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Executive Chairman’s Statement

DEAR SHAREHOLDERS,
 
FY2018 has been a year encapsulated in uncertainty and volatility underpinned by the ongoing trade tensions between two of the world’s major economies – The United States of America and China.
 
Even though  FY2018 was  a very  challenging year, the Group achieved total revenue of S$501.55 million, an increase of 8.09% or S$37.54 million compared to FY2017. The increase was mainly attributable to stronger demand in Packaging Business (Tat Seng Group), with  both Singapore and China sectors experiencing growth.  Additionally, Consumer Business  in  Malaysia achieved higher  revenue  as a result of new agency products, more aggressive promotions and working closely with various distribution channels to drive sales.
 
Gross  profit   margin  decreased  by  2.02%   from 22.58%  to  20.56%,  mainly  due  to  reduced  margin from  Packaging Business  and Singapore Consumer Business. This is partially offset  by improved margin from Malaysia Consumer Business for new agency products.  As a result  of  the  reduction  in the  gross profit  margin, gross profit  for  the  Group decreased by 1.61% from S$104.78 million to S$103.10 million despite registering higher revenue.
The Group’s net profit after tax for FY2018 was S$22.23 million as compared to S$20.92 million reported for FY2017. The net profit attributable to shareholders was S$13.43 million for FY2018 as compared to S$11.10 million reported for FY2017.
 
DEVELOPMENTS IN FY2018
Notwithstanding  an increasingly challenging FMCG operating  environment,   the   Company  continues to pursue opportunities to diversify its core retail business. Alongside the Group’s business strategy of redeploying capital into potentially higher return real estate opportunities, we  have acquired an overseas property in 2018. The property is located at Kyoto City, Higashiyama-ku, Gion Machikitagawa 305, Japan. It has a land area of 90.53 sqm and a total buildable area of 72 sqm for a 5-storey commercial building.
 
This property is strategically located in Kyoto’s tourist destination with close proximity to major shopping malls,  restaurants and the  Yasaka Shrine. We  plan to  develop  the  property  into  a boutique  hotel  with food and beverage (F&B) outlets, which is estimated to  cost  JPY170 million (equivalent to  approximately SGD2.08 million). Key milestones for this development are targeted  for  completion  within  the  next  12  to 18  months,  subjected  to  the  relevant  authorities’ approval.
 
We view this acquisition as a stepping stone to expand our food business into the Japan market, thereby enlarging our footprint globally.
 
Tat Seng’s overseas subsidiary, Nantong Tat Seng Packaging Co., Ltd. (“Nantong  Tat Seng”)  acquired a property in Tongzhou District, Nantong, Jiangsu Province  that  comprises  a  50  year  leasehold land with  an area of about 74,115 sqm. The new plant of Nantong Tat Seng is ready to commence its operations and management is confident  the new  state-of-the- art plant will  help the Group to seize new  business opportunities and further accelerate the  strengthening and expansion of its market share in Nantong and surrounding area.
Apart from this, one of the top selling brands under Topseller Pte Ltd (“Topseller”),  Royal Umbrella continues to dominate and has secured top spot as the best-selling rice brand in Singapore (based  on  Nielsen  Retail  Audit  moving  annual totals  (MAT) conducted in September 2018). As testament to  the  brand’s long-standing popularity, it  has been a continual winner of the Reader’s Digest Trusted Brands platinum award in 2017 and 2018.
 
Fortune Food Manufacturing Pte Ltd (“Fortune Food”) saw its new tofu manufacturing facility garner the  Food Safety System  Certification  22000  (FSSC
22000) qualification in December 2018. This further reinforces and strengthens the high food safety and quality standards of our tofu products and notably, this demonstrates Fortune Food’s capability to meet the International Food Safety Standards and our facility is now poised to distribute its products overseas; thereby deepening and widening Fortune Food’s product  outreach.  Some  of  the  countries  that  we are able to export our chilled products include the European Union (EU), which is well known for its strict quality standards and regulations.
 
Moreover, Tipex Pte. Ltd. (“Tipex”)  has being organizing its trademark Life’s Beautiful Art Competition  under the  Beautex brand for  the  tenth year running. Winning artworks were printed on box tissue  with  donations totalling  more  than S$30,000 and collections from the sales of the box tissues were donated to the Straits Times School Pocket Money Fund. The competition  theme for 2018 was Healthy Living, echoing the  nation’s  focus  on healthy living and keeping fit.
 
FUTURE PROSPECTS
We expect the business environment to remain competitive attributable to escalating raw materials and labour cost. On the foreign exchange front, margins from overseas purchases that are denominated in USD will continue to remain under pressure as the USD is forecasted to stay strong against domestic currencies of our major markets as there is no indication of rate- lowering from the Federal Reserve.
 
Meanwhile,  our Packaging Business is perceived to face challenges presented by volatile raw material prices coupled with  trade tension  between  the  US and China. As such, we will continue to enhance operational efficiencies and implement measures through automation for efficient production whilst managing costs prudently and effectively.
We  foresee  FMCG  retail  sales  growth  to  remain muted in FY2019 against the backdrop of rising costs and changing consumer demographics and spending patterns. Online business is likely to grow positively spiraled by progressive consumers’ preference and business  partners’  inclination  to  trade  on  various e-commerce platforms.
 
In this light, our business strategy in 2019 would be to forge ahead with new product launches coupled with greater diversification whilst  exploring more markets to boost our exports and sales; thereby seeking more opportunities to improve our margins, particularly in the chilled tofu business segment.
 
More importantly, we strive to improve costs efficiency so as to keep our price competitive without compromising on the quality of our products.
 
ACKNOWLEDGEMENTS
On behalf of the Board, I would like to extend my gratitude to Mr Lien Kait Long, a past director who has retired on 20 April 2018. I wish to express appreciation for Mr Lien’s invaluable contribution to the Company during the tenure of his directorship.
 
At the same time, we would like to take this opportunity to extend a warm welcome to our new directors Mr  Kong WeiLi and Mr  Siu Wai Kam, who joined us in June 2018, as well as Mr Goh Yang Jun, Jasper that came onboard in December 2018. We certainly look forward to working cohesively with them so as to bring the Group to greater heights and I firmly believe that together we can manage obstacles in this fiercely  competitive  environment  and find  the  key to deal with  the challenges that we face for a more sustainable future for the Group.
 
On this note, I would like to thank our customers, business partners, management and staff for their contribution and dedication over the past year; enabling the Group to forge ahead despite current headwinds. Last but not least, I would like to express my appreciation to our shareholders, who have supported us over the years.
 
Thank you again for the trust you have placed upon us and we  certainly look forward  to steadfastly striving towards achieving better results in the years to come.
 
Dr. Allan Yap
Executive Chairman