We managed to turn around unhealthy business divisions and subsidiaries by a dedicated on our 3R - policy
- Reduce Inventory, Reduce Accounts Receivables, Reduce Operating Cost - which we first implemented in 2014 to counteract inflationary cost and the economic challenges we had correctly anticipated.

DEAR SHAREHOLDERS,
Amidst a backdrop of global economic malaise, continued weak oil and commodity prices, stock market volatility, political shocks in some parts of the world and resulting cautious corporate and retail spending, YHI International Ltd (“YHI” or “the Group”) registered a weaker performance for the financial year ended 31 December 2016 (“FY2016”). Nevertheless, given the onerous external factors that weighed down heavily on the Group’s businesses, we are encouraged by the substantial progress made in the areas that we had undertaken to restructure our business, rationalise our nonprofit-making assets and develop new opportunities for continued and sustained growth.

We managed to turn around unhealthy business divisions and subsidiaries by a dedicated focus on our 3R policy – Reduce inventory, Reduce account receivables, Reduce operating cost – which we first implemented in 2014 to counteract inflationary costs and the economic challenges we had correctly anticipated. Our prior efforts were directed largely towards the first two components of our 3R policy of reducing inventory and account receivables. We lowered inventory by clearing old stock and curbing excessive purchases to bring the overall stock-holding to below three months’ projected sales. Our account receivables was brought down to healthier levels through more conscientious collection methods. The results were borne out in our robust financial position with much improvement in our operating cashflow. In FY2016, we channelled more energy and focus into reducing our operating cost. Specifically, we right-sized our businesses to more closely align their operating costs and infrastructure with turnover, thus eliminating excess capacity, optimising resources and reducing wastage. We are certain these will bear results in the near future, as our previous efforts have thus far shown, making us a much leaner, nimble organisation, poised to leverage on the eventual economic uptake.

FINANCIAL PERFORMANCE REVIEW
The Group posted revenue of S$465.6 million and net profit attributable to equity holders of the Company (“net profit”) of S$3.7 million in FY2016, representing a year-onyear decrease of 6.7% and 55.2% from revenue and net profit registered in the financial period ended 31 December 2015 (“FY2015”). The decreased revenue was on the back of lower sales from both the distribution and manufacturing businesses as compared to FY2015. With the exclusion of retrenchment compensation payable on the consolidation of our Shanghai wheel manufacturing operations into our Suzhou factory and the disposal gain from our Sepang plant in 2015,net profit after tax and non-controlling interests would have increased by 23.6% for FY2016 While our gross profit decreased by 6.2% to S$100.3 million as compared to the same period last year, our gross margin increased to 21.6% in FY2016 as compared to 21.4% in FY2015 on account of higher gross profit margin from both the distribution and manufacturing businesses.

The distribution business remained the main contributor to the Group’s revenue, constituting 69.6% of Group revenue. In line with the overall decrease in revenue, the business posted sales of S$323.8 million, 6.9% lower than the same period last year. Our distribution business, as with most businesses, is affected by the economic state of the markets in which we operate. Most of our Asia-Pacific markets are resource-based economies, largely influenced by commodity prices. With the decline in commodity prices, including rubber and oil prices, between 2011 and early 2016, these economies were gravely impacted, which in turn directly affected our revenue. Two other factors in the tyre distribution business impacted our profits due to downward pressure exerted on tyre prices. First was weak market demand. The second is the oversupply of tyres in the global market which also led to price competition and further margin erosion. Taking into consideration these factors collectively, our distribution business has done well to mitigate their impact on our profits through conscientious cost control measures.

The Group’s wheel manufacturing business registered sales of S$141.8 million, a 6.4% decrease in turnover. Amid the slowing global economy, the sluggish demand of Aftermarket wheels continued to weigh heavily on our wheel manufacturing business, despite an improvement in our Original Equipment Manufacturing (OEM) wheel manufacturing business in Shanghai. Despite this improvement, lower OEM subcontract prices twinned with the rising operating costs in Shanghai impacted the overall profitability of the wheel manufacturing business as a whole. With the blueprint to success in restructuring readily available in our consolidated production operations from Sepang to Malacca, we embarked on a similar restructuring plan to consolidate our manufacturing operations in Shanghai to Suzhou. In the first quarter of FY2016, we moved our precision moulding operations from Shanghai to Suzhou, realising savings in rental and fixed overhead costs. Subsequently, we commenced relocation of our wheel manufacturing operations from our factory in Shanghai into our Suzhou factory to further reduce operating cost. We plan to move the production capacity of our Shanghai factory to our Suzhou and Malaysia factories, with the moving of machinery expected to be completed by the first half of 2017. With this consolidation, we expect to raise our production efficiency and lower the wheels manufacturing costs in China. We have seen the positive results of restructuring and consolidation in our Malaysian operations. Our Malacca operations are the best performing among the Group since the consolidation of operations from Sepang to Malacca in 2015. We anticipate seeing similar positive results from this restructuring, although the cost of rationalisation is being felt immediately this financial year. The consolidation exercise has right-sized our operations in tandem with turnover, enhancing our efficiencies through the streamlining of our operations and the leveraging of greater synergies from operating only one manufacturing facility. Reduction in business costs, such as rental and fixed overheads, will also enable us to strengthen our balance sheet, conserving much needed resources for future growth opportunities.

