the h le solution provider
TRANSCRIPT
The H le Solution Provider
M U L T I - C H E M L I M I T E D A N N U A L R E P O R T 2 0 0 1
We can drill a hole 20 times smaller than this at the precise location
and with the required hole-wall quality. In our business, precision is the key.
[ C O N T E N T S ]
Corporate Profile 2 Corporate Data 3 Board of Directors 4 Management Team 6
Chairman’s Statement 8 Operations Review 13 Prospects & Future Plans 17 Calendar of Significant Events 18
Group Structure 19 Financial Highlights 20 Financial Review 23 Value Added Statement 24
Information on Employees 25 Investor Relations 26 Corporate Governance Report 27 Corporate Directory 32
[ C O R P O R A T E P R O F I L E ]
Since we were established in 1985 as a small distributor
of Printed Circuit Board (”PCB”) chemicals and materials,
Multi-Chem has seen tremendous growth. We are a major
distributor of specialty chemicals and other PCB-related
products and equipment. More importantly, we have
diversified into the provision of precision drilling services
to leading PCB manufacturers in the region and we are
the current market leader in terms of production capacity.
These accomplishments are testimony to the Group's
core strengths: namely our strategic planning ability,
skilful and dedicated production team, and application
of advanced technologies to the fullest.
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2
[ C O R P O R A T E D A T A ]
3
BOARD OF DIRECTORS
Foo Suan Sai (Chairman & Chief Executive Officer)
Han Juat Hoon
Toshiaki Suzuki
Chew Thiam Keng
Wong Meng Yeng
COMPANY SECRETARIES
Ho Boon Chuan Wilson
Low Mei Mei Maureen
AUDIT COMMITTEE
Wong Meng Yeng (Chairman)
Foo Suan Sai
Chew Thiam Keng
REGISTERED OFFICE
11 Tuas Avenue 5
Singapore 639337
Tel: (65) 6863 1318
Fax: (65) 6863 1618
SHARE REGISTRAR
M & C Services Private Limited
138 Robinson Rd, #17-00
The Corporate Office
Singapore 068906
AUDITORS
Chio Lim & Associates
95 South Bridge Rd #07-28
Pidemco Centre
Singapore 058717
INTERNAL AUDITORS
C.C. Yang & Co.
10 Anson Road #13-16
International Plaza
Singapore 079903
PRINCIPAL BANKERS
The Development Bank of Singapore Ltd
6 Shenton Way
DBS Building Tower One
Singapore 068809
Overseas Union Bank Ltd
1 Raffles Place
OUB Centre
Singapore 048616
KBC Bank N.V.
Singapore Branch
30 Cecil Street #12-00
Prudential Tower
Singapore 049712
[ B O A R D O F D I R E C T O R S ]
From left to right:
Mr Chew Thiam Keng (Independent Director) Mdm Han Juat Hoon (Chief Operating Officer)Mr Foo Suan Sai (Chairman & Chief Executive Officer) Mr Toshiaki Suzuki (Executive Director)
Mr Wong Meng Yeng (Independent Director)
4
BIODATA OF DIRECTORS
Foo Suan Sai, Chairman and Chief Executive OfficerMember of Audit Committee
Mr Foo, one of the founding shareholders of Multi-Chem, has more than 20 years of experience
in the PCB industry, of which the last 13 years were spent building up the Company. Mr Foo
is responsible for the overall direction and development of the Group. He holds a Diploma in
Chemical Process Engineering from the Singapore Polytechnic and a Diploma in Management
Studies from the Singapore Institute of Management.
Han Juat Hoon, Chief Operating Officer
Mdm Han is a founding shareholder of Multi-Chem. She has been a Director of the Company
since 1987 and commenced working in an executive capacity with the Company in 1992.
Mdm Han is well versed in factory operations, having held the appointment of factory manager
with a chemical company for 12 years from 1980 to 1992. Mdm Han is responsible for the
overall operations of the Group. She holds a Diploma in Chemical Process Engineering from
the Singapore Polytechnic and a Diploma in Management Studies from the Singapore Institute
of Management.
Toshiaki Suzuki, Executive DirectorMember of Remuneration Committee
Mr Suzuki was appointed as a Director of the Company in January 2000. He is largely responsible
for the Group’s marketing efforts, particularly to Japanese customers. Mr Suzuki graduated from
Sophia University of Tokyo in 1958 and has over 35 years of experience in the PCB industry.
Wong Meng Yeng, Independent DirectorChairman of Audit Committee, Chairman of Remuneration Committee
Mr Wong has been on the Board of Directors of the Company since January 2000. He has been
an advocate and solicitor in Singapore for 18 years, with the past 12 years spent as a corporate
lawyer. He holds a Bachelor of Law (Hons) degree from the National University of Singapore.
He is currently a director in Alliance LLC, a law corporation he co-founded.
Chew Thiam Keng, Independent DirectorMember of Audit Committee, Member of Remuneration Committee
Mr Chew was appointed as a Director of the Company in January 2000. Currently, he is the
managing director of KS Tech Ltd. Before he joined KS Tech Ltd, Mr Chew was an executive
director of another public listed company between January 1996 and November 2001. Prior
to January 1996, he worked for 9 years with The Development Bank of Singapore Ltd in areas
such as corporate finance and retail banking. He holds a MBA and a Bachelor’s degree in
Mechanical Engineering. Mr Chew is also director and audit committee member of several listed
companies.
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[ M A N A G E M E N T T E A M ]
From left to right:Mr Ho Boon Chuan Wilson (Chief Financial Officer) Mr Pui Boon Tiong Eugene (Operations Manager)Mr Ong Teck Heng Bernard (Business Manager)
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BIODATA OF MANAGEMENT TEAM
Ho Boon Chuan Wilson, Chief Financial Officer
Mr Ho has been with the Company since March 2000. Before joining Multi-Chem, he worked
for 6 years with The Development Bank of Singapore Ltd, specialising in corporate finance. A
Certified Public Accountant and a Chartered Financial Analyst, he is responsible for Multi-Chem’s
finance, taxation, investments and investor relations. Mr Ho is also currently Multi-Chem’s
Company Secretary.
