Our Prospect Economy The road ahead for the global economy is likely to be bumpy as political conflicts in Ukraine and the Middle East region, trade protectionism and sluggish economic recovery in China continue to pose a threat to the global economic growth trajectory. Chemical industry The chemical industry may continue to face supply chain risks as the Middle East conflicts will take a while to reach a full resolution even though a ceasefire has been agreed. Managing inventory therefore remains challenging. Business conditions in the industry is primarily dependent on continued growth in manufacturing activities. Megachem Given the supply chain challenges the industry face, prudent inventory management will be a key focus for Megachem in 2025. Megachem’s chemical products are sold to a wide spectrum of industries. Our business prospects are to a large extent intertwined with the chemical industry and overall economy. If the conditions in the global economy and industry remain positive, the recovery momentum in our business, seen in 2024, may remain intact in 2025. However, any deterioration in economic growth could alter the picture of our growth outlook. Rebuilding Our Warehouse On 5 July 2023 Megachem informed shareholders via an SGX announcement that a fire broke out on the same day at 132 Pioneer Road where one of our warehouses is located. The structural work for the rebuilding of our warehouse had just recently commenced, following the completion of the piling phase. If all go as planned, construction is targeted to complete by end of 2025. The budget for the warehouse rebuilding is estimated at about S$19 million of which S$16.2 million is for the construction and the balance for professional fees, equipment and other fixtures. This is budgeted to be funded by insurance compensation proceeds, bank loan and internal funds. While the reconstruction of the warehouse will increase our cost in the short and medium term, it will lead to lower warehousing cost in the longer term as we reduce our reliance on third party warehouses. The new warehouse, which is stringently compliant with Major Hazard Installations (MHI) Regulations, more environmentallyfriendly and has bigger warehousing capacity, will enhance our operational efficiency and long term strategic competitiveness. Our Strategy (CH emical)+Re(Action)2: for- Gr{OW} th The Megachem formula for growth is a reaction of 3 key strategies creating a chemistry that will elevate us to a different level of growth. We develop our strategies around the key pillars of geographic network, product offerings and industry coverage. Combine these with our supply chain infrastructure and close relationships with customers and suppliers, Megachem will be well positioned to grow its business, thereby enhancing value for our shareholders. 8 ANNUAL REPORT 2024
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