Saturday, April 10, 2010

GMG Global Annual Report 09/10: CEO's Message Sounds Good

CEO’s Statement

2009 was marked by global financial and economic crisis, and our Company encountered a very difficult year which saw an unprecedented slow down and uncertain market outlook in USA and Europe. Although the Group generated a lower profit compared to FY2008, overall we are confident of our medium to longer term prospects. Besides attending to crisis management, much attention was paid to building the Group’s core competence, integration, team building, identifying and implementing M&A targets and preparing the Company for further growth in the years ahead. At the same time, our Company has built up a significant financial strength via capital injection to support its strategy to expand its output significantly via M&A in South East Asia. We have the desire, ambition and a plan in place to double or even triple output over the next two or three years. Management is making all efforts to pave the way for the Company towards becoming a large sustainable integrated Natural Rubber (“NR”) operator of competitive strengths in the years ahead.

Rubber scenario
The Natural Rubber prices saw high volatility during 2009. It swung from a low US$1050 per ton in January 2009 after falling from a near US$3000 level in 2H 2008, to a high of US$3000 per ton in late 2009. The average 2009 prices were below 2008 average. The auto sector in North America and Europe was adversely affected but fortunately, auto market in China remained robust. China ranked before USA as the biggest auto market in the world with about 13.5 million vehicles sold in 2009. In 2009, China increased its share of the world aggregate rubber consumption (natural & synthetics) to almost 40%. We are very pleased with the timely entrance of GMG into the China market leveraging on Sinochem expertise, market position and wide established distribution network, though both our traditional markets faced a slow down in demand. Generally, the NR producers/processors in the industry during 2009 encountered unprecedented long delayed shipment take-up by major tyre manufacturers under their long-term supply contracts.

Group’s performance
The Group’s annual sales tonnages for 2009 totalled 72,754 metric tons, higher than 62,802 metric tons in 2008, with total sales of S$180,207,232 (2008:S$245,645,055). However, the Group’s profit performance was affected by lower average selling price, stronger Euro/US$ exchange rate which resulted in an increase in operational costs. The foreign exchange impact on the Group’s Euro inter-company payables and the long delayed shipments take-up by major tyre manufacturers (which caused prices differentiation between lower contracted selling prices and higher rubber raw materials procurement prices under an upward price trend) also adversely impacted the Group’s profit performance. The Group has also completed its acquisition of a 30,000 metric tons annual capacity (with 25,000 metric tons capability)processing plant in Pontianak, Indonesia on January 15, 2010 through a 75% owned joint-venture entity PT GMG Sentosa.

Continued Commitment Towards Corporate Social Responsibility

GMG is a firm believer of corporate social responsibility and the commitment to its employees in its Cameroon and Cote d’Ivoire plantations and its Indonesian factories. The Group continues to provide appropriate and applicable social amenities to its employees and family, namely housing, kindergarten, primary & secondary schools, hospital and medical care including John Hopkin’s research, microfinance, economart, funeral assistance as well as providing support to smallholders of natural rubber.

2009 was a challenging year for the rubber industry and I would very sincerely like to express my appreciation to our shareholders, customers and business associates for their trust in us and their unwavering support. In addition, I would like to thank the entire management and staff of GMG for their loyalty, tireless efforts and faith in the Company and to stand united in the face of a challenging and difficult year. We strongly believe that together we can take GMG to new heights and translate our vision and aspiration into reality.

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