Ong Teck Heng Bernard, Business Manager
Mr Ong joined the Company in April 1997. He worked as an engineer at Pentex-Schweizer
Circuits Ltd for 4 years, and Stormedia International Ltd for a year before joining the Company.
Mr Ong was appointed Business Manager in January 2001, and is responsible for sales and
development of new product lines in the Distribution Division. He holds a Bachelor’s degree
in Engineering (Mechanical and Production) from the Nanyang Technological University.
Pui Boon Tiong Eugene, Operations Manager
Prior to joining the Company in December 1999, Mr Pui worked as an engineer with PCB
manufacturers Motorola Electronics Pte Ltd and WUS Printed Circuits Pte Ltd. He worked his
way up in Multi-Chem from Assistant Production Manager and Equipment Manager before
being named Operations Manager in February 2002. Mr Pui currently oversees operations in
the Manufacturing Services Division, which include production, maintenance and quality
assurance. He holds a Diploma in Engineering (Electronics & Computers) from Ngee Ann
Polytechnic.
The year 2001 was a difficult one for the electronics industry in general. Competition in the PCB industry
intensified for the significantly-reduced orders and, as a supplier to PCB manufacturers, the effects filtered down
the supply chain to us. As customers cut back on orders, machine utilisation for our Manufacturing Services
Division remained low during the year. In the light of the difficult operating environment, the Group’s expansion
plans also proceeded at a significantly slower pace.
THE GROUP
Notwithstanding the above, the Group remains committed to providing quality services to our customers.
As a testimony to our commitment to quality, the Company achieved ISO 9001 certification in May 2001.
[ C H A I R M A N ’ S S T A T E M E N T ]
8
Multi-Chem has also set up an in-house laboratory, which gives us the capability to carry out cross section
evaluation of hole-wall quality.
Our wholly-owned subsidiary, M-Precision Tech Sdn Bhd (“M-Precision”), was set up to provide PCB precision
drilling services to the Group’s customers in Malaysia. By shifting part of our operations across the causeway,
the Group is able to capitalise on lower operating costs, as well as gain faster turnaround time by virtue of closer
proximity to our customers. M-Precision commenced operations in May 2001. It currently has 8 CNC drilling
machines from Hitachi Via Mechanics, Ltd. (”Hitachi”), one of the industry’s leading manufacturers of CNC drilling
machines. M-Precision achieved ISO 9001 certification in December 2001.
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In September 2001, the Group expanded its precision drilling operations to the Philippines
through Cambridge Multi-Chem Electronics Corporation (“CMEC”), a 50%-owned joint venture
company of Multi-Chem. CMEC is currently providing precision drilling services to its other
shareholder, Cambridge Electronics Corporation. It has a total of 12 CNC drilling machines.
Our next phase of expansion will take place in the People’s Republic of China (“PRC”).
Multi-Chem (Suzhou) Co., Ltd (“MCL SZ”), located in the Suzhou Industrial Park, was incorporated
in October 2001 in the PRC. On 1 March 2002, MCL SZ took over the existing precision drilling
business, including the customer base, from Multi-Chem’s associated company, Hawera Precision
Tec (Suzhou) Co., Ltd (“HPTec SZ”), which has been in operations since August 2000. Including
the 8 Hitachi CNC drilling machines from HPTec SZ, MCL SZ currently has 32 CNC drilling
machines.
Despite the gradual shifting of operations outside Singapore, Multi-Chem continues to be
the Group’s headquarters and has the most advanced machines to service high end PCB
manufacturers based in Singapore. Multi-Chem currently has 44 Hitachi CNC drilling machines,
including 2x6MB, the most advanced CNC drilling machines from Hitachi.
In line with the scaling down of our Singapore operations, the Company recently entered
into a sale and purchase agreement for the sale of its factory at 13 Tuas Link 1 for a consideration
of $2.45 million. The sale is subject to approvals from the relevant authorities.
FINANCIAL PERFORMANCE
The Group’s business was affected by the ongoing difficult business conditions. While the
Group was still profitable in 2001, it performed poorly compared to 2000.
The Group recorded a turnover of $23.6 million in 2001 compared to $30.0 million in 2000,
a decrease of 21%. Group profit before tax (”PBT”) dropped by 80% to S$2.3 million from
$11.4 million in 2000.
The poorer performance was largely due to the twin effects of the downturn in the electronics
cycle and the overall slowdown in the global economies, with the events of 11 September
2001 in the United States (”US”) further magnifying the impact.
In 2001, the Manufacturing Services Division’s contribution to Group turnover dropped to
47%, compared to 53% the year before. In comparison, the Distribution Division contributed
a higher 53% to Group turnover. This was because turnover decreased in the Distribution
Division was a moderate 12% compared to a higher 30% for the Manufacturing Services Division.
The decrease in PBT was due to the sharp fall in turnover, accentuated by price pressures
resulting from intensified competition. Additionally, an amount of $1.2 million recorded in
“Other Income” in 2000 from the disposal of a 5% interest in Hawera Precision Tec Pte Ltd,
Multi-Chem’s associated company, did not recur in 2001. Due to the capital-intensive nature
of the Manufacturing Services Division, the Group’s profit and loss was weighed down by
depreciation of factory assets, one of the largest fixed cost items.
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FINANCIAL POSITION
The Group has maintained a healthy financial position. As at 31 December 2001, net working
capital of the Group stood at $15.9 million, with gearing at 36%. Current assets stood at
$25.4 million, which included cash of $13.5 million. While there was an overall cash outflow
due to the repayment of the principal sum on the transferable loan facility, the Group’s cash
flow from operations remained positive.
DIVIDENDS
The Directors recommended and the Company paid an interim dividend of 0.24 cents per
ordinary share less tax and 0.12 cents per ordinary share tax exempt. As the performance of
the Group for the second half of 2001 declined further from the first half, the Directors did
not recommend any final dividend.
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[ The trend towards outsourcing in the precision drilling of PCBs
is expected to continue as PCB manufacturers increasingly recognise
the benefits of outsourcing.]
