustain the momentum of growth. Through a steadfast commitment to finding new markets
for our products and new customers in existing markets, we have grown our topline at a time when business development would have been low on the priority list of many other organisations.

Much has been previously said of our cost management strategies and it needs no
repeating. Nevertheless, what must be emphasised is our commitment regardless of our performance, to keep on exercising restraint and prudence while simultaneously keeping an eye for opportunities even in the most challenging of times. Towards this end, we have taken
certain strategic decisions in terms of our assets, with long term growth in mind.

In the first half of FY2018, we disposed of our freehold warehouse and office building of our Australian subsidiary as part of our further efforts to streamline and optimise the use of our resources and to be nimble in responding to market demand changes. The Group simultaneously
made strategic investments elsewhere, laying the groundwork for future business initiatives. In October, we completed the purchase of two lots of industrial land in Malaysia through our Malaysian subsidiaries.

The land was purchased with a view to building up the Group’s logistics and warehousing capabilities over time to serve our existing distribution entities and customers there. We have plans to gradually consolidate our warehousing and logistics services, thus reducing our warehouse rentals costs and related overheads. We will eventually extend our offerings to just-in-time delivery services to be managed by logistics professionals, with a view to enhancing and distinguishing our customer service. This
will enable our customers to leverage on our capabilities, in turn eliminating or reducing their own warehousing space requirements and achieving cost savings.

There are headwinds on the horizon and we anticipate that FY2019 will prove to be challenging. Firstly, the United States-China trade dispute remains unresolved. The US has postponed its deadline for the imposition of the increased 25% tariff, which was supposed to have been effected after 1 March 2019, due to progress made during recent trade negotiations. We had taken steps to mitigate its effect on our customers in the United States and on our wheels manufacturing business in Suzhou, China; we have ensured that our US customers have sufficient stock while our manufacturing facilities in Malaysia and Taiwan ramp up production to meet demand.

Nevertheless, a prolonged trade war between the two largest economies in the world will inevitably take its toll on the global economic activity. There are other downside risks. China’s growth is projected to moderate on account of a slowdown in credit growth and softer external demand. The economies of ASEAN countries may also face a slowdown or at best stagnation.1 Several new governments and administrations have been voted in on populist sentiments that are heralding changes in economic and foreign policies that may have far reaching reverberations particularly as protectionism gains momentum. All these do not bode well for business sentiment and consumer spending which will in turn impede economic growth and impact business earnings.

Faced with these external pressures, we are continuing to focus on improving our internal organisational capabilities, enhancing our productivity, leveraging on technology, increasing automation and finding new channels of sales. As business revolutionises, we have to take transformative steps to ensure we are in step with these changes and to maintain our competitive advantages. With technology empowering consumers to make informed choices based on price, service levels become imperative as a distinguishing characteristic of our business and as a means of preserving and even improving our profit margins. We will, therefore, continue to seek ways to value add to our customer experience and enhance our service levels.

At the same time, we will seek long term and sustainable growth opportunities, looking for yield accretive investments that will complement our existing businesses. We are also looking at opportunities in countries such as Vietnam and Indonesia for future expansion. Vietnam is projected to grow above 6% while Indonesia’s growth is pegged above 5% in 2019-2020. Both markets offer opportunities given their growing middle class, relative economic stability and ongoing job creation for the population.

Furthermore, there is no longer a compelling case for our expansion in China due to rising business costs and intense market competition there, although it will continue to be an important base of
operations and market for us. We will adopt a cautious approach always with a view to sustainable growth, balancing this with a keen eye for opportunities and a bold spirit to take us forward.

In closing, the Board of Directors and I would like to express our thanks to our customers, partners and shareholders for their support during the year. We would like to extend our warm appreciation to the talented and dedicated staff and management for their efforts and achievements in helping us through another challenging year.

Finally, we would not be able to have had the right strategies and plans in place without the guidance, acumen and foresight of our Board of Directors. I have every confidence in our team in executing our plans and bringing the Group through FY2019. Opportunities, after all, are made through effort and do not exist just for the taking.

Richard Tay
Executive Chairman & Group Managing Director


整个亚洲受中国经济放缓的影响,其经济发展不平衡。而新加坡作为一个开放的经济体,势必受到全球经济放缓的侵扰。友发国际有限公司 (或 “集团”) 可以说对这种经济和政治的变幻莫测尚有经验和应对措施。



2018年12月31日 (“2018财政年度”),集团总销售额达到4.556亿新元,比去年同期 (截至2017年12月31日 “2017财政年度”) 的4.429亿新元增长2.9%。