Dear Shareholders,
Wider Business And Investment Outlook
Economic indicators continue to point to a gradual stabilization in the
global economy by end-2009 and leading into 2010. However the pace
of recovery is relatively anaemic and pick-up in economic activities has
been weak. Analysts think that this is inevitable as the world emerges
from the Financial Crisis. Generally, trading volumes across all major
markets have slowed significantly since the Global Financial Crisis in
2008/2009.
In 2010, global growth has been mainly driven by Asia as the region is not
burdened by massive fiscal structuring problems that hamper developed
economies. Unlike USA and Europe, Asian growth outside of Japan is
largely relying on self-sustained demand and domestic consumption to
fuel growth. Discounting any short term pickup in economic momentum,
this has led to more bullish expectations amongst equities investors
especially in such markets like China, India, Indonesia and the Oceania
region.
Within this broader framework of events, Lereno Bio-Chem Ltd ("LBC")
Group has undergone internal and external changes in anticipation of
the changes in the business landscape ahead.
The Group's Business And Financial Results
As reported last year, the Management of LBC has been reshaping the
Group and its business activities since 2007/2008. In financial year ("FY")
2009, LBC has smoothly transitioned to the Catalist Regime with its
appointed Continuing Sponsor, Collins Stewart Pte. Limited. In so doing,
LBC has fulfilled the requirements for good corporate governance as laid
down by the Singapore Exchange Securities Trading Limited ("SGX").
The audited net tangible assets of the Group amounted to S$11.473
million as at 31 March 2010. The net loss of the Group has reduced
from previous year's loss of S$9.961 million to S$5.782 million. This was
mainly due to reduction in expenses from S$7.034 million in the previous
year to S$4.105 million as a result of the cost control measures taken
by the Group and the reduced share of loss from associated company,
Lereno Sdn Bhd from S$2.593 million in the previous year to S$1.888
million this year.
BioFuel Processing
Despite LBC taking a more open and diversified approach to bring in
value-added businesses for the Company and shareholders, the future
direction remains consistent with focus on resources and trading. Hence
LBC disposed of all its 2.3 million shares in Bintai Kinden Corporation
Berhad during the financial year.
The Plantation Industries and Commodities Ministry of Malaysia said
in their media release that mandatory use for biofuels for all vehicles
will commence in stages beginning in mid-2011. This presents a major
opportunity for quality biofuel companies like Lereno Sdn Bhd ("LSB"), in
which LBC is a substantial shareholder. According to the media statement
released, the policy "will benefit the country as biofuel is environmentfriendly
and it will reduce our (Malaysia's) dependence on petroleum
diesel". LBC will also be able to make its contribution towards greener,
eco-friendly cities.
LBC had decided to concentrate its limited resources to focus on the
existing LSB biodiesel production plant in Lumut, Malaysia and not to
proceed with its own planned biofuel plant project in Jurong Island,
Singapore. Currently the Lumut plant is in full production and has secured
valuable production contracts with key energy groups in Malaysia and
the region.
Being one of the few winterized biodiesel manufacturers in Malaysia
with a strong reputation for quality standards, LSB will be in a very good
position to take advantage of the coming changes in legislation. Through
LSB, LBC will be able to reach out further to market LSB across a wider
region where the margins and potential profits are higher.
The Search for Alternative Business
While palm oil as feedstock remains the cornerstone for LSB and LBC's business, the search for alternative business and profit has
not been neglected.
During the financial year, Jarak Nursery Sdn Bhd ("JN") was acquired by the Group and has become its wholly owned subsidiary.
JN is in the business of Plant Science and Seeds Supply, and has extensive research, cultivation skills and trading opportunities
for jatropha seedlings to supply planters and producers of crude jatropha oil. Jatropha oil is gaining a reputation as a viable and
economical alternative to palm oil.
Beginning with its existing nursery with a production capacity of 5 million jatropha seedlings per month at Selangor Darul Ehsan, JN
aims to be the market leader in jatropha plant science in Malaysia. In addition, JN has entered into a confirmed jatropha seedlings
supply contract with a third party with a contract value of RM48 million over 3 years. This is another important step in LBC's
business expansion strategy for the longer term.
New Business Development
While renewable energy remains the Company's key focus, new business opportunities exist in the market and LBC is poised and
ready to take advantage of such circumstances.
LBC has entered into a conditional sale and purchase agreement and a supplemental deed (collectively called "S&P Agreement")
with PT. Eastbourne Minerals Resources, Teranova Group Limited and Astam Mining Pte Ltd ("Astam") to acquire a 5% stake in
Astam through the issuance of S$10 million worth of LBC warrants whereby Astam intends to enter into an exclusive Master Supply
Contract for the supply of bauxite to Astam's customers. Bauxite is a rock composed mainly of aluminum oxide and aluminum
hydroxide minerals and it is the primary source of aluminum. After the completion of the S&P Agreement, Astam will also provide
S$2.5 million cash to LBC. This will be set off against the S$10 million investment amount. If Astam is able to realize its full potential
it will help to generate cash and profit for the Group over the next few years.
Many analysts have agreed that commodity prices are set to surge with increased economic activities and such an acquisition will
strengthen the group's performance and will represent another step in diversifying LBC's business.
The Rights cum Warrants Issue
To meet the Group's working capital requirements the Company carried out a rights cum warrants issue which was successfully
completed in May 2010. I am glad to inform shareholders that the Rights Issue was oversubscribed and net proceeds of approximately
S$4.3 million were raised. As at 30 June 2010, approximately S$1.6 million from the rights issue proceeds has been used for
repayment to bankers and creditors, as previously indicated in our announcements.
Conclusion
For the past few years, my message to all our shareholders and staff has been the same – a good company requires time to build
and the Board, management, staff and shareholders must be able to rally together and to pull through the difficulties together. In
the face of the financial crisis, the Board, management and staff have remained resolved to succeed and stuck together, despite
painful bitter-pill measures such as salary adjustments and down-sizing. Our shareholders too are able to understand what the
Company is trying to do and stand by the Company, despite the poor showings in the wider equity market, sharing the same longer
term vision.
Fundamentally, the level of corporate governance and management leadership is strong. LBC must be given the chance (and time)
to bring all these potential projects to fruition in the next 1-2 years.
I wish to express appreciation to Mr Jiro Suzuki and Mr Kong Mun Kwong, who have retired, for their contributions as Directors
of the Company. The LBC Group has benefited from their insights and I would like to thank them for their service. I would also
like to express gratitude to the continuing Directors, shareholders, supporters, management and staff of the Company for their
continued support. The story of LBC is still unfolding. And sincerely, the best is yet to be. The projects in the pipeline are lining up
and the future potential is very encouraging. Hence I urge everyone to hold onto their faith. The story from here onwards will be
even more colourful and rewarding.
Tan Sri Dato' Kamaruzzaman Bin Shariff
Chairman
Lereno Bio-Chem Ltd
Click here for 2009 statement
Click here for 2008 statement
Click here for 2007 statement
Click here for 2006 statement