BUSINESS OUTLOOK
The Group is expanding business activities regionally, in particular, in the PRC. Through our
subsidiary MCL SZ, the Group is already capitalising on market opportunities in Suzhou, where
many major PCB manufacturers are located. Since early this year, we have strengthened our
team in MCL SZ and will continue to focus our efforts and resources in growing the business
there. MCL SZ is expected to contribute to the Group’s performance in 2002.
With the fall in electronics demand in 2001, our customers cut back on outsourcing as their
in-house capacities were adequate to meet production requirements. However, once there is
an upturn in electronics demand, the need to outsource will re-emerge, particularly as businesses
have generally held back on any new capital expenditure. The trend towards outsourcing in
the precision drilling of PCBs is expected to continue as PCB manufacturers increasingly recognise
the benefits of outsourcing. The Group has aggregated one of the largest number of CNC
drilling machines in this region and hence is well poised to ride on the wave of recovery in
the electronics industry. As our customers produce more, there will also be additional requirements
for the products under our Distribution Division, including the specialty chemicals that we
distribute.
CORPORATE GOVERNANCE
The Directors have taken note of the new corporate governance rules and their required
implementation dates. We are implementing in stages to the rules and are pleased to inform
shareholders that the Group plans to commence quarterly reporting on the results of the third
quarter of 2002.
APPRECIATION
On behalf of the Board of Directors, I take this opportunity to commend our management
and staff for their commitment and contribution during a difficult 2001. I would also like to
express my sincere appreciation to our suppliers, customers and business partners for their
valued support. I also wish to thank the shareholders for granting the mandate on share buy-
back and for continuing to share our belief in the Group.
We are hopeful that the worst is behind us and we look forward to better performances in
the years ahead.
Foo Suan SaiGroup Chairman & Chief Executive Officer
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In the electronics industry, the years 2001 and 2000 presented a picture of extreme contrasts. Whereas the
Group tested new heights in its financial performance in 2000, this performance did not last into 2001.
In 2000, the electronics business was booming. It was a time where optimistic projections led to industry
players increasing production capacity to cater to further anticipated increase in demand for technology and
networking products. When the dot.com bubble burst and demand for technology and networking products
waned, the inventory amassed during 2000 led to an overhang, leaving a negative impact throughout the
industry.
In 2001, excess capacity led to intense competition for the significantly-fewer orders and that flowed down
the entire supply chain. As end customers cut back on purchases, suppliers at each stage of the supply chain
reduced orders and cut prices for orders placed. When a recovery looked to be on the cards in the second half
of 2001, the events of 11 September 2001 altered all that. Consumer confidence in the US, where most of our
electronics products are shipped to, plunged. Just as 2000 was the year where the supplier held the power,
2001 was the year where the customer reigned.
[ O P E R A T I O N S R E V I E W ]
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Manufacturing Services Division
As a service provider of precision drilling of PCBs, the Group relies on PCB manufacturers to
outsource their excess orders. In the PCB manufacturing process, precision drilling is generally
a bottleneck. As investments in CNC drill ing machines require large capital outlay, PCB
manufacturers prefer to invest only a percentage of their drilling requirements, while outsourcing
the rest. Multi-Chem, being the specialist in this area and with the largest number of CNC
drilling machines in this region, would be a prime beneficiary of this outsourcing trend.
However, in 2001, because of the downturn in the electronics industry, there were insufficient
orders from our customers, who had barely enough orders to fully utilise their own CNC drilling
machines. This resulted in a cut back in outsourcing. Consequently, there was a sharp decrease
in Group turnover arising from the lower business volume in Malaysia, Singapore and the
Philippines. Even as the Group focused on cost cutting measures, the actions we took were
insufficient in the face of high fixed costs of depreciation and the constant price pressures.
Consequently, the Group recorded an operating loss in this business in 2001.
In terms of equipment assets, Multi-Chem operates the most advanced CNC drilling machine
from Hitachi. All of our machines are able to run at speeds of 125,000 rpm and above. Fifteen
machines can run at 160,000 rpm, including 2x6MB machines which run on linear motors
instead of servo motors. Linear motors increase stability during in-feed and retract, therefore
14
reducing drill breakages and boosting efficiency. The Group also uses advanced x-ray equipment
and automated hole checkers to provide quality assurance to customers. We have also set up
an in-house laboratory with the capability to carry out cross-section evaluation of hole-wall
quality.
Distribution Division
The Group supplies a range of PCB specialty chemicals for the wet processes in PCB
manufacturing, as well as other PCB-related products, including dry film, mass lam and clean
room products.
During the year, we focused our efforts on maintaining existing businesses, as well as getting
new products qualified for use in our customers' production lines. While the evaluation generally
ran smoothly, we had limited success securing orders for new products such as dry film and
mass lam. This was not unexpected as the demand for PCBs shrank during 2001, with some
PCB manufacturers operating at less than 50% capacity. In addition, the Group faced severe
price pressure even for existing products, such as specialty chemicals.
In the second half of 2001, the Group also supported one of our customers in Wuxi, PRC
in the starting up of the PTH (plated-through-hole) line.
Risk Factors
The Group’s primary business risk is our exposure to the electronics products segment. As
our customers are PCB manufacturers, most of them will be exposed to the cyclical nature of
the electronics business.
As we have already commenced operations in the PRC, we are also exposed to the political
and economic climate of that market. Success in the PRC will depend on our ability to secure
new customers. We will, however, leverage on the network already built up by our related
company, HPTec SZ, in Shanghai, Kunshan, Suzhou and Wuxi (“Greater Shanghai region”).
The Group is also exposed to foreign exchange risks as apart from Singapore dollars, we also
transact with suppliers and customers in US dollars and European euro, and to a lesser extent,
Chinese renminbi and Malaysian ringgit. The Group may, from time to time, enter into borrowing
and foreign exchange arrangements as currency hedges.
