The Power of Tyre Contract Manufacturing
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An inside focus on Stamford Tyres' Operations contents Blueprint for the Future STAMFORD TYRES CORPORATION LIMITED Annual Report 2005 How will Stamford Tyres resume its growth? Evolution is the answer. The Group must tap on its strengths for Regulars opportunities as they unfold. Stamford Tyres conducted its operations over FY2005 with a long-term 01 Letter to Shareholders – Right on Track strategy in mind. The objective is to better serve its business partners 03 Five Year Financial Highlights and customers. The result is to integrate and augment its operations and services to meet customers' needs. 04 Board of Directors Leveraging on its strength, the business activities of Stamford Tyres has 06 Key Executives evolved into two core segments – integrated concept with value-added services and manufacturing activities. 20 Stamford in the News This is the story of Stamford Tyres' evolution for the future – to build a strong and robust enterprise that adds value to their customers Features and business partners. 10 People Make the Difference 11 Rewarding Shareholders 11 At a Glance 11 Review 12 Our Products – Major Brands, Proprietary Brands, and Major Subsidiaries Cover Story – Behind the Blueprint 14 Integrated Concept with Value-Added Services 18 Manufacturing Activities Also in this issue G Corporate Governance G Financial Statements 2005 10 08 Corporate Information Board of Directors Remuneration Committee Share Registrar Chairman Chua Kim Yeow Chairman Chua Kim Yeow Lim Associates (Pte) Ltd Executive Directors Wee Kok Wah Members Sam Chong Keen 10 Collyer Quay #19-08 Ocean Building (President) Goh Chee Wee Singapore 049315 Dawn Wee Wai Ying (Executive Vice President) Nominating Committee Principal Bankers Non-executive Director Kwok Weng Fai Chairman Sam Chong Keen United Overseas Bank Limited Independent Directors Tay Puan Siong Members Tay Puan Siong Malayan Banking Berhad Sam Chong Keen Michael David Nesbitt Overseas-Chinese Banking Corporation Limited Goh Chee Wee DBS Bank Limited Auditors BNP Paribas Michael David Nesbitt Ernst & Young Audit Committee 10 Collyer Quay #21-01 Ocean Building Registered Office Chairman Tay Puan Siong Singapore 049315 19 Lok Yang Way Jurong Members Chua Kim Yeow Audit Partner: Yen Heng Fook Singapore 628635 Sam Chong Keen (Since the financial year ended 30 April 2001) Tel : (65) 6268 3111 Company Secretary Fax : (65) 6264 0148 / 6264 4708 Chuang Sheue Ling Email : [email protected] Website : www.stamfordtyres.com LETTER TO SHAREHOLDERS Right on Track Stamford Tyres gathers momentum for growth Dear Shareholders, When I wrote to you last year, I said that we intended to embark on several initiatives to lay the groundwork for our next phase of growth. This is an important undertaking to position the Group for the future. During the past year, we made several significant commitments towards this goal. I am happy to report to you on what we did and how we anticipate these undertakings will shape the fortunes of the Group. More focused and responsive business model Over the past few years, my I am pleased to management team and I have observed and report that the evaluated the significance commitment and of the rising affluence and resolve of my rapid economic growth in In order to respond quickly to market needs, we realigned our colleagues and staff South East Asia and China. distribution structure from a central warehousing system in Singapore have spurred us to In these territories, we noted to direct shipment to our overseas operations. This initiative has the rise in demand for truck enhanced our position to be closer to our dealer-retail network. accomplish our goals and passenger car tyres. and to deliver results There was also a growing We continue to value-add to our existing major international tyre as targeted for the demand for Off-The-Road brands – Falken, Dunlop, Continental and Toyo – by focusing on financial year under (OTR) tyres rising from the wider and deeper market penetration through our integrated review. boom in the mining industry. concept in the territories that we operate. We expect to benefit All these developments have from the consistent organic growth from this business activity. directed us to sharpen our – Mr Wee Kok Wah business focus to develop a more responsive business Manufacturing activities model that will meet the needs of our customers with flexibility and efficiency in the years to come. Rapid increases in industrial and commercial activities contribute to higher economic growth. Higher economic growth translates to The result is a business and operating model that focuses on two rising affluence and higher disposable income. Recognising these core segments of our business activities – an