Chairman’s Statement

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On behalf of the Board of Directors, I am pleased to present the Company’s Annual Report for the financial year ended 31 March 2019.

This year, the Company achieved a revenue of RM1, 127.9 million, a decrease of RM71.2 million or 5.9% as compared to the previous year’s revenue. A lower profit before taxation of RM131.3 million was also recorded for the year ended 31 March 2019, which was a decline of 21.0% or RM35.0 million, as compared to previous year’s profit before taxation of RM166.3 million.

The year 2018 witnessed a continued slowdown in the global economy as well as important changes in Malaysia’s political and economic landscape. The domestic consumer sentiment improved arising from an unexpected short tax break during the transition period from GST to SST, thus placing the Company in an advantageous position in the first half of fiscal year 2018. However, the international front took a different direction with the trade sanctions imposed by the United States of America on certain Middle East countries where a good portion of the Company’s sales is made. Furthermore, this is compounded by the on-going US and China trade tensions and other geopolitical risks arising.

Nevertheless, the Company’s financial performance was relatively stable despite the external challenges faced and is expected to improve in the next financial year. To further improve sales, the Company is intensifying its efforts to increase sales in some of its existing markets especially in the ASEAN region such as Vietnam and the Philippines. Efforts are also being made to seek new markets.

SUSTAINABILITY

This is the second year we are publishing the Sustainability Report, and we are committed to further improve the company’s sustainable practices. The Company’s daily operations will take into consideration various sustainability aspects e.g safeguarding of the environment, clean energy etc. whilst, pursuing long term growth.

The Company’s efforts are also directed towards engaging local talents and vendors, thus contributing to the local market’s economic performance.

Section 17A of the Malaysian Anti-Corruption Commission Act (Amendment 2018), which will be enforced in mid 2020, will have a big impact on the business operations of all companies within Malaysia. The provision extends liability not only to the offender, but also to the commercial organization as a whole. This year, as an enhancement to other existing governance measures already undertaken, the Company has incorporated corruption risk assessment as part of its Enterprise Risk Management exercise.

In line with the Panasonic Corporation Environmental Sustainability Policy – Green Plan 2018, we are promoting the usage of recycled materials with the objectives of preserving natural resources and also as a strategy to improve the bottom line of our business through lower raw material expenses. The Company is proud to introduce recycled raw material which are subjected to high quality assurance standards into manufacturing production with the aim to preserve natural resources and to reduce raw material expenses. In addition to that, the Company will continue to promote and adopt environmental friendly best practices in energy and carbon management in creating factories with zero carbon emission.

In terms of employees wellbeing, the company aims to provide a conducive and safe working environment as well as appropriate working conditions. Amongst the initiatives in place is the occupational safety and health policy which the Company has adopted in its business operations. To provide better working environment, apart from meeting legal requirements, additional benefits such as healthcare checks and life and health insurance coverage are offered to permanent and foreign employees.

DIVIDENDS

In the past years, the Company has consistently distributed dividends of more than half of its annual profit, whilst allocating funds for business growth and investment. The Board is committed to maximise returns to shareholders and for the financial year ended 31 March 2019, despite the lower profitability, a higher final dividend of 211 sen (2018: 133 sen) per ordinary share has been recommended for approval by the shareholders at the forthcoming Annual General Meeting.

Together with the interim single tier dividend of 15 sen per ordinary share, the total gross dividend for FY 2019 will be 226 sen (FY 2018: 148 sen excluding the special anniversary dividend of 100 sen) per ordinary share.

INDUSTRY OUTLOOK AND PROSPECTS FOR 2019

Arising from the need to remain competitive in the global market, the Company recently initiated the use of automation and robotics system. These initiatives are expected to ensure the Company continues to produce quality goods at competitive prices. Robotic automation is being implemented in stages over various production facilities.

The transfer to the new office building in the main plant was completed by the end of January 2019. The Company is now focused on the development of the new building construction projects at SA2 Plant which is expected to be completed by the end of 2020. The new parking lot has also been completed at SA1 Plant which can accommodate about 200 vehicles.

The Company increased the intensity of its 6S activities to ensure all employees are motivated and duly educated on the importance of ensuring a clean and orderly working environment

Although in the financial year ended 31 March 2019, the Company’s sales in the Middle East market was adversely affected by the trade sanctions, the Company is still able to extend its product marketing to other places that are expected to enhance the company’s market. The Company plans to launch new products which incorporate attractive features such as light weighted, more choices of colours and energy saving. The Company also plans to expand and strengthen its presence in the markets which has similar climate to Malaysia as it believes that products that fit in the Malaysian market can also thrive in these countries.

DIRECTORATE

The Board bids farewell to Mr Toru Okano, Mr Yuji Kogure and Mr Yasuo Tonooka who have resigned from their office and we wish them well in their future undertaking.

The Company has recently appointed Non-Independent Non-Executive Director, Mr Shigeru Dono to fill the vacancy on resignation of Mr Yasuo Tonooka. The vacancy on the Board following the resignation of the Executive Directors, Mr Toru Okano and Mr Yuji Kogure will not be filled. The Board had earlier committed to reduce the ratio of independent directors to non-independent directors from 4:7 to 4:5 by 31 March 2022. With the resignation of the mentioned Executive Directors, the Company has now reached this ratio much earlier as it strives to adopt the best practices of the Malaysian Code on Corporate Governance.

Datuk Supperamaniam a/l Manickam has informed that he would not be seeking re-election at the forthcoming Annual General Meeting in view that his tenure on the Board as Independent Director would be reaching 12 years by the end of 2019. On behalf of the Board of Directors and Management, I wish to place on record, our heartfelt thanks and appreciation to Datuk Supperamaniam for his services during his tenure as Independent Director. The Company is deeply grateful for all his valuable contribution these years and we wish him well in his retirement.

ACKNOWLEDGEMENT

On behalf of the Board of Directors, I would like to thank the management team and all employees for their relentless efforts, dedication and resilience in maintaining the Company’s operation and delivering greater value for our shareholders despite 2018 being a volatile year. My warmest gratitude is also extended to our Business Partners for their collaboration with our team to ensure the smooth operation of the company as well as their continued support and confidence in this Company.

May the Company continue to work together and forge ahead to achieve greater growth and success for the betterment of the Company in the years ahead.

Tan Sri Datuk Asmat bin Kamaludin
Chairman

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