Megachem Limited
Annual Report
2014
26
Chairman’s Message
Dear Shareholders,
On behalf of the Board of Directors, it is with pleasure that I present Megachem
Limited’s (“Megachem” or the “Group”) annual report for the financial year
ended 31 December 2014 (“FY2014”).
Gross profit improved by 8.7% to S$23.5 million while
gross profit margin rose 0.3 percentage point.
In line with the higher sales in FY2014, the Group’s
overall operating expenses rose by 4.7% to S$20.2 million
from S$19.3 million mainly due to higher employee
remuneration.
Megachem’s net profit after tax consequently increased
14.6% from S$2.8 million in FY2013 to S$3.2 million in
FY2014 while EBITDA improved to S$6.2 million from
S$5.7 million. Accordingly, earnings per ordinary share
rose from 1.88 cents in FY2013 to 2.08 cents in FY2014.
Our balance sheet remained robust, with our gearing
ratio reaching a reasonable level of 0.52 and net asset
value per share improving to 31.45 cents as at 31
December 2014. This compares to a net asset value per
share of 30.24 cents as at 31 December 2013.
Managing Costs, Enhancing Our Asset Base
During the year, we reached a key milestone by acquiring
a piece of industrial land in Klang, situated in Selangor,
Malaysia, for approximately RM8.3 million (S$3.2 million)
to build a warehouse facility. Warehousing costs have
been creeping upwards over the years and the acquisition
allows us to not just manage increasing cost pressures
but to also enhance our asset base. With the expected
handover of the land to occur in the mid of 2015 and
the building fit out period of about a year, our short-
term results will invariably be impacted by charges such
as depreciation. However, we believe this far-sighted
approach of asset ownership is necessary for our growth
and is a sound strategy for us to build Megachem’s
capabilities. This will better equip the Group to further
its growth through the enhanced logistic infrastructure
and achieve greater efficiencies in its supply chain.
2015: Capitalising On Opportunities In An
Environment of Risks
Although the overall global economy is anticipated to
grow in 2015, albeit at a slower rate, the economies in
the Euro zone remain uncertain and China’s growth is
feared to be decelerating.
FY2014: A Macro Environment Fraught With
Volatility
The macro environment for FY2014 has been fraught
with volatility surrounding the oil and currencies
markets. On a geographical specific front, it has also been
a mixed bag of performance, with activities in the United
States and the United Kingdom gathering momentum,
the sputtering of the Euro zone’s and Japan’s recovery
while China continued to be in the midst of a carefully
managed slowdown.
Despite the uncertainties, the chemical industry which
Megachem operates in fared reasonably well during the
year, translating into a good set of performance for the
Group. In addition, as a player focused on products which
are further downstream in the supply chain, Megachem’s
operations remained resilient and fairly insulated from
wide fluctuations in oil prices.
Achieving A Year Of Record Sales
This is the fourth consecutive year since FY2011 where
Megachem achieved sales beyond the S$100 million
mark. FY2014’s results performance saw record sales of
S$115.9 million, surpassing the previous corresponding
year’s (“FY2013”) record of S$108.7 million.
HavinganAsia-centric approachhelpedbuoyMegachem’s
performance as FY2014’s increase in revenue of 6.7%was
primarily contributed by the growth in our ASEAN and
North Asia markets. Other than our America and Africa
markets, all our geographical segments recorded positive
sales growth for the year.
Megachem’s distribution arm continued to be the
main driver of our performance, increasing by 7.0%
or S$7.3 million, contributing to S$112.6 million of the
total FY2014 revenue of S$115.9 million. Although our
manufacturing segment contracted slightly by S$0.1
million, the potential for growth remains positive and
we remain committed in investing our efforts toward
growing the segment.