15
Our Associated Companies
The Company holds a 35% interest in Hawera Precision Tec Pte Ltd ("HPTec"), which is a key subsidiary of
German-based PCB tools manufacturer, HPTec GmbH. HPTec is principally engaged in the distribution of the
"Hawera" brand drill and router bits in ASEAN and the provision of drill bit regrinding service. Its wholly-owned
subsidiary, HPTec SZ, located in the Suzhou Industrial Park, services PCB manufacturers in the Greater Shanghai
region. HPTec has an issued and paid-up share capital of S$3.0 million. Its directors are Messrs Foo Suan Sai,
Manfred Kling and Georg Konstantinou. HPTec SZ has a registered capital of US$2.1 million and its legal
representative is Mr Foo Suan Sai.
Our Joint Venture Company
Multi-Chem holds a 50% interest in CMEC, our joint venture with Philippines-based PCB manufacturer Cambridge
Electronics Corporation ("CEC"). CEC is a member of the JG Summit Group. CMEC has an issued and paid-up
share capital of PHP64.7 million. Its directors are Messrs Lance Y. Gokongwei, Foo Suan Sai, Jose S. Palma, Jr,
Ricardo C. Palma, Han Juat Hoon, Ma. Victoria M.Reyes-Beltran, Ho Boon Chuan Wilson and Cesar C. Cruz.
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The Group has been adversely affected by the slowdown in the global economy as well as the electronics
industry in 2001 and has taken measures to reduce costs. The Directors are committed to maintaining a strong
balance sheet through prudent cash flow management during the difficult year to await the next upturn in
the electronics cycle.
There have been signs that such an upturn is forthcoming. The US economy has seen an increase in electronic
equipment orders and consecutive monthly increases in the purchasing managers index. While the pick-up in
electronics demand is expected to occur sometime during 2002, the quantum of the pick-up and exactly when
it will be felt by the Group will play a crucial role in determining our performance this year.
Among the expected effects of an upturn in the global electronics cycle is the need for higher production
capacity. Additionally, PCB manufacturers have increasingly outsourced their drilling requirements instead of
increasing their in-house mechanical drilling capacity to cut back on capital expenditure on equipment and this
trend is expected to continue. The production of the PCB is moving towards higher layer count and higher
hole density PCBs and this is expected to further increase the requirements for drilling.
The Group has generally scaled down its operations in Singapore. In February 2002, the Company entered
into a sale and purchase agreement to sell one of our two factories in Singapore. This is reflective of the trend
of investments pouring into the PRC. As PCB manufacturers continue to move operations into the PRC, the
Group, too, must follow suit or we risk losing our customers.
In recent years, the Chinese PCB industry has been developing at a rate of 15% each year and has become
one of the largest PCB-manufacturing countries in the world1. Notwithstanding the sluggish global electronics
industry in 2001, the PRC continues to attract foreign investments, including PCB manufacturers which are
either existing customers or potential customers of the Group. The Suzhou Industrial Park, where MCL SZ is
located, is also emerging as the chip-making hub of the PRC2.
MANUFACTURING SERVICES DIVISION
MCL SZ, a subsidiary of Multi-Chem was incorporated in October 2001 with an investment amount of US$5.0
million and a registered capital of US$2.5 million. Its main business is primarily to provide precision drilling
services for PCB companies located in the Greater Shanghai region.
The plant is currently operational with 32 CNC drilling machines. To be even closer to customers, the Group
is already looking at expanding to other locations in the Greater Shanghai region. The expansion involves multi-
sites, each fully equipped to be an independent precision drilling service provider. Currently, the Group is
evaluating the feasibility of a new factory in the Kunshan or Wuxi area.
DISTRIBUTION DIVISION
The Distribution Division has generally been the more stable performer of the Group. It is currently focused
on expanding the distribution of the Nan Ya dry film, for which Multi-Chem is the agent for the South-East Asia
region, as well as the laminates, pre-preg and mass lam of Taiwan Union Technology Corporation.
Various evaluations have been carried out and the products have generally passed the stringent quality
requirements imposed by customers. However, orders have been slow as our customers have not yet indicated
to us any increase in their orders. The situation should improve once orders pick up.
With signs pointing to a recovery this year, the Directors are cautiously optimistic that the operating performance
of the Group for 2002 will be better than 2001.
1 Printed Circuit News. Issue 26. Jan/Feb 2002 2 The Business Times, 12 March 2002
[ P R O S P E C T S & F U T U R E P L A N S ]
17
[ C A L E N D A R O F S I G N I F I C A N T E V E N T S ]
CORPORATE CALENDAR
• The Group was ranked joint 13th out of 268 companies in the Business
Times Corporate Transparency Index (with total score of 70) for companies
announcing results for the year ended 31 December 2000 (The Business
Times 9 April 2001).
• Multi-Chem's Investor Relations homepage at
http://www.multi-chem.com.sg was successfully launched.
• Multi-Chem was awarded ISO 9001 certification.
• In-house laboratory with capability to carry out cross-section
evaluation of hole-wall quality was set up.
• 2x6MB Hitachi drilling machines were acquired.
• CMEC commenced its precision drilling operations in the Philippines.
• MCL SZ was incorporated to provide precision drilling services to PCB
manufacturers in the Suzhou region.
• M-Precision attained ISO 9001 certification.
• To reach our Chinese reading investors, Multi-Chem joined Zaobao.com
to provide news and information about the Group.
• Multi-Chem entered into a sale and purchase agreement for the sale
of our factory at 13 Tuas Link 1.
