Investor Relations - Corporate Information

Euro Holdings Berhad (EHB)

Euro Holdings Berhad (“EHB”) was listed on Bursa Malaysia Securities in January, 2005. Currently, the Company has eight subsidiaries, engaging mainly in the manufacturing, marketing and trading of office furniture. The Group is a “Total Office Solutions” provider which designs, manufactures, markets and trades its own brand (“EURO” or Euro “Chairs”) of chairs, system furniture, storages and accessories.

The Group supplies and takes on large-scale projects involving furnishing and refurbishment of office buildings in Malaysia and internationally. The Group has strengthened its growing worldwide presence through the exports of its products to South-east Asia, India, Japan, Australia, Europe, Middle East, Central and South America. And today, the Group has a strong network of dealers and agents globally that has ensured that Euro products are sold in more than 60 countries all over the world.

The Group now has three integrated manufacturing facilities with approximately 500,000 sq. ft., all situated in Rawang, Selangor. The facilities are fully equipped with advanced machinery and equipment that allows end-to-end manufacturing of office furniture, giving the Group control over virtually the entire manufacturing and assembly of its office furniture. Together with an in-house research and development team, the Group is able to chart the course of its line of furniture, from design inception to final assembly, and ensure that these live up to the quality and excellence which the EURO brand name is synonymous with.

In 2011, the Group has expanded its business into property development in Malaysia.

Chairman’s Statement

Extracted from Annual Report 2012

Economy and Industry Review

While economic conditions continued to challenge businesses, consumption and livelihood around the globe, 2012 demonstrated Euro’s resilience in weathering another tumultuous year.

The world growth momentum which picked up gradually in the first quarter of 2012, moderated during the subsequent quarters. By the second half of 2012, it had become clear that developed countries would need more time to fully recover and stoke the global economy engine. The continued weak growth in these developed countries further led to the decline in demands for manufactured goods from developing nations, notably China. This resulted in many developing nations channeling their focus homeward for revival.

This homeward policy proved crucial in the overall Malaysian economy as 2012 drew to a close. Malaysia Institute of Economic Research (MIER) reported how strong domestic demand in the forms of private and public investments helped to boost GDP to grow 5.6%, surpassing the forecasted 5%. The fourth quarter growth of 6.4% year-on-year was also the highest since the second quarter of 2010.

For the furniture industry, Malaysia’s export in 2012 was valued at RM8 billion, an increase of 4.3% compared to 2011 with nearly 200 international destinations for the end-products. Another significant development reflected was the fast-growing number of furniture suppliers in Southeast Asia. The development of furniture production in these countries is mainly export–driven, with around two-thirds of production being sold outside the country of origin.

It is therefore important for Euro to remain adaptable in reacting to changing market conditions by standardizing and improving our business processes, so that we are ever ready to face any challenges ahead and to match our abilities with emerging opportunities.

Financial Overview

For the full year ended 31 December 2012, revenue was recorded at RM103.2 million against FY2011’s RM107.1 million, a decrease of 3.6% on a year-to-year basis. Profit after tax however increased from 2011’s RM0.1 million to RM1.5 million. Earnings per share increased from FY2011’s 0.15 sen to 1.82 sen while net assets rose from 82.0 sen in FY2011 to 83.81 sen in FY2012.

Generally, product demand remained flat with low sales volume in the first quarter from both global and local markets. Improvements ensued though slowly, most noticeably in the second quarter. In 2012, export sales went from FY2011’s RM59.3 million to RM68.6 million. This is made possible through the securing of projects across the Asian region, coupled with considerable headway in expanding our steel product range into the European and African markets. There was also a collective increase in projects from India, Bangladesh and the Middle East.

Domestically, FY2012 recorded RM34.6 million in sales versus RM47.8 million in 2011. Corporations remained cautious in moving forward with mid to big-size projects, opted to wait and see. There was also a sense of looming uncertainty in anticipation of the Malaysian general election, which further affected expansion and renovation plans of business owners.

Awards and Accreditation

As always we are proud to be the recipient of the following honors, a testament of the Group’s successful brandbuilding strategy and unwavering commitment to corporate management:

Furniture Leadership Award (“FLA”) Malaysia and Asian Furniture Leadership Award (“AFLA”) 2011/2012 – Organized by APS Media Group, the publisher of Furniture and Furnishing International Export (a member of International Alliance of Furnishing Publications representing Southeast Asia) with the endorsement of the Malaysian Furniture International Council (“MPIC”). The Group won awards in FLA Malaysia 2011/2012 for Brand Excellence and Product Excellence. Asian Furniture Leadership Award 2011/12 for Brand Excellence – In recognition of commendable furniture companies in the ASEAN region. Participating countries include China, Japan and South Korea.

Euro continues its pledge to be eco-friendly and environmentally-conscious by renewing the Greenguard certification by the Greenguard Environmental Institute. Euro also made its annual appearance at the Malaysia International Furniture Fair (MIFF) 2012 earlier in the year, followed by international exhibitions in Dubai and Germany.

Outlook & Prospects

The Group’s primary attention in overseas market will remain on Asia’s developing countries with resilient domestic consumption and proactive government’s initiatives to accelerate investments, particularly in infrastructure and expansion projects. Euro will also explore new opportunities in Central America and the Carribean. As the Euro-zone economy heals through austerity programs and emergency loans, growth is expected to lag. While the United States and Japan look forward to modest growth, furniture demand will remain slow and cautious from these markets.

