GROUP FINANCIAL PERFORMANCE

For the year under review, the Group recorded a lower revenue of RM432.2 million, a decline of 22% as compared to RM553.9 million a year ago. Despite the weak operating environment, Silverstone Berhad ("Silverstone"), our core tyre manufacturing business, recorded a commendable profit even though sales was lower whilst our automotive business continued to incur losses. The disposal of 60% equity interest in Nanjing Jingyi Casting Co Ltd had enabled the Group to record a gain of RM12.9 million and the proceeds received from the disposal had been earmarked for debts repayment of the Group. However, the strengthening of the US Dollar ("USD") had caused the Group to book in an unrealised loss on foreign exchange due to its substantial USD borrowings. After accounting for finance costs and share of losses of associated companies, the Group reported a loss before taxation of RM66.7 million for the financial year under review.

Tyre Division

Silverstone, our tyre manufacturing company based in Taiping, continued to achieve another year of good performance with profit before taxation rising by 22% to RM18.1 million from RM14.8 million recorded in the preceding financial year despite lower sales during the economic downturn. The better than expected profit was due largely to the substantial fall in natural and synthetic rubber prices in the second half of the financial year. Silverstone was not spared from the negative impact of the global recession and had implemented various measures to overcome the depressed tyre market. By managing its working capital closely and efficiently, particularly in inventory control for both its raw materials and finished goods, we were able to mitigate the adverse impact of the weak local and export markets. Silverstone had extended its range of tyre products for Sports Utility Vehicles ("SUV") and agricultural vehicles/ machines as well as its Snowblitz 1000 snow tyres. With its sophisticated equipment and machinery, Silverstone is able to cater to the demanding high performance tyres market with its production line engineered to enhance handling and responsiveness. Its continuous involvement in motorsports events has enabled Silverstone to keep abreast with new technology underlining its commitment towards developing tyres with exceptional performance. Silverstone will also continue with its various aggressive strategies to improve production efficiencies by lowering production cost, enhancing productivity, improving sales services and expanding its market presence in order to remain profitable.

Automotive Division

The operating environment for Lion Motor Sdn Bhd ("Lion Motor"), our local automotive distributor, remained challenging and was compounded by the slowdown in the economy. The sale of light trucks continued to be affected by the intensified competition amongst the local truck assemblers as well as from the rebuilt trucks offering competitive pricing. To remain competitive, various marketing and promotion campaigns were carried out to boost sales. Revenue from the sale of light trucks was more than double that of the preceding year. Lion Motor will continue to work closely with its Chinese manufacturer on product improvement and to ensure quality enhancement, reduce operating costs as well as striving to regain a bigger market share through innovative marketing strategies. Meanwhile, our component parts manufacturing business in China under Nanjing Jingyi Casting Co Ltd, was disposed of during the middle of the year.

Associated Companies

Our motorcycle business is carried out by two associated companies namely Suzuki Motorcycle Malaysia Sdn Bhd ("Suzuki Motorcycle") in Malaysia and Nanjing Jincheng Machinery Co Ltd ("Nanjing Jincheng") in China. Despite the stiff competition and the slowdown in the economy, Suzuki Motorcycle recorded a higher profit due to increased export of motorcycle spare parts which fetched better profit margins. Meanwhile, Nanjing Jincheng posted lower growth in revenue and higher losses this year. Impairment losses provided on its plant and machinery and inventories write-down during the year had further increased its losses.