Letter to shareholders

Dear Shareholders,

During the financial year ended 30 June 2009 (“FY2009”), the global financial system underwent severe stress stemming from the US sub-prime mortgage market and which resulted in the collapse of several global financial institutions and damaging confidence world wide. A global recession ensued with a resultant sharp drop in international trade, rising unemployment and
falling commodity prices.

Singapore’s economy grew by 1.1% for the whole of 2008 as compared to 7.8 per cent in 2007.1 For the first half of 2009, Singapore’s economy contracted by 6.5% with growth for the year maintained at -6.0% to -4.0%.2 Although there are signs of recovery, overall sentiment is still very cautious.

Financial Performance

Our financial performance for FY2009 needs to be viewed against this backdrop. The stainless steel business, like all other sectors, was not spared the effects of the crisis. Revenue decreased by 41% from $92.6 million for financial year ended 30 June 2008 (“FY2008”) to $54.4 million for FY2009, while net profit fell by 89% to $1.5 million from $13.7 million. Our earnings per share decreased to 0.67 cent from
6.2 cents in the previous financial year. However, net asset value per share remained resilient at 38 cents per share (FY2008: 39.2 cents per share), while cash balances remained at a healthy level of $33.7 million as at 30 June 2009.

Outlook and strategy

Early prognosis suggests that the financial crisis has seen the worst and recovery is underway, albeit slowly. Nevertheless, global markets remain jittery in anticipation of any news that could see the world economy back peddling into a danger zone again. While stainless steel prices appear to be on an upward trend, demand from end-users is expected to remain low at least till the end of 2009. It is thus still early days to predict our performance in the coming year given the still unclear price movements.

We have, however, cause for optimism due to the long-term prospects and strong fundamentals underpinning the marine industry from which we derive a substantial portion of our revenue. The Oil & Gas and Petrochemicals industries which contributed significantly to our revenue, likewise, have bright prospects. These conditions augur well for the demand for our products well into the future.

Prudence in business investments

We nevertheless will adhere to our policy of prudence which has stood us well through the years. With the poor visibility for sustained economic recovery in the short term, we will focus on providing a comprehensive range of 304/304L and 316/316L grades of stainless steel products, progressively widening the range.

In view of the protracted economic recession and the resultant fall in demand for stainless steel products in FY2009, the Board has taken the decision, as announced via the SGX on 30 June 2009, to redeploy the amount initially set aside for the redevelopment of our existing warehouse or the acquisition of a new warehouse, for use as working capital instead.

We remain confident of our ability to emerge from this crisis more resilient, given our sound business fundamentals and a strong balance sheet.

Appreciation

We are pleased to recommend a final one-tier tax exempt dividend of 1.0 cent per share. The dividend, if approved at the upcoming Annual General Meeting, will be paid on 16 November 2009.

In October, Mr Kua Chee Seng will relinquish his position as Chief Executive Officer of the Company to Mr Lim Lian Soon who, with his diverse experience, will provide a different perspective to contribute positively to the growth of the Company. Mr Kua will remain on board as executive director and, on behalf of the Board of Directors, I thank him for his invaluable service to the Company.

It leaves me to thank our shareholders, business partners and customers for their commitment and loyalty to us. My Board and I would also like to thank the management and staff for their dedication, hard work and perseverance in the face
of great challenges.

Last but not least, I would like to take this opportunity, this being my last term as Chairman, to personally thank my fellow Board members for their invaluable guidance and contributions during the year.

Hong Pian Tee
Non-Executive Chairman