Apr 2001
May 2001
Jun 2001
Sep 2001
Oct 2001
Dec 2001
Jan 2002
Feb 2002
18
Payment date of 2000 final dividend on ordinary shares 28 May 2001
Announcement of 2001 half-year results 14 Aug 2001
Payment date of 2001 interim dividend on ordinary shares 19 Sep 2001
End of financial year 31 Dec 2001
EGM for share buy-back mandate 15 Jan 2002
Announcement of 2001 full-year results 19 Feb 2002
Annual General Meeting 16 May 2002
Announcement of 2002 half-year results Aug 2002
Announcement of 2002 full-year results Feb 2003
End of financial year 31 Dec 2001
Announcement of 2001 full-year results 19 Feb 2002
Announcement of 2002 half-year results Aug 2002
FINANCIAL CALENDAR
[ G R O U P S T R U C T U R E ]
100%
HaweraPrecision Tec
Pte Ltd
HPTECGMBH
HaweraPrecision Tec
(Suzhou)Co.,Ltd
HaweraPrecision Tec (Thailand) Co.,Ltd
(Dormant)
35% 65%
100% 100% 100%
M-PrecisionTech
Sdn Bhd
HaweraPrecision Tec (HK) Ltd
(Dormant)
19
50%
CambridgeMulti-ChemElectronics
Corporation
100%
Mass-LamTech Pte Ltd(Dormant)
100%
Multi-Chem(Suzhou)Co., Ltd
100%
M.Tech ProductsPte Ltd
(Dormant)
[ F I N A N C I A L H I G H L I G H T S ]
GROUP BALANCE SHEET ($'000)
1997 1998 1999 2000 2001
Fixed assets 3,576 4,412 12,690 34,956 30,823
Investment in associated company 1,038 1,479 2,017 2,995 4,129
Investment in joint venture - - - - 1,203
Other investments - - - 495 461
Other receivables and intangibles - - - 618 348
Current assets 12,182 9,422 10,079 37,878 25,421
Current liabilities (4,018) (1,922) (7,056) (14,796) (9,575)
Net current assets 8,164 7,500 3,023 23,082 15,846
Long term liabilities - - - (13,994) (7,128)
Deferred taxation (273) (534) (862) (2,590) (2,630)
Other payables (166) - - - (769)
12,339 12,857 16,868 45,562 42,283
Share capital 1,338 1,338 1,338 16,500 16,500
Reserves 11,001 11,519 15,530 29,062 25,783
12,339 12,857 16,868 45,562 42,283
GROUP PROFIT & LOSS ($'000)
1997 1998 1999 2000 2001
Turnover 13,367 16,549 21,594 30,031 23,605
Earnings before interest, tax, 3,393 3,928 9,228 14,479 8,816 depreciation & amortisation
Depreciation & amortisation (728) (947) (1,699) (4,706) (7,337)
Interest expense (16) (9) (24) (153) (774)
Profit from operations 2,649 2,972 7,505 9,620 705
Share of profit from associated 1,384 1,144 1,478 1,817 1,585 company/joint venture
Profit before taxation 4,033 4,116 8,983 11,437 2,290
Taxation (1,100) (1,007) (1,102) (2,261) (448)
Profit after taxation 2,933 3,109 7,881 9,176 1,842
20
PER SHARE DATA (cents, unless otherwise stated)
1997 1998 1999 2000 2001
Net earnings (basic) 1.59 1.69 4.28 2.82 0.56
Net earnings (fully diluted) 1.59 1.69 4.28 2.60 0.55
Net dividend 0.79 3.31 0.70 1.37 0.30
Net dividend payout (times) 0.50 1.96 0.16 0.49 0.54
Net tangible assets 6.71 6.99 9.17 13.81 12.81
Note:Save as disclosed below, all per share data are computed based on 184,000,000 shares for each of 1997
to 1999, 330,000,000 shares for 2000 and 330,000,500 shares for 2001.Basic earnings per share and fully diluted earnings per share are computed based on 325,500,000 shares
and 353,000,000 shares respectively in 2000 and 330,000,322 shares and 335,176,755 shares respectivelyin 2001.
FINANCIAL RATIOS
1997 1998 1999 2000 2001
Current ratio (times) 3.03 4.90 1.43 2.56 2.65
Return on shareholders' funds (%) 23.77 24.18 46.72 20.14 4.35
Return on assets employed (%) 17.46 20.30 31.80 11.93 2.95
SEGMENTAL RESULTS (S$’000)
2001 2000
By Activity
Manufacturing Services 11,179 (1,578) 15,878 5,434
Distribution 12,426 2,283 14,153 4,186
Total 23,605 705 30,031 9,620
By Geographical Region
Singapore 17,962 536 23,175 7,136
ASEAN 5,643 169 6,856 2,484
Total 23,605 705 30,031 9,620
Turnover OperatingProfit
Turnover OperatingProfit
21
2001 TURNOVERBY ACTIVITY
Manufacturing Services - 47%
Distribution - 53%
2001 TURNOVER BYGEOGRAPHICAL REGION
ASEAN - 24%
Singapore - 76%
First Half Year
1H2000 1H2001 1H2000 1H2001 1H2000 1H2001
Sales 7,123 6,586 5,884 6,728 13,007 13,314
Operating profit 3,254 (607) 1,113 1,682 4,367 1,075
Profits equity accounted for 908 883
Profit before tax 5,275 1,958
Profit after tax 4,297 1,990
Second Half Year
2H2000 2H2001 2H2000 2H2001 2H2000 2H2001
Sales 8,755 4,593 8,269 5,698 17,024 10,291
Operating profit 2,180 (971) 3,073 601 5,253 (370)
Profits equity accounted for 909 702
Profit before tax 6,162 332
Profit after tax 4.879 (148)
DEBT FINANCING STRUCTURE AS AT 31 DECEMBER 2001
GroupDistributionManufacturingServices
GroupDistributionManufacturingServices
HALF-YEAR RESULTS OF THE GROUP ($’000)
In dollar terms ($’000)
Amount available for drawdown 25,997 30 1,000 27,027
Amount utilised for loans 15,184 - - 15,184
Amount utilised for banker's guarantees - 30 - 30
Balance unutilised 10,813 0 1,000 11,813
In percentage terms (%)
Amount available for drawdown 96.19 0.11 3.70 100.00
Amount utilised 99.80 0.20 0 100.00
Average effective cost of debt in 2001 5.09
Interest coverage ratio
Net profit before interest and tax ($'000) 3,064
Interest expenses ($'000) 774
Interest coverage ratio (times) 3.96
Debt servicing ratio
Operating cash surplus before interest & tax ($'000) 4,215
Interest expenses ($'000) 774
Debt servicing ratio 5.45
Gearing ratio
Total debt ($'000) 15,184
Total equity ($'000) 42,283
Gearing ratio (times) 0.36
FixedRate Loans
Banker’sGuarantees
Lettersof Credit
TotalFacilities
22
The Group recorded a turnover of $23.6 million in 2001, a 21.4% drop over the $30.0 million recorded
in 2000.
