PROSPECTS
We are an established independent lubricant manufacturer and trader, supporting customers in the automotive, industrial and marine sectors from over 30 countries, primarily in the Asia-Pacific region. Accordingly, our Directors believe that our ability to secure new projects depends on the growth trends and developments in such sectors, particularly in the Asia-Pacific region.
Global growth is projected at 2.4% in 2016, as advanced economies are projected to expand at a slower rate this year.(1) Growth in developing Asia is projected at 5.7% in 2016 and 2017, while GDP growth across Southeast Asia is projected at 4.5% in 2016.(2)
The global lubricant market was 36.36 million tons in 2014 and is projected to grow to 43.87 million tons by 2022, at an estimated compound annual growth rate of 2.4%. High demand from automotive, industrial machinery and construction are expected to drive industry growth over the forecast period.(3) World demand for lubricants is expected to rise 2.0% yearly through 2019, and the fastest gains are expected in the Asia-Pacific region, where a greater number of motor vehicles in use and continued industralisation in large countries such as China and India will support rising demand for lubricants.(4)
TREND INFORMATION AND ORDER BOOK
Based on the revenue and operations of our Group as at the Latest Practicable Date and barring unforeseen circumstances, our Directors have observed the following trends for FY2016:
(a) We expect sales volume in the manufacturing business segment to increase moderately in line with the expected growth in the global lubricant market, while sales volume in the trading business segment to decrease due mainly to an expected decrease in orders from the Greater China region as a result of expected increase in competition.
(b) We expect the average unit selling price of our products to be less than the average unit selling price in FY2015, notwithstanding the recent increases in base oil prices in the last two (2) months prior to the Latest Practicable Date.
(c) We expect our cost of sales and our operating expenses to remain relatively stable for FY2016 and we also expect our advertising, promotion and marketing costs to increase in FY2016 as we expect the market to be more competitive.
(d) As a result of the above, we expect our overall gross profit margin to decrease marginally.
A portion of our listing expenses to be incurred in connection with the Placement will be treated as a charge in our financial statements as well as on-going compliance costs as a listed company will affect our financial results and financial position for FY2016. Please refer to the section entitled “Use of Proceeds from the Placement and Expenses Incurred” of this Offer Document for further information.
For the period from 1 January 2016 to the Latest Practicable Date, we have completed US$35.4 million of sales orders. While we do not maintain an order book, our confirmed sales orders as at the Latest Practicable Date was US$7.6 million, which is expected to be completed and recognised in FY2016.
In view of the aforementioned, our Directors are of the view that our revenue and profit for FY2016 may not be at the level of that in FY2015. Save as disclosed above and in the sections entitled “Risk Factors”, “Management’s Discussion and Analysis of Results of Operations and Financial Position” and “Prospects, Business Strategies and Future Plans” of this Offer Document, and barring any unforeseen circumstances, our Directors believe that there are no other known recent trends in production, sales and inventory, and in the costs and selling prices of our products and services, or other known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our Group’s revenue, profitability, liquidity, or capital resources, or that would cause financial information disclosed in this Offer Document to be not necessarily indicative of our Group’s future operating results or financial condition. Please also refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements” of this Offer Document for further information.
