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Email This Print ThisChairman's Statement
Extracted from Annual Report 2016

Dear Shareholders

FINANCIAL REVIEW

For the financial year ended 31 December 2016 ("FY2016"), against the backdrop of weak global economic growth, the Group registered a decrease in revenue of 8.6% year on year ("y-o-y") to S$152.2 million. Excluding foreign exchange gains and allowances for impairment, the Group reported net profit attributable to equity holders of S$7.9 million.

In spite of the adversities facing the industry, we realised an increase in operating cash flow and maintained our strong financial position, which will enable us to continue to strengthen our operations with new infrastructure and improved efficiencies.

For FY2016, we generated net cash from operating activities of S$15 million and we remained in a net cash position with cash and cash equivalents of S$30.9 million as at 31 December 2016.

OUR BUSINESS

In FY2016, our core Marine and Offshore Supply business contributed 97% of the Group's revenue. Subdued world trade in FY2016 generated reduced demand for marine and offshore supplies, leading to a 6.7% decrease in revenue to $122.5 million from our Singapore business. Consequently, our Marine and Offshore Supply business realised a 15.5% y-o-y decrease in net profit to $7.3 million for FY2016. Our Agency and Logistics business remained resilient with its bottom line maintained at approximately $0.6 million for FY2016. Despite the global negative sentiment, Sinwa continued to push forward with the upgrading of our facilities in Singapore.

On the oil and gas front, FY2016 as predicted, began with a slow start with oil prices stabilising only towards the second half of the year. However, the operational environment remained muted as companies continued to cut capital expenditure in preparation for a prolonged downturn. Our Australian business was affected by these headwinds, resulting in a drop in revenue of 17.6% y-o-y to $22.6 million for FY2016.

ASSET HELD FOR SALE

After taking into consideration the current weak market conditions in the oil and gas industry, and that the expected net realisable value for the asset held for sale is negligible, the Group decided to make a full impairment.

OUTLOOK AND PROSPECTS

Market conditions remain challenging in both the oil and gas and marine industries as the operating environment remains fiercely competitive. With both industries in a phase of restructuring, distress and uncertainty prevail, with no clear sign of recovery in the short term

Our current business plan is aimed at striking a balance between growth opportunities, whilst improving our cost efficiencies, enabling us to maintain a lean business model within our core marine, offshore supply and logistics segments. As the industry continues to face adversities, in the prevailing climate, owners, operators, service companies and suppliers alike are looking for better deals. With this in mind, we continue to push forward with our marketing efforts to capture any opportunities that may present themselves.

The redevelopment of our existing warehousing infrastructure in Singapore should be completed by mid – April, adding further 54,000 square feet of warehousing space to our current storage facilities. To further enhance our cold chain integrity with the increased freezer, chiller and ante-room capability, we now offer our customers refrigerated delivery trucks to our fleet of company owned and operated vehicles. These improvements will enable us to source product direct from international manufacturers, in bulk and at a more competitive price. Moreover, equipped with the additional ISO 22000 and HACCP certification, we will be able to tender to additional industry sectors, including defence and cruise.

Our Australian operation which is primarily oil and gas reliant continues to face strong headwinds, despite the apparent stabilising of the global oil price. The West Australian economy continues to be hampered by rising unemployment levels and the subdued commodities and property markets. However, despite these impediments, we were able to secure additional supply agreements with a number of new customers. We will continue to maintain our position as the market leader in this sector in Western Australia.

In Thailand, Sinwa has continued to work closely with our business partner and achieved further success with the awarding of a major supply contract, adding a further fourteen sites to our portfolio in that location.

On the horizon, we see opportunity for possible expansion in the ASEAN region and we will take a measured and conservative approach towards establishing additional supply locations.

With our experience, coupled with a strong financial position and operating cash flow, we are confident that we have the determination and aptitude to emerge from this prolonged downturn, a more efficient, competitive and stronger Sinwa.

PROPOSED DIVIDENDS

To show appreciation to its shareholders, the Board has recommended a first and final dividend of 1.2 Singapore cents per share. This represents a dividend yield of approximately 5%, based on a share price of S$0.24 at the close of FY2016.

APPRECIATION

I commend the level of diligence that our management and staff have displayed in these challenging times. On behalf of the Board of Directors, we are thankful to all our management and staff for their continued commitment and loyalty to the Group. I would also like to take this opportunity to thank our shareholders, partners, suppliers, customers and business associates for their trust and for their continued support. I look forward to strengthening our relationship and growing together, for many more years to come.

SIM YONG TENG
Executive Chairman