Extracted from Annual Report 2024
Dear Valued Shareholders,
On behalf of the Board of Directors, I am pleased to present to you Megachem’s annual report for the financial year ended 31 December 2024 (“FY 2024”).
FY 2024: A Year Of Recovery
FY 2024 was a year marked by recovery, resilience, and renewed momentum for Megachem. Despite the challenging macroeconomic environment characterised by high interest rates and persistent geopolitical tensions, Megachem demonstrated our ability to adapt and thrive. Like the global economy, our business displayed remarkable resilience as we navigated through a period of normalisation following the tepid demand and destocking cycle of 2023 and the disruption of our business by the warehouse fire in the same year. We observed a steady pickup in customer orders, a reflection of renewed confidence.
Megachem’s diversified business model, which spans a wide range of products and a broad customer base, has been a cornerstone of our resilience. Our ability to operate across diverse markets, serve global customers, and leverage our extensive supplier network has proven to be a key differentiator setting us apart internationally.
Financial Performance Recovering
For FY 2024, Megachem’s revenue stood at S$128.8 million, a 4.7% increase compared to the S$123.0 million in the previous financial year ended 31 December 2023 (“FY 2023”). The higher revenue was attributed to rising chemical demand and higher sales across key geographic markets including ASEAN and North Asia.
Sales from the Distribution segment increased by S$5.6 million or 4.7% while the smaller manufacturing segment rose by S$0.2 million or 5.7%. In line with the higher sales, gross profit increased by S$8.7 million or 38.8% to S$31.2 million. Adjusting for the impact of a fire incident in July 2023, gross profit margin and gross profit would be 24.5% and S$31.5 million respectively.
Total operating expenses (excluding finance cost) increased by S$1.9 million or 6.1% to S$32.5 million, mainly due to higher waste disposal costs, employee renumeration, net foreign exchange losses and warehouse storage charges. This was offset by lower demolition and decontamination costs, lower compensation claims and the absence of loss from property, plant and equipment destroyed in the fire written down.
Overall, Megachem recorded a net profit after tax of S$7.9 million for FY 2024, as compared to a net loss after tax of S$5.8 million in FY 2023. Adjusting for the impact of the fire incident, Megachem would have recorded a net profit after tax of S$2.9 million, representing an increase of S$1.0 million or 53.5% year-on-year.
Earnings per share for FY 2024 came in at 5.93 cents as compared to losses per share of 4.43 cents for FY 2023. Net asset value per share rose to 43.92 cents as at 31 December 2024, up from 37.48 cents as at 31 December 2023. The Group’s balance sheet remained in good standing with cash and bank balances of S$16.0 million as at 31 December 2024, as compared to S$13.6 million as at 31 December 2023. Net gearing ratio stayed healthy at 0.16 times as at 31 December 2024.
Overall, our commitment to prudent capital management has enabled us to sustain a healthy financial position, allowing us to weather challenging times while supporting future business growth and expansion.
Rebuilding our warehouse
2024 also marks the beginning of the reconstruction of our warehouse facility, which was destroyed by the fire incident in July 2023. Piling work for the new warehouse has been successfully completed and structural work has recently begun. If all goes as planned, we target to complete construction by the end of 2025. The new warehouse, which is safer, stringently compliant with Major Hazard Installations (MHI) Regulations and environmentally-friendly, will enhance our operational efficiency and long-term strategic competitiveness.
Bracing For Uncertainties
As we look ahead, the global economy remains fraught with uncertainties. Persistent geopolitical issues raise concerns about the potential for renewed trade conflicts, particularly with the return of a Trump administration in the US. Meanwhile, China’s economic recovery continues to be sluggish, adding further strain to global demand. In the Middle East, ongoing conflicts, if left unresolved, threaten to disrupt supply chains and upend industries. Against this backdrop, managing optimal inventory levels remains a significant challenge. The health ofthe chemical industry and overall business conditions will continue to hinge on continued growth in manufacturing activities.
For Megachem, prudent and optimal inventory management will be a key priority moving forward, given our business’s deep integration with both the global economy and the chemical industry. As we navigate these uncertainties, we will endeavour to remain agile in our approach, ensuring we are well-positioned to seize opportunities for sustainable growth.
Capitalising On Growth Opportunities
Looking ahead, given its booming population and growing middle class, Asia remains a key geographic market and growth driver for us. Fuelled by latent market potential and investment activity, we foresee the expansion of Asia’s production capacity and surge in demand for chemicals.
To capitalise on growth opportunities, we will continue to expand our geographic footprint and product portfolio, ensuring we remain competitive while delivering customised value-added solutions to our global customer base. We will endeavor to deepen our collaboration with customers to finetune our product and solution offerings as a one-stop partner for their evolving needs. By committing to our proven track record, we aim to deliver sustainable value for our stakeholders.
Sustainable Chemistry
Sustainability has always been a core priority. We remain steadfast in integrating sustainability into our operations and actively collaborating with our business partners to build a better future for all.
Words of Appreciation
I would like to extend our gratitude to Mr. Lee Bon Leong, Mr. Chan Kam Loon and Dr. Tay Kin Bee for their invaluable contributions to the Company over the past years.
As this juncture, a warm welcome is also extended to my fellow new Board members, Mr. Daniel Loh Hong Chye and Mr. Sim Guan Seng. Mr. Loh has been appointed as the Independent Director and will assume the positions of Chairman of the Remuneration Committee and member of the Audit Committee, and Mr. Sim, who has been appointed as the Independent Director, will assume the positions of Chairman of the Audit Committee and member of the Nominating and Remuneration Committees. Their expertise and guidance will undoubtedly enhance our Board as we continue to prioritise resilience and collaboration in our path ahead. I would like to convey my heartfelt appreciation to the Board of Directors for their guidance and stewardship.
My appreciation also goes to the management team, our staff and business partners for their continued support. Lastly, I would also like to express my deepest gratitude to our shareholders for their continued trust and unwavering support over the years.
I believe that Megachem is well-positioned to capitalise on growth opportunities in the region and beyond, leveraging our diversified product offerings and tapping on our global network to provide one-stop solutions for our customers. Together, we are committed to building a leading specialty chemicals business that delivers value and sustainable growth for all stakeholders.
YEO WEE KIONG
Independent Director and Non-Executive Chairman
Megachem Limited
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