KEEPING OUR BALANCE SHEET STRONG
With an effective cost management strategy encompassing our adherence to reducing inventories and account receivables, we are pleased to report that the Group’s balance sheet is in a robust state. As at 31 December 2016, we generated total net cash flow of S$44.3 million from operating activities after changes in working capital with cash and cash equivalents amounting to S$50.4 million. Total assets stood at S$402.4 million with S$242.5 million in net assets attributable to shareholders, translating to a net asset value per share of 82.97 cents per share based on the 292.3 million shares in issue. The Group’s net gearing ratio was at an acceptable 19 % as at 31 December 2016.

RETURNING VALUE TO SHAREHOLDERS
Despite the challenging environment, the Board is recommending a first and final tax-exempt cash dividend of 0.64 cents per ordinary share for FY2016, subject to approval at our annual general meeting to be held on 26 April 2017. This represents a dividend yield of 2% based on the closing share price of S$0.33 cents as at 31 December 2016 and a dividend payout of 50% of our net profit. Our distribution of dividends is in line with our commitment to returning value to shareholders and as a recognition for their unwavering support and belief in YHI.

OUTLOOK AND FORWARD STRATEGY
There are headwinds on the horizon, despite the expected pick-up in emerging markets and developing economies as well as the projected growth in the US economy resulting from fiscal stimulus.1 Increasing protectionist rhetoric and threat of trade barriers, uncertainty surrounding the US trade policies in light of the new administration, reverberations from Brexit, China’s corporate debt situation and geopolitical factors are all downside risks to projected growth. We thus have to be prepared for more uncertain times ahead.

The gradual increase in commodity and oil prices augurs well for our tyre distribution business in particular. Nevertheless, we do not see a real turnaround occurring until at least 2018. We anticipate price competition to continue intensely in FY2017 due to the prevailing overcapacity in the tyre industry. Hence, our ongoing focus on cost management, rationalising and restructuring while exploring new sales channels and business opportunities. With respect to our power distribution business, we have incorporated a wholly-owned subsidiary in Malaysia, YHI Power (Malaysia) Sdn. Bhd. with a view to expanding our power business network in Malaysia. We will look for other such opportunities to augment our distribution business.

We expect the difficult market conditions of the wheel manufacturing business to remain well into 2017. The antidumping duty of 22.3% imposed by the European Commission on aluminum wheels imported from China entering the European Union is set to continue. With the United States adopting a protectionist stance, it is uncertain if there will be similar measures imposed for our wheels being imported into the United States, which currently has only imposed anti-dumping duties on tyres. We thus have to be prepared for such a scenario and other similar measures. Towards this end, we will continue to innovate, invest in research and development, improve our technical competencies and enhance our production processes to bring down further production costs to counter such threats to our profitability.

While we cannot control external factors which impact our business, we can and must control our internal responses to these factors. We need to determinedly focus on the 3Rs across our businesses with an emphasis on reducing operating cost through restructuring, rationalising and right-sizing of our businesses as well as raising productivity and efficiency as a counterforce to external threats and to keep up with the dynamics of business conditions. Simultaneously, we have to continue developing new business opportunities through increasing the reach and network of our distribution channels and seeking synergistic joint-ventures, partnerships or other forms of business tie-ups to widen our revenue stream and open up new markets to our products.

IN APPRECIATION
On behalf of our Board of Directors, I would like to express our appreciation to our customers and partners for their support during the year, and to the staff and management for their unwavering commitment and untiring efforts in helping the Group to navigate its way during these highly challenging times.
I am also grateful to our shareholders for their confidence and loyalty to the Group.
Last but not least, my deepest appreciation to the Board of Directors for their invaluable guidance and contribution during the year.
I look forward to working with our stakeholders in FY2018 as the Group prepares itself for the gradual but steady ascent to the top after weathered the worst of headwinds in past few years.