integrated concept with developments in the territories that we operate, it is evident that value-added services and manufacturing activities. we should leverage on the strengths in our international distribution network to pursue opportunities in manufacturing that will allow the Group to develop our own proprietary brands – Sumo Firenza, Integrated concept with value-added services Sumo, Firenza and Stamford Sport Wheels (SSW). This will broaden our product range for global distribution. The integrated concept with value-added services segment comprises our international distribution network, retail chain operations and Our manufacturing business segment comprises the manufacturing fleet and mining tyre management services. Though separate and of our proprietary brand, SSW light alloy wheels and tyre outsource with their unique inherent strengths, these business units can support contract manufacturing of our proprietary brands. each other to provide an integrated whole that will offer our customers the level of value-added services that they demand. continues on pg 02... STAMFORD TYRES CORPORATION LIMITED Annual Report 2005 01 Our SSW wheel plant in Thailand commenced operation in the Outlook for FY2006 first half of FY2005. It broke-even after six months of operations. Based on the success of the first production line, we added a The management team and I are confident that the new business second line in May 2005. With the additional capacity, our annual model and the initiatives undertaken in FY2005, will put Stamford output is expected to range between 350,000 and 400,000 pieces. Tyres in a stronger position and propel us to achieve our next level of growth. My team and I recognised that in order to drive growth in our distribution business, we have to increase our tyre supply. Due to The seeds have been planted and FY2006 will be the year of the rapid economic growth in China and South East Asia countries, harvest. We expect organic growth from our existing major brands tyre manufacturers have ramped up their production capacity. and incremental sales from our proprietary brands through the However, demand exceeds supply. This prompted us to explore the manufacturing activities. Collectively, all these activities will contribute tyre outsource contract manufacturing that would enable us to create to a double-digit growth in our FY2006 revenue. our own proprietary tyre brands to meet demands from customers and to better manage the supply situation in the future. Also, with The Group expects the results for FY2006 to be better than FY2005. less geographical restrictions, we can widen the market coverage for our proprietary products . We have since commenced production Rewarding shareholders for Sumo Truck Bus Radial (TBR) tyres in In appreciation of May 2005, and your loyalty stepped up ongoing and continued arrangements for the confidence in supply of Sumo Truck Stamford Tyres, the Bus Bias (TBB) tyres Board is pleased to and Passenger Car propose a final Radial (PCR) tyres dividend of 1.25 from manufacturers Singapore cents per in China. ordinary share and a special dividend of 0.75 Singapore Duty to our cents per ordinary shareholders share for FY2005. We expect organic growth from our existing major The total dividend Major undertakings brands and incremental sales from our proprietary brands of two cents per of these magnitudes share translates into through the manufacturing activities. – Mr Wee Kok Wah require meticulous a gross dividend planning, vigilance rate of 20 percent. in its execution and short-term sacrifices especially when our profit trend was on the rise till FY2004. Appreciation Unforeseen developments and the lack of vigilance can invite undesirable outcome. Mindful of the consequences, I felt duty These achievements in FY2005 would not have been possible bound to inform you of the outlook as forecasted by management without the guidance of the Board, support from management for FY2005. and staff, who have worked tirelessly to help to sow the seeds for the next phase of growth. Their sacrifices are often personal. Accordingly, in the 2004 annual report I had guided that, “we I want to record our appreciation to them and their families. expect profit for FY2005 to be lower than FY2004 due to the start- up costs for our alloy wheel plant, as well as additional investment The confidence of our suppliers, bankers and business associates in infrastructure to improve our overseas distribution network. in us is also crucial. My team and I could not ask for better partners. However, earnings are expected to remain above the healthy level that was recorded in FY2003.” Finally, as we look forward to a better FY2006, I want to thank you, our shareholders, for standing by us during this year of consolidation. I am pleased to report that the