Locally, Euro is anticipating a brighter outlook with the expected roll-out of more projects, by both the government and the private sector in the second half of 2013. This is in line with the return of business confidence and consumer sentiments following the conclusion of the general election, and continued deployment of various Economic Transformation Programme projects.

However, it is increasingly important for the Group to cushion rising production expenses, specifically labour cost with the implementation of minimum wage in Malaysia in 2013. Though more competitors are outsourcing offshore as a cheaper option, Euro will stay true as a Malaysian manufacturer. Continued efforts will be made to further improve overall production efficiency and rationalisation of operation. Technologically, Euro is fortifying its imprint by fine-tuning its production efficacy, from automation to mechanization and simplification.

The changing landscape of office furniture calls for the increased emphasis on ergonomics, adaptability and eco-friendly products. The principal focal point of our R&D team now is to design workspace that addresses the organizational, human and facility needs of a broad, diversified client base.

Despite numerous economic downturns, Euro is confident it will continue to set itself apart. Our excellent practice and standards have allowed us to adjust and align with the times administratively, operationally and strategically. We will redefine and improve our products, continue to invest and nurture working relationships with the help of industrial advances to make Euro better and stronger.

Dividends

The Board of Directors does not recommend any payment of final dividend for the year ended 31 December 2012. This is to conserve cash to meet working capital requirements and expansion plans of the Group in 2013.

Appreciation

Euro is constantly reminded of the resolute effort from our Board members, management team and employees. Working together towards a common goal has sustained Euro through another challenging year and we cannot thank you enough.

To our business partners, bankers and various government agencies, thank you for your unremitting support. To our esteemed customers and stakeholders, your steadfast confidence in the Group’s vision fuels us to march forward courageously.

Thank you.

Dato’ Mohd Haniff Bin Abdul Aziz
Chairman, Non-independent and Non-Executive Director

Operations Review

Extracted from Annual Report 2012

Business Review

The Group recorded a satisfactory performance in the second half of 2012, prevailing over losses suffered in the first quarter of the year. Despite an overall 3.6% revenue decrease on a year-to-year basis, Euro continues to find the silver lining behind every challenge by moving forward with constructive planning instead of emotive choices; from operation efficacy to emerging markets, new products and diversifying revenue.

Domestic

Here at home, sales went down 27% from FY2011’s RM47.8 million to RM34.6 million for FY2012. Generally, there were less activities in the furniture market with corporations cutting down on expansion and renovation plans, amidst the uncertain political environment due to the looming general election. Government initiatives focused on public infrastructure projects which had no immediate correlation to the demand on furniture products. However, the poor market condition was compensated by Euro’s success in making major inroads into the local steel furniture market via its steel storage line’s maiden project and penetration into the local steel storage dealers’ network.

Export

In spite of less than favorable market conditions in some of our trading partners’ region, specifically in Vietnam, China and Indonesia, the Group registered a 15.7% increase in export sales for FY2012, compared to 2011 while the export-domestic sales ratio was recorded at 67:33 for 2012 versus 55:45 in 2011. The Group was able to secure some key projects in Asia and Middle East. These high-volume projects enabled the Group to maximize its production capacity usage, thus resulting in higher efficiency to ensure profitable returns. The Group also made considerable headway in broadening its international clientele base for the steel-storage range, in line with ongoing marketing expansion plans. By the end of 2012, the Group managed to garner better penetration into the European and African markets.
Product Launches

In 2012, Euro stayed on-track and rolled out new range of workstations with metal-storage products to create a compact and cost-effective way to enhance functionality. This particular line was streamlined to provide storage with work-surface support that can assume multi-tiered, space-divide and flexibility with stackable and adjustable add-on features. Euro also introduced “Theory”, its latest range of office chairs in 2012.
Operations Expansion

Following the completion of 2011’s plant comprising of the third plant’s Phase II, the Group also completed the installation of a new epoxy line to cater to growing demand for steel-storage products. This new addition aims to relieve production congestion, increase production flow while boosting quality yields.

The Group, via its Euroland & Development Sdn Bhd continues to work with relevant agencies and authoritative bodies to progress its debut set in Mukim Cheras, Kuala Lumpur. This property subsidiary will be able to contribute to the Group’s overall revenue in time to come.

Looking Forward

With the Malaysian economy expected to grow at 4.5% to 5% in 2013, Euro is expecting higher sales volume, especially in the second half of the year with the return of business confidence following the conclusion of the Malaysian general election. Domestic demand is also projected to maintain its strong momentum in-line with various initiatives under the Economic Transformation Program.

In terms of upcoming strategies and measures, Euro is exploring opportunities with reputable global players to form Original Equipment Manufacturer (OEM) and Original Design Manufacturer (ODM) collaboration. This exchange will not only expand our revenue base but more importantly, it will advance our operational and production processes as we learn from the best the industry has to offer.

It is also vital to increase our brand visibility to ensure Euro’s marketability does not rest solely on affordability. The Research & Development team will continue to analyse and respond to the market’s needs to fine-tune our existing products, while creating new ones.

The road ahead to recovery may be long and arduous still but Euro is ready, steady and poised to write another memorable chapter in the coming year. We ask that your support and faith remain equally dedicated and strong. There is still much to be done, but together, anything is possible.

Thank you.

Lew Fatt Sin
Group Managing Director