Richard Tay
Executive Chairman & Group Managing Director

亲爱的股东们,
2017年对全球经济而言是美好的一年,虽然对美国总统唐纳德•特朗普的贸易政策表示担忧。

根据国际货币基金组织( I M F ) 的数据,2017年全球产出增长3.7%,比较与2016年的增长率为3.2%。欧洲、日本、中国和美国的经济激增推动了全球增长。

尽管受到行业内那些不利因素的影响,友发国际有限公司(“友发”或“集团”)在2017年12月31日的财政年度业绩报告,创下这三年来最好的成绩。

2017年集团发布的净利润为8百80万新元,相比2016年的3百70万新元增加了136.9%,这是集团自2013年以来的最佳表现,当时的净利润为8百80万新元。

净利润的增长,证明我们的重组和转型策略已经步入正轨,这包括2014年首次实施的“3R”政策。

3R政策要求所有部门主管着重在降低库存,减少应收账款,降低运营成本。在最初阶段,我们通过清理旧库存和限制过度采购来降低库存,整体库存保持在三个月以下的预计销
售额。我们采用更积极的收款方式,将应收账款减少到更健康的水平。

自2016年以来,我们花了很多精力来达成3R政策的目标,如降低运营成本,调整业务规模,并结束非盈利的资产如上海工厂。

实施了四年的3R政策,帮助集团减少了产能过剩,优化资源和减少浪费。因此,尽管经营环境仍具挑战性,但我们坚实的基础将有助于我们不仅实现持续增长,而且能为我们的股东带来稳定的回报。

财务业绩回顾
2017年集团总销售额达到4亿4千2百90万新元,净利润为8百80万新元,比去年同期(2016年财政年度,截止到12月31日)的总销售额减少4.9%,但净利润则增长136.9%。

总销售额的减少主要是由于制造业的销售下降,而净利润的增加则得益于三家轮毂厂利润的贡献及上海轮毂厂的结束。

我们的毛利与去年同期相比增长了3.4%,达到1亿3百80万新元。我们的毛利率亦上升至23.4%,而2016年则为21.6%,我们的批发业务和制造业务都为此贡献了一份力。

批发业务仍然是本集团收入的主要来源, 占总营业额的72.8%。由于整体收入下滑,批发业务的销售额为3亿2千2百40万新元,比去年同期低了0.4%。

我们的轮胎批发业务继续受到轮胎供过于求的市场疲弱影响,导致价格面临巨大压力。供应过剩导致价格竞争和进一步的利润空间萎缩。

尽管困难重重,我们的批发业务通过销售不同的产品组合和严格的成本控制措施,缓和了市场环境带来的冲击和影响。

集团的轮毂制造业总销售为1亿2千50万新元,比较去年下降了15%。虽然苏州,马来西亚和台湾工厂今年取得较高的销售额,然而上海厂的结束导致制造业总销售额比去年来得低。但是我们有信心,过去几年来我们在马来西亚和中国进行的整合工作将有助于我们的轮毂制造业务渡过艰难的经营环境。

2017年,我们将上海工厂的机械设备移去了苏州和马来西亚工厂。重组成本,如裁员,机器减值准备以及上海工厂的维修和保养,部分影响了轮毂制造业务的整体盈利。

随着我们把中国的模具及轮毂制造业务集中在苏州,我们预计租金和固定间接成本的节省以及效率的提高将对未来的利润产生正面的影响。

为适应瞬息万变的市场和行业需求,我们不断调整业务规模。我们相信,这些措施将有助于我们加强资产负债表,并为我们提供所需资源,以便开拓新的增长机会和市场。

保持资产负债表强劲之势
我们的3R政策使我们有效地管理成本,因此集团的资产负债表仍然保持健康平稳的状态。

截至2017年12月31日,经营业务之总现金净额为2 千2百70万新元,现金及现金等价物达5千4百万新元。资产总额为3 亿8 千7百50万新元,归属于股东的净资产为2 亿6 千90万
新元,根据发行的2亿9千2百30万股股票,转化为每股净资产84.88分。集团的净资产负债率为12.5%在可接受范围内。

回馈股东
尽管市场环境充满挑战,董事会仍提出2017年派发首末期股息1.5 分每股,此提案会在2018年4 月26日的年度大会中商讨决议。

截至2017 年12 月31日股票收盘价为每股0.47 分,此股息收益率为3.2%,股息支付占集团总利润的50%。集团派发股息不仅反映了对股东回报的承诺,也为了回馈股东们对友发的支持和信任。

展望未来
随着经济体系的的改善,国际货币基金组织预计今年的全球经济增长将加速至3.9%,因此2018年全球环境变得更加乐观。

然而,在唐纳德•特朗普总统3月份宣布美国将对进口钢铁和铝征收25%和10%关税后,全球贸易战即将拉开帷幕。人们不得不担心其他国家会通过提高自家的关税来进行抵制。特朗普的举动引发了人们的担忧,其他国家会通过征收自己的关税来阻止廉价钢铁从美国市场转入他们的国家来进行报复。

