Chairman's Statement
On behalf of the Board
of Directors of Furniweb
Industrial Products
Berhad, I have great
pleasure in presenting to
you the Annual Report
for the year 2008,
incorporating the
audited financial
statements of the Group
and the Company for
the same period.
BUSINESS ENVIRONMENT
The year 2008 was a turbulent and volatile one with two very contrasting halves that presented the Group with unprecedented challenges across its spectrum of activities from manufacturing to marketing. The first half of the year saw the escalation of raw materials costs caused by the relentless spiraling of crude oil prices and as a result the squeeze on our margins and subsequent decline in profit. When the year reached its second half, the situation changed dramatically. Although prices of commodities fell from their peaks, the build up and subsequent eruption of the financial crisis saw an immediate plunge in the demand side of the economy as credit dried up and overall consumer confidence evaporated.
In the past, our market risks were mitigated to an extent that when a market in one region declined we could draw on the strength of another area. Needless to say the global scale of the current crisis has been daunting and has stretched the resources of the Group to manage under such difficult conditions to the full.
FINANCIAL PERFORMANCE
Despite the extremely poor market conditions, the Group still ended the financial year with a commendable net profit after tax attributable to shareholders of RM6.5 million. This represents a reduction of 26.5% from the RM8.8 million net profit after tax achieved in the previous financial year. It is significant to note that the Group revenue of RM93.6 million dropped only marginally by 0.3% as compared to the previous year. So the Group managed to maintain its share of the market and the decline in profits was mainly due to reduced margins as a result of materials cost escalation.
Earnings per share for the current financial year was 7.1 sen compared to the 9.7 sen reported for the previous year which is in line with the lower profits being achieved.
Total equity attributable to shareholders as at 31 December 2008 was RM73.1 million, contributing to net assets per share of 80.7 sen, an increase of 4.3% from the 77.4 sen recorded last year.
The balance sheet of the Group remained strong with net current assets of RM39.3 million at the end of the financial year, including a closing cash balance of RM17.9 million.
Gearing ratio of the Group at the end of the financial year was 0.3, consistent with the ratio recorded at the close of the previous financial year.
CORPORATE GOVERNANCE
The Group continues to be committed to uphold and practice good corporate governance in all areas of its operations. Our Corporate Governance Statement presented on pages 16 to 19 outlines the manner in which the Group has applied the principles set out in the Malaysian Code on Corporate Governance. As a result of our commitment to adhere to these principles, the Group was ranked very favorably in the Corporate Governance Survey Report 2008 published jointly by the Minority Shareholder Watchdog Group and the Nottingham University Business School, Malaysia Campus. The report, which presents the findings on the compliance with corporate governance principles and best practices by all public listed companies on Bursa Malaysia Securities Berhad, ranked the Group in 63rd position out of 960 companies and in 5th position among companies in the industrial products sector.
The Group over the years has strengthened its internal audit processes and also pays close attention on its external auditors' report. A Statement on Internal Control is also set out on pages 23 to 24 of this Annual Report.
The Group is also working towards being a responsible corporate citizen and has implemented various initiatives with emphasis on safer workplaces, a greener environment and a caring community. The report on Corporate Social Responsibility is presented on pages 20 to 22 of this Annual Report.
DIVIDENDS
The Board is recommending that the Group maintains a dividend payout of 6.0% and hence the payment of a first and final tax exempt dividend of 3.0 sen per share subject to shareholders' approval being obtained at the forthcoming Annual General Meeting.
In arriving at this decision, the Group is aware of the current economic conditions and the need to ensure that adequate funds remain for us to meet our financial obligations and also to finance future growth and expansion.
It is also useful to note that since the listing of the Company on Bursa Malaysia Securities Berhad on 16 October 2003, the Group has consistently paid dividends of not less than 6.0% per annum based on the par value of the Company's shares of RM0.50 per share.
PROSPECTS
The current year is expected to be filled with many hurdles and will be one of the most challenging the Group has ever faced.
The outlook for the next twelve months is gloomy as economies worldwide are anticipated to be sluggish with most regional economies forecasting negative to minimal GDPs. The huge stimulus budgets being poured into the economy, notwithstanding, will take time to remove the clogs in the financial system to allow credit flows and eventually kick start consumption. The general consensus is that this recession will linger well into the early 2010.
Countries in the Group's important and major export markets are deeply affected by the global recession and the speed of recovery will very much depend on the success of the governmental stimulus efforts and their concerted effort to repair and restructure the global financial system.
Against this precarious backdrop, the Group is mindful that it has to manage with prudence and utmost care. The Group's lean organization and operational agility will lead positively to its effort to pursue improvements in productivity, reduce cost, rationalize manpower and streamline operations.
The Board is confident that the Group's strong foundation built over the years, together with the commitment of our people and prudent business management in place, we will most certainly ride through the volatility of the coming year.
APPRECIATION
On behalf of the Board of Directors, I wish to express my sincere appreciation and gratitude to the management and staff for their invaluable contribution and perseverance in fulfilling their responsibilities to the Group in a very difficult year.
The Board would also like to take this opportunity to extend our appreciation to our shareholders, valued customers, suppliers, bankers, business partners and the governmental authorities for the strong support given to the Group.
Last but not least, I also wish to place on record my sincere thanks to my fellow directors for their valuable guidance and support.