The year began with high hopes for our two business divisions, limestone processing and scrap metal trading, but the shadow of the worsening global economic crisis put a severe damper on demand, motivating the Group to take steps to minimise the downward trend.

Limestone Processing

Following its first successful full year of operations in the previous financial year ended 30 June 2008, our limestone processing business, operated by the Group’s subsidiary, Compact Energy Sdn Bhd ("Compact"), faced slowing demand this year from Malaysia’s steel and construction industries. During the year ended 30 June 2009, Compact’s turnover fell by 9% from S$17.9 million to S$16.3 million, with a 7% drop in earnings from S$2.7 million to S$2.5 million. Much of this decline was attributed to the fourth quarter alone with a 26% and 12% decrease in revenue and earnings respectively. Long-term prospects for the business are still positive. But with projects put on hold and construction schedules pushed back, the plant expansion we commenced in June 2008 has been deferred till we are confident that the market is back on the upswing. With the planned addition of a twin-shaft kiln, a quicklime crushing plant and a limestone crushing plant, the expansion is expected to significantly boost our annual production capacity of quicklime, as well as enable the production of fine lime and fine stone, giving Compact an even greater competitive edge.

Scrap Metal Trading

Turnover for our scrap metal trading business, operated by LAP Trading and Marketing Pte Ltd ("LAP Trading") plummeted by 70% from S$33.3 million in its first nine months of operations last year to S$10.0 million in this first full year of operations. Correspondingly, earnings dropped 75% from S$0.8 million to S$0.2 million. Again, most of the decline was attributed to the fourth quarter, during which revenue and earnings decreased by 71% and 86% respectively. Recycling scrap metal involves processing the metal into raw material feedstock for industrial manufacturing. With most of our current demand coming from the Malaysian steel industry, the substantial reduction in industry demand has had a direct impact on this business segment. It is expected though that once demand picks up, the scrap metal trading business will also recover ground fairly quickly.

Electronics Division

The story was much the same for Advent Electronics Pte Ltd ("Advent"), which reported a 33% decrease in sales from S$53.3 million to S$35.5 million due to the continuing slowdown in the global electronics industry. The company has been operating in three business segments, namely component distribution, turnkey project management, and system solutions. Given the deterioration of the global electronics industry, which shows no signs of recovering in the foreseeable future, the division underwent a restructuring exercise by ceasing component distribution and system solutions and focusing all resources on turnkey project management. This consolidation will allow Advent to stem the downward trend in revenue, and utilize its resources more effectively towards securing higher profit margin business. The restructuring had a considerable impact on Advent’s bottom line for the current financial year. Sale of stocks and fixed assets relating to component distribution were completed at year end, which led to writeoff of stocks and loss on disposal of fixed assets amounting to S$1.0 million. After also accounting for S$2.6 million for impairment of receivables, S$0.9 million for impairment on an available-for-sale financial asset and S$0.3 million for bad debts written off, a net loss of about S$5.4 million was registered in the fourth quarter. Overall, a net loss of S$5.4 million was incurred for the full year, compared with the S$0.8 million profit reported in the previous year. With evidence of some initial signs of improvement in the global economy, the Group looks forward to Compact and LAP Trading steadily regaining their momentum in the coming year, while Advent harnesses its experience to its advantage in seeking out new turnkey project opportunities.