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Group Performance

The Group registered a 10.4% growth in revenue from RM 469.3 million in 2006 to RM 518.2 million in 2007. Group profit before tax (PBT) was RM 16.0 million, a decrease of 40% from the RM 26.7 million recorded in 2006.Turnover growth is mainly attributable to increase export sales and price increase due to the increased in raw material and other input prices.The sharp drop of PBT was attributable to a culmination of factors including the higher input cost, increased freight cost, high interest cost, unfavourable foreign exchange movements which stifled margin and the losses suffered by one of the Group’s subsidiary company in China.

Dividend

The Board of Directors has recommended a final tax-exempt dividend of 3 sen per ordinary share amounting to approximately RM 3.2 million or 26.9% of profit after tax and minority interest for the year ended 31 December 2007 (2006: 3 sen, RM 3.2 million, 15.2%).

Prospects

The global GDP growth is projected to moderate amidst deteriorating environment with the continued unfolding of the financial crisis in the US.Liquidity strains, impact on declining asset prices, higher inflation on consumer spending and the write down of asset value by US financial institutions will continue to create volatility and uncertainties in the US.This has had a contagion effect on the European economy.World growth is projected to grow at 3.7% in 2008 (2007:4.7%) with moderating growth across major economies namely the US at 1.0% (2007:2.2%),European Union at 1.5% (2007: 2.6%) and Japan at 1.0% (2007: 2.0%).The slower growth in the larger economies is likely to lead to declining global trade.

While the major economies are expected to moderate, growth is expected to remain strong in Asia and other emerging economies notably the BRIC countries.The BNM has charted the Malaysian GDP growth to be sustainable at between 5-6% in 2008 underpinned by sustained domestic demand, rising incomes, strong labour market conditions and increased access to financing which will support consumption and investment spending. The Malaysian Plastic Manufacturers Association (MPMA) has projected that growth in the Malaysian plastic industry to be minimal and to reflect that of the growth of the manufacturing sector. It further reiterated that rising raw material prices remain a major concern in 2008 and that raw material prices should ease in late 2008 and 2009 due to the coming on stream of major gas based petro-chemical plants in the Middle East.

With the expected slow downs and volatilities in the major economies, the Group expects a challenging year ahead. The prolonged high raw material prices is expected to sustain into 2008 with the continued high prices of naphta and natural gas. The average prices of polyethylene, the Group’s main raw material has inched up further during the first 5 months of 2008 compared to the close at end 2007. As at May 2007, the Ringgit has appreciated by more than 3.5% against the USD from its closed at end 2007. The Government is under tremendous pressure to hike the domestic prices of gasoline with the record high price of crude oil that has breached the USD 130 per barrel level.

Amidst concern over these developments, the general environment is still conducive for the Group’s business.The sustained growth in the usage of disposable plastic packaging in particular garbage bags and stretch films despite the higher prices and the initiatives by buyers in developed countries to search for lower cost countries to produce their requirements provide an opportunity that augurs well for the growth of the group especially with its foray into Vietnam.The projected sustainable double digit growth in China fits well into the Group’s expansion into China’s domestic market.The Group will continue to build on the strong momentum of its continued export growth and expansion of its operations in China while consolidating its position as one of the largest producer of stretch film in Asia Pacific. It is also positioning itself to be one of the largest producers of stretch film in the world in the next five years.The Group is optimistic that it will be able to achieve satisfactory financial performance for 2008.

Acknowledgement

On behalf of the Board of Directors, I would like to extend our gratitude to the management and staff for their contribution to the Group during the year.We would also like to thank our shareholders, business partners, advisers, customers, friends and the authorities for their continued trust, confidence, support and guidance.

I would like to take a moment to express our deepest sadness on the passing of my brother the late Dato’ Ang Toon Cheng on 3 January 2008. His enormous contribution to the development of the Group since its humble inception and to society in general is indescribable by words. An honest and respectable man. May his soul rest in peace.

Thank you

Ang Toon Piah Chairman

Sources: Bank Negara Malaysia,Annual Report & The Malaysian Plastic Manufacturers Association

THONG GUAN INDUSTRIES BERHAD

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