TURNOVER
Manufacturing Services Division
The decrease in Group turnover was mainly due to the decrease in turnover from the Manufacturing Services
Division. Division turnover fell by $4.7 million from $15.9 million to $11.2 million, a decrease of some 29.6%.
Comparing the first half of 2001 ("1H2001") to its second half ("2H2001"), turnover in this Division fell by
30.3% or $2.0 million from $6.6 million to $4.6 million.
The performance decline was a result of the overall slowdown in the global electronics industry due to excess
inventory and capacity from the boom year of 2000. The sluggish demand for electronics affected the demand
for PCBs. As PCB manufacturers cut back on outsourcing with their in-house capacity being adequate to meet
production requirements, this in turn affected our business. Turnover in this Division for 2H2001 showed a
more significant decrease compared to 1H2001 as the global recession continued, exacerbated by the events
of 11 September 2001 in the US.
Distribution Division
Turnover from the Distribution Division decreased by 12.2% or $1.8 million from $14.2 million to $12.4
million. The decrease was mainly due to the fall in turnover during the second half of 2001. Comparing 1H2001
to 2H2001, the Division’s turnover decreased by 15.3% or $1.0 million from $6.7 million to $5.7 million as
orders from customers in this Division decreased with the electronics slowdown.
Profit before tax ("PBT")
PBT of the Group decreased by 80.0% or $9.1 million from $11.4 million to $2.3 million in FY2001. While
the Group recorded a PBT of $2.0 million in 1H2001, it only managed to register a PBT of $332,000 in 2H2001
resulting from which, there was only a small increase in PBT between 1H2001 and the full year 2001.
The decrease in PBT was mainly due to the following factors:
(1) Periodic price reductions given to customers due to the overall weakness in the electronics market. The
intense competition for the smaller pie resulted in low margins.
(2) Higher depreciation expense due to more CNC drilling machines (an average of 56 in 2001 compared to
an average of 43 in 2000) and full year depreciation for 40 CNC drilling machines acquired in 2000.
Depreciation expenses on factory assets alone increased by 53.3% or $2.4 million from $4.4 million to $6.8
million during the year.
(3) Interest expenses amounted to $774,000 in 2001 compared to $153,000 in 2000. This was due to a full
year interest charge for the transferable loan facility in 2001 compared to only two months in 2000.
(4) Gain on disposal of 5% interest in associated company in 2000 amounting to $1.2 million, which did not
recur in 2001.
(5) Reduction in foreign exchange gains of 38.1% or $302,000 from $792,000 in 2000 to $490,000 in 2001.
Profit after tax ("PAT")
PAT of the Group dropped by 80.0% or about $7.4 million from $9.2 million to $1.8 million, largely in line
with the decrease in PBT. Provision for tax for 2001 mainly comprised the Company's share of taxes of its
associated company and the provision of deferred tax. No other provision has been made as the Company still
has available investment allowance incentives to cover its tax position.
[ F I N A N C I A L R E V I E W ]
23
[ V A L U E A D D E D S T A T E M E N T ]
VALUE ADDED STATEMENT ($'000)
1997 1998 1999 2000 2001
Turnover 13,367 16,549 21,594 30,031 23,605
Purchase of goods & services (8,552) (11,228) (10,789) (15,459) (13,462)
Value added from operations 4,815 5,321 10,805 14,572 10,143
Non production income 1,772 1,974 2,237 5,298 3,220
6,587 7,295 13,042 19,870 13,363
DISTRIBUTION
To Employees
Salary & other staff related costs 1,778 2,186 2,383 3,506 2,877
To Government
Income & other taxes 1,130 1,040 1,135 2,329 533
To Providers of Capital
Finance costs 43 38 49 161 897
Dividends 1,453 6,091 1,290 4,535 994
Retained in the Business
Depreciation 728 947 1,699 4,698 7,214
Retained earnings 1,455 (3,007) 6,486 4,641 848
6,587 7,295 13,042 19,870 13,363PRODUCTIVITY DATA
Value added per employee ($'000) 283 409 373 217 147
Value added per $ employment cost 2.71 2.43 4.53 4.16 3.53
Value added per $ net sales 0.36 0.32 0.50 0.49 0.43
Average number of employees 17 13 29 67 69
24
VALUE ADDED PER $ NET SALES
‘97
‘98
‘99
‘00
‘01
0.0.5 0.10 0.15 0.20 0.25 0.300 0.35 0.40 0.45 0.550.50
VALUE ADDED PER $ EMPLOYMENT COST
‘97
‘98
‘99
‘00
‘01
0.50 1.00 1.50 2.00 2.50 3.000 3.50 4.00 4.50 5.00
VALUE ADDED PER EMPLOYEE ($'000)
‘97
‘98
‘99
‘00
‘01
50 100 150 200 250 3000 350 400 450
[ I N F O R M A T I O N O N E M P L O Y E E S ]
BREAKDOWN BYJOB GROUP
BREAKDOWN BYEDUCATIONAL QUALIFICATION
BREAKDOWN BYYEARS OF SERVICE
Technical & others - 50%
Administrative - 21%
Managerial - 11%
Engineering - 9%
Sales - 9%
Less than 3 years - 78%
6 to 9+ years - 7%
3 to 5+ years - 12%
10 years or more - 3%
Secondary level & lower - 38%
Degree and above - 26%
Trade Certificate & equivalent - 2%
‘O’ & ‘A’ levels & equivalent - 20%
Diploma & equivalent - 14%
The Company believes that our employees are key resources and we do not fail to recognise and reward
dedicated staff. In terms of remuneration, such employees are not affected by the across-the-board pay freeze.
Promising employees are given the opportunity to work for a period in our overseas subsidiaries to further
enhance their experience.
