Dear Shareholders,
The financial year ended
31 March 2009 has been a
defining period for the Group.
In view of the changes in the
economic environment, we
have held steady and cautious
but are actively re-crafting
our forward business strategy
to take advantage of the
opportunities we see ahead.
Global Investment and Business Outlook
The collapse in global financial business activity has been extremely
broad-based and significant. Economies like Europe, USA, Japan and
other parts of Asia are suffering a contraction in economic activity which
analysts expect to continue in the current year before there can be any
signs of recovery.
Given the extent of the structural and institutional financial problems and
uncertainties, investors' confidence has weakened and thus they will
require a greater degree of certainty before committing. Since negative
news is generally expected by investors, the main concern is not about
earnings weakness but the valuation of stocks. Currently most equity
stocks, even the blue-chip ones, have taken a beating in the market.
Analysts are generally concerned that the recovery process will be long
and slow. However, this is where the Group intends to take advantage of
the numerous opportunities ahead.
The Group's Business and Results
Management of the Lereno Bio-Chem Ltd Group ("LBC") has been reshaping
the Group and its business activities since 2007. In financial
year ("FY") 2008, LBC was able to raise approximately $6.75 million
by the placement of 35 million shares and to convert S$11.70 million
worth of debts into equity through the issue of 68.70 million new shares.
The Capital Reduction Exercise, approved at the extraordinary general
meeting held on 28 July 2008, to cancel the accumulated past losses
of the Company as at 31 March 2008 to the extent of $105 million has
been successfully completed. In September 2008 we were able to attract
Veilmillion Ltd (a Japan-linked company) to take up a private placement
of 20 million shares at a substantial premium above the market price of
LBC shares. The $1 million raised thereby has been used for working
capital purposes and for the pursuit of potential business expansion.
The audited net tangible assets of the Group amounted to $11.25 million
as at 31 March 2009. The net loss of the Group in FY2009 has increased
from the previous year's loss of $8.84 million to $9.13 million. This was
due to the Group's share of the increased losses from our associated
company, Lereno Sdn Bhd ("LSB"), which have arisen because while
its operating expenses had been increased to support full production,
escalating feedstock and commodity prices delayed the commencement
of full scale production with a consequent delay in maximising revenue.
The volume of production for FY2009 as a whole was less than the
planned full capacity. However, for the months of April and May 2009,
the plant has operated at near full production capacity based on tolling
orders and LSB is currently negotiating for trade-line facilities to support
the securing of long-term contracts for full production based on its
own orders which will, in consequence, generate higher revenue. The
Group has moved with caution, not knowing when the economy will
turn positive, and engaged in measured development activities. It has
taken the opportunity during this time to re-examine its operations and
production and streamlined its management, manpower and business
activities at its headquarters and the LSB production site.
Going forward, the Group has taken measures to reduce
its overheads substantially for the time being and will be
able to adapt quickly when the economy picks up or our
operations can be geared up.
Biofuel Processing
The direction of the future is renewable energy. Hence, the
priority and direction of LBC will still be biofuel, and the
related "green" businesses.
As I have said, LBC has streamlined its business strategy
and management team. It has decided that the best way
forward, and to steer LBC through the economic downturn,
is to leverage on existing assets and grow our core
competencies. Management has decided to concentrate
LBC's limited resources to focus on the existing LSB
production plant in Lumut, Malaysia and not to proceed
with its planned biofuel project in Jurong Island, Singapore.
We have already announced that our subsidiary had, on
16 April 2009, terminated the Building Agreement with
Jurong Town Corporation for its land licence on Jurong
Island because of difficulties in raising sufficient long term
funds for the project under the current economic climate
and global financial crisis. However, the Group will still
actively explore viable ways for it to expand its biodiesel/
oleochemicals production capacity to take advantage
of the eventual upturn in the biofuel and oleochemicals
industry.
LSB is one of the very few winterized biodiesel manufacturers
in Malaysia that has started production and established
its reputation for being a quality manufacturer. The key
attraction and strength of LSB is its special winterized
biodiesel technology which has enabled it to differentiate
itself from the competition and for its products to earn the
approval of major multinational companies and to penetrate
into higher-margin markets like Europe and USA.
Through LSB, LBC will be able to actively compete and
secure contracts with major distributors across world
markets.
Alternative Feedstock
As part of the "green" revolution, LBC has been very active
in seeking alternative non-edible feedstocks to complement
its existing palm oil intake. Jatropha, for example, is being
evaluated as an alternative feedstock for our biofuel
business in addition to palm oil.
With the USA taking the lead, the "green" revolution will take
on greater importance and motivate greater momentum
worldwide. We believe that it is necessary to seek such alternative feedstock supplies for its biofuel business and
trading which will not compete with edible oils. Companies
who are able to display vision and courage will be able to
take a leading competitive position in the future. LBC is
one such visionary group.
Transition to Catalist Regime
I am pleased to confirm that the Company has appointed
Collins Stewart Pte. Limited as its Continuing Sponsor
and successfully transitioned to the Catalist Sponsor - supervised regime on 7 May 2009. There are no nonsponsor
fees paid to the Sponsor since its appointment.
Conclusion
In my FY 2008 message to all our shareholders, I said that
a successful company has to be prepared to be nimble
footed in order to respond to all environmental changes.
And good companies do require time to build, consolidate
and to institutionalize good management practices, ideas
and people. LBC is evolving rapidly and positioning itself for
the future. The Group has shown courage and steadiness
in the midst of wider economic turmoil.
We are grateful to our shareholders for their understanding
of this very important point. They have shown faith and
have looked beyond short-term temporary gains and have
instead focused their viewpoint towards the future – a future
whereby LBC will play a leading and dominant role in the
biofuel business, innovating, expanding and contributing
actively towards the "green" revolution.
Let me take this opportunity to sincerely thank everyone
who started this journey with us, and for continuing this
same colorful journey together. I would also like to take
the opportunity to express, on behalf of the Company, our
appreciation to Mr Kong Mun Kwong who has stepped
down as Deputy CEO and Executive Director of LBC to
become a Non-Executive Director due to his personal work
commitments. The Group has greatly benefited from his
stewardship and guidance. I would also like to thank all
directors and staff for their contributions and efforts during
the past eventful year.
LBC's future is still evolving. Let us keep the faith and move
confidently forward together!
Tan Sri Dato' Kamaruzzaman Bin Shariff
Chairman
Lereno Bio-Chem Ltd
Click here for 2008 statement
Click here for 2007 statement
Click here for 2006 statement