其他问题包括中东可能出现的全球能源市场紧张局势和中国的经济低迷。尽管中国政府已将其2018 年GDP增长目标定在6.5%左右,但经济学家指出,加强地方政府债务的控制以及与美国贸易紧张局势可能会破坏中国的计划,特别在2018年头的几个月。

抛开这些风险不谈,我们运营地区也竞争激烈,预计友发整体业务运营环境仍然具有挑战性。

由于轮胎行业普遍存在产能过剩,我们预计激烈的价格竞争将在2018年继续。然而,我们对行业即将好转寄予希望。随着中国对经济结构调整迅速展开,导致成千上万经营不善的工厂将随之倒闭,在不久的将来,相信轮胎行业这种供过于求的问题会被控制。

2018年,我们计划把重点放在东南亚市场,包括马来西亚,印尼和菲律宾。

目前马来西亚是我们的主要市场,在2015年从雪邦厂迁移至马六甲的合并活动中,得到效率的提升。我们的马六甲工厂现已成为集团内表现最佳的公司之一,这归因于我们的业务精简和综合一家制造工厂带来更大协同效应。

通过我们的子公司Y H I P o w e r(Malaysia) Sdn Bhd)以及新设立的YHI Logistics (Malaysia) Sdn Bhd,我们计划进一步加强我们在该国的影响力 - 由于车辆需求和消费者购买力的增加,预计轮胎和电力产品市场在不久的将来会出现强劲增长。

YHI Power于2016 年成立,负责向马来西亚推广电力产品,而于2018年1月设立YHI Logistics将专注于提供物流服务。

随着中产阶级和经济的增长,预计2018 年会增长5.4%,尽管面临一些挑战,但印尼仍然是集团具有强劲增长潜力的市场。

2018年,我们还计划加强我们在印尼的3M营销策略- 多产品,多品牌和多类别- 例如开发新轮胎销售渠道,专注于优质轮毂品牌市场,并扩展我们的工业电池业务。

在2017年10月我们和缅甸合伙人签署的合资协议在当地设立公司,合作伙伴是Aung San Company。这是一家私营公司,负责进口汽车产品,如轮毂,轮胎,配件,零配件和一般商品。

新合资公司YHI Aung(Myanmar)Company Limited 将在缅甸开发和建立汽车和工业产品的营销业务。

由于商品价格下跌,澳大利亚的经济在过去几年里表现欠佳,不过今年也将是另一个前景看好的市场。根据经合组织预测,2018 年澳大利亚经济可能增长3%,而2017年为2.4%。经济改善导致消费者支出增加,反映近几个月新车销量强劲。

鉴于铝锭是我们车轮制造业务的主要生产物料,我们预计原材料价格提高以及美元疲软将影响我们制造业务的利润率。

然而我们不会放弃中国市场,在25年前我们就在中国进行投资。结束上海工厂后,我们将所有的轮毂制造业务合并在苏州。我们预计上海工厂的租金收入将会提高未来的利润。

尽管我们在中国的业务规模缩减,但近年来劳动力和运营成本一直在上涨,所以我们将继续在国内推广我们的品牌和提高产品的质量。

无论2018 年经济如何,集团将继续加强内部程序和机制,未雨绸缪,做好充分准备迎接挑战。

早在2014年,我们开始着力贯彻实行3R政策,以应对外来的各种挑战与变幻莫测的商业环境,使我们的脚步与时俱进。当时的重点是通过重组和调整我们的业务规模来降低运营成本,提高效率和生产力。

自2016 以来,尽管我们还是把重点放在降低运营成本上,同时我们也寻找新的增长来源。今年,我们将进行“节约与发展共存”这种双管齐下的战略,即是寻求销售增长与成本控制。这包括增加分销渠道的范围和网络,寻求合作的合资企业、商业伙伴关系或其他形式的业务合作来发展新的商业机会,以扩大我们的收入来源,并为我们的产品开拓新的市场。

我们还将继续投资于产品技术研发这一块,并利用技术改善我们的生产工艺流程,进一步降低生产成本。

感谢
我代表董事会,向我们的客户和合作伙伴在这一年中对友发的支持表示感谢;谢谢所有员工和管理人员对友发的忠守和不懈的努力,是他们在极具挑战的困境中帮助集团渡过难关。
当然我也要感谢我们的股东们对本集团的充分信任和忠诚。最后,我要向董事会在这一年里对友发给与宝贵建议和贡献致以最真诚的感谢。

2018年,我期待着与我们的股东们一起努力,在度过了最困难的几年后,本集团正整装待发,朝着巅峰逐步平稳上升。

郑添和
执行主席兼集团董事长