The Manufacturing Services Division is in a business which is capital intensive and that further requires our
employees to have the necessary knowledge in operating the machinery and equipment. Selected employees
are sent for training conducted by machine manufacturers to learn about the operations, capability and
maintenance of the equipment. In the Distribution Division, selected employees are trained by our principals,
as well as attached to our customers' production lines in the region, for on-the-job training. The amount spent
on employees providing them with on-the-job training, in-house and external training amounted to approximately
$50,000 in 2001.
The Company also participates in the internship programmes of local polytechnics to give students a stint
with a local corporation before they step into the working world. In 2001, the Company provided 10 weeks
of training to five polytechnic students.
25
[ The Company was placed joint 13th (with a score of 70 points) out of 268 companies
in the complete listing of results of the Business Times Corporate Transparency Index
for our final results announcement for 2000. ]
[ I N V E S T O R R E L A T I O N S ]
The Company has made efforts to be as open as can be with shareholders and the investing community.
In May 2001, the Company's investor relations went on-line with our own website at www.multichem.com.sg.
Since then, we have also joined Zaobao.com to provide Chinese reading investors with news and
information about the Group. Information in Chinese about the Group can be found under
http://ir.zaobao.com/multichem.
Multi-Chem has always made efforts to announce its results early. In its short history of results
announcement, Multi-Chem has not taken more than two months after the period end to announce its
results. The Company has also organised press and analysts' briefings for each of its results announcement
to explain the results, clear doubts and to update on developments. We have made regular announcements
on the latest events to update the public.
The Company was placed joint 13th (with a score of 70 points) out of 268 companies in the complete
listing of results of the Business Times Corporate Transparency Index for our final results announcement
for 2000. The Company announced its full year results for 2001 on 19 February 2002 and was placed
4th (with a score of 70 points) in the Business Times Corporate Transparency Index out of 51 companies
whose results were announced for the period from 18 February 2002 to 6 March 2002.
While we would like to hold more regular meetings with investors, it is often difficult as we have yet
to attract any analyst coverage on a regular basis. This problem persists in many listed companies that
are not of substantial size. We are, however, not deterred and will work to differentiate ourselves from
the other listed companies in terms of information flow and investor relations.
To further improve the information flow to investors, the Company will commence quarterly reporting
this year. Its first quarterly reporting will take place in the fourth quarter of 2002 on the results of the
third quarter ending 30 September 2002.
Multi-Chem is committed to improving the information flow to our shareholders and the investing
community and will continue to make efforts to do so.
26
Corporate governance refers to the processes and structure by which the business and affairs
of the Company are directed and managed. The Board of Directors of the Company recognise
that sound corporate governance can contribute to good business practices and improved
corporate accountability and has therefore made efforts to adopt the measures and practices
set out in Best Practices Guide issued by the Singapore Exchange. As the Code of Corporate
Governance (“Code”) issued on 21 March 2001 will essentially expand the scope of and replace
the Best Practices Guide, the Company intends to continue to make efforts to comply with the
Code.
BOARD OF DIRECTORS
The Board of Directors (“Board”) of the Company consists of five members, of which two are
independent Directors. Mr Foo Suan Sai, Chief Executive Officer, is Chairman of the Board.
[ C O R P O R A T E G O V E R N A N C E R E P O R T ]
27
The role of the Chairman pertaining to Board proceedings includes:
• Scheduling of meetings that enable the Board to perform its duties responsibly while not
interfering with the flow of the Company’s operations;
• Preparing meeting agenda;
• Exercising control over quality, quantity and timeliness of the flow of information between
management and the Board; and
• Assisting in ensuring compliance with the Company’s guidelines on corporate governance.
The Board is responsible for the Company’s corporate governance. Members of the Board,
as Directors, shall, at all times, act honestly and use reasonable diligence and care in the
discharge of the duties of their office. They have to carry out their duties in the best interests
of the Company. Board members are required to submit themselves for re-election once every
three years.
The Board meets a minimum of two times annually and its significant responsibilities include:
• Business direction and corporate strategy;
• Corporate management;
• Internal controls;
• Regulatory compliance;
• Reporting to shareholders;
• Supervising the Company’s agents and employees in the discharge of their duties;
• Authorising major projects and significant financing matters;
• Review of internal and external audit reports; and
• Review of financial performance.
Board members are provided with adequate and timely information prior to Board meetings.
They also have separate and independent access to the Company Secretaries.
There is an Audit Committee and a Remuneration Committee set up by the Board, more
information of which is provided below.
AUDIT COMMITTEE
The Audit Committee (”AC”) comprises three members, including two independent Directors.
Mr Wong Meng Yeng, an independent Director, is Chairman of the AC.
The AC meets at least three times a year and, besides the members of the AC, such meetings
are also attended by external auditors and appropriate members of the executive management
by invitation.
The AC’s functions include assisting the Board in fulfilling its responsibilities in financial
reporting, developing policies that will enhance the controls and operating systems of the
Company, review of interested party transactions and serving as a channel of communication
between the Board and the external auditors on matters related to and arising out of external
audit.
As part of the AC’s responsibilities in enhancing the controls and operating systems of the
Company, internal auditors have been engaged to assist the AC. The internal audit function
has been outsourced to a public accounting firm and the internal auditors’ primary reporting
line is to the Chairman of the AC. It is the responsibility of the AC to ensure the adequacy of
the internal audit function.
28
The opinion of the AC has to be sought for transactions not in the ordinary course of business
if such transaction exceeds $2.0 million in value. The opinion of the AC would not be required
for day-to-day decisions and matters which are operational in nature, even though such single
transaction may exceed $2.0 million in value. The Directors may seek independent professional
advice on company matters upon approval of the AC.
The AC confirms that the Company has adequate internal controls to safeguard shareholders’
investments and the Company’s assets.
REMUNERATION COMMITTEE
The Remuneration Committee (“RC”) comprises three members, two of whom are independent
Directors. Mr Wong Meng Yeng, an independent Director, is Chairman of the RC. The RC was
set up on 22 February 2001.
The RC meets once a year and is responsible for reviewing the performance of the Chief
Executive Officer, the Chief Operating Officer and senior management, as well as reviewing
and approving executive remuneration. The RC has access to expert advice or external research
so as to make informed decisions on remuneration matters.
The aggregate remuneration for the three executive Directors and two independent Directors
amounted to $1,204,692 (2000: $1,880,825 ) and $40,000 (2000: $40,000 ) respectively in
2001.
29
The total remuneration of employees who are related to the substantial shareholders shall be subject to the
annual review and majority approval of the Audit Committee. For the financial year ended 31 December 2001,
the total remuneration paid to these employees amounted to $137,052 (2000: $146,785).
FY 2001
Directors$500,000 and above
Foo Suan Sai
Han Juat Hoon
$0 to $249,999
Toshiaki Suzuki
Executive Officers$0 to $249,999
Ho Boon Chuan Wilson
Ong Teck Heng Bernard
Pui Boon Tiong Eugene
BaseSalary
%
98
100
-
95
83
93
Variable Bonus
%
-
-
-
-
-
-
Benefits-in-kind
%
2
-
-
5
17
7
Fees
%
-
-
100
-
-
-
Total
%
100
100
100
100
100
100
30
OTHER INFORMATION ON DIRECTORS
Each Director attended the following meetings in 2001:
Name
Foo Suan Sai*
Han Juat Hoon
Toshiaki Suzuki#
Wong Meng Yeng*#
Chew Thiam Keng*#
NumberAttended
1
2
2
2
2
NumberAbsent
1
-
-
-
-
NumberAttended
1
3
2
3
3
NumberAbsent
2
-
1
-
-
NumberAttended
1
1
1
1
1
NumberAbsent
-
-
-
-
-
As at 31 December 2001, the Directors of the Company are as follows:
Name
Foo Suan Sai
Han Juat Hoon
Toshiaki Suzuki
Wong Meng Yeng
Chew Thiam Keng
Age
48
45
68
43
40
Position
Chairman
Executive Director
Executive Director
Independent Director
Independent Director
Date of InitialAppointment
30 Aug 1988
16 May 1987
5 Jan 2000
5 Jan 2000
5 Jan 2000
Date lastre-elected
-
23 Jun 2000
23 Jun 2000
2 May 2001
2 May 2001
* Member of AC # Member of RC
BOARD AC RC
The remuneration bands of the executive Directors and the three executive officers are set out below:
SECURITIES TRANSACTIONS
The Company has adopted the Best Practices Guide relating to dealing in securities. In particular, share trading
guidelines, which specify that officers should not deal in the Company’s securities
- when in possession of unpublished material price sensitive information;
- on short term considerations; and
- during the period commencing one month before the announcement of the Company’s annual or half year
results and ending on the date of the particular announcement,
have been disseminated to Directors and key employees (including employees with access to price sensitive
information in relation to the Company’s shares). In addition, the guidelines require key employees to disclose
in writing to the executive Directors on dealings in the Company’s shares.
INTERESTED PARTIES TRANSACTION
No interested parties transaction occurred in 2001.
31
Tat Hong Holdings
Limited
Name
Foo Suan Sai
Present directorshipsin other listedcompanies
Nil
Past directorshipsin other listed companiesover last 3 years
Nil
Other majorappointments
Managing Director, Hawera
Precision Tec Pte Ltd
Legal Representative,
Hawera Precision Tec
(Suzhou) Co., Ltd
Deputy Chairman,
Cambridge Multi-Chem
Electronics Corporation
Han Juat Hoon Nil Nil Director, Hawera Precision
Tec (Suzhou) Co., Ltd
Director, Cambridge
Multi-Chem Electronics
Corporation
Toshiaki Suzuki Nil Nil Nil
Wong Meng Yeng Novena Holdings Ltd Nil Nil
Chew Thiam Keng Ban Joo & Company
Limited
Flaris Technology
Corporation Limited
KS Tech Ltd
TSM Resources Ltd
Kian Ann Engineering
Limited
Nil
Foo Suan SaiGroup Chairman & Chief Executive Officer
Information on directorships in other listed companies and other major appointments held by the Directors isset out below:
Chairman & Chief Executive OfficerFoo Suan Sai
Chief Operating OfficerHan Juat Hoon
Executive DirectorToshiaki Suzuki
Finance, HR & AdministrationHo Boon Chuan WilsonLim San SanSiow Mee LinChua Kar Lin Catherine
Distribution DivisionOng Teck Heng BernardAndry Liong
Purchasing & LogisticsFoo Suan Ooi
Manufacturing Services DivisionPui Boon Tiong EugeneKoh Henry
OVERSEAS SUBSIDIARIES
Multi-Chem (Suzhou) Co., Ltd
No. 28 Su Tong Road, Suzhou Industrial Park
Jiangsu Province, PRC 215021
Tel : (86 512) 6252 9822 Fax : (86 512) 6252 9809
M-Precision Tech Sdn Bhd
PTD37441 Jalan Perindustrian 3,
Kawasan Perindustrian Senai 2,
81400 Senai, Johor, Malaysia
Tel : (60 7) 6598 8801 Fax : (60 7) 6598 8802
OVERSEAS JOINT VENTURE
Cambridge Multi-Chem Electronics Corporation
SEPZ, First Cavite Industrial Estate
BRGY, Langkaan, Dasmarinas
Cavite 4114, Philippines
Tel : (63 46) 402 0361 Fax : (63 46) 402 0362
ASSOCIATED COMPANY
Hawera Precision Tec Pte Ltd
11 Tuas Avenue 5 Singapore 639337
Tel : 6863 1318 Fax : 6863 1618
OVERSEAS ASSOCIATED COMPANY
Hawera Precision Tec (Suzhou) Co., Ltd
No. 28 Su Tong Road, Suzhou Industrial Park
Jiangsu Province, PRC 215021
Tel : (86 512) 6252 9822 Fax : (86 512) 6252 9809
[ C O R P O R A T E D I R E C T O R Y ]
32
Multi-Chem Limited 11 Tuas Avenue 5 Singapore 639337 Tel: (65) 6863 1318 Fax: (65) 6863 1618