Results for the financial year ended 30 June 2015 (FY2015)
Q1. How do you see the semiconductor industry evolving and how does Micro-Mechanics ensure its semiconductor tooling business can keep up with these changes?
As the semiconductor industry becomes increasingly driven by consumer applications, there has been an acceleration in the trends towards miniaturization and densification. As a result we see our customers demanding more stringent requirements in terms of higher precision, smaller feature sizes and shorter delivery lead time.
At Micro-Mechanics, we are continually looking forward to ensure that we are ready for new industry requirements and to keep up with the fast-changing requirements of our customers. For example, we set up a Research & Development department about four years ago that focuses on developing specialised materials and processes to manufacture our tooling products. Through the use of more automation in our operations, we have also been able to achieve greater consistency in the quality of our products, while improving our efficiency to lower cost and shorten cycle time.
Back to topQ2. How will the depreciation of the Malaysian ringgit and Chinese yuan affect the Group?
Malaysia and China are our two largest geographical markets, with each accounting for 21% and 26% of Group revenue respectively in FY2015. As the Group’s reporting currency is the Singapore dollar (SGD), our revenue in FY2015 would have been higher if not for the depreciation of the Malaysian ringgit and Chinese yuan against the SGD.
However, we do not see foresee any major impact unless the Malaysian ringgit and Chinese yuan falls substantially against the SGD. This is because the invoices and costs of our Malaysia and China operations are mostly denominated in local currencies.
Q3. What were the main reasons for the Group’s higher gross and net profit margins in FY2015?
The Group’s gross profit margin expanded to 55.0% in FY2015, from 50.7% in FY2014. This is attributable mainly to our semiconductor tooling business which benefited from higher GP margin of 62.6% as a result of our continuous efforts to improve cost, productivity and cycle time of our manufacturing operations.
The improvement in the Group’s net profit margin to 23.0% in FY2015, from 17.6% previously, was due to higher gross profit margin coupled with our tight control of overhead expenses.
Q4. Why did the gross profit margin of the CMA division decline in FY2015?
The gross profit margin of our CMA division declined to 14.2% from 23.2% in FY2014 due mainly to an increase of about S$0.4 million for non-cash depreciation expenses following the investment in a second 24/7 Machining Line at our CMA factory in the USA.
Q5. How does the Group intend to bring the CMA division into a profitable position?
During FY2015, we completed one of the last phases of our plan to build a 24/7 Machining facility at our CMA factory in the USA. Having completed much of the most difficult and challenging engineering work, our team in the USA is now in a good position to place greater focus on developing innovative and cost-effective processes for new parts, growing CMA revenue and meeting the needs of our customers.
Q6. How will a slowdown in China’s economy affect the Group?
While China’s economic growth is expected to moderate, the country remains as a large and important market for the semiconductor industry due to sustained demand for consumer electronic devices. Over the past two years, the Group has steadily broadened our customer base and expanded our sales to gain a larger share of this key market for semiconductor tools. We will continue to leverage on our stronger position in this market to seek new sales opportunities.
Q7. The Group will be paying dividends totalling 5 cents for FY2015, which is higher than the 3 cents that it paid for the last five financial years. Does this signal that the Group has plans to pay annual dividends of 5 cents in the future?
The final dividend of 2.0 cents per share and special dividend of 1.0 cent per share in respect of FY2015 is subject to the approval of shareholders at our Annual General Meeting on 28 October 2015. If approved, our total dividend of 5.0 cents for FY2015 will comprise interim and final dividends of 3.0 cents per share as well as special dividends of 2.0 cents per share.
Since listing in 2003, the Group has paid consistent and regular dividends every year despite the ups and downs of the business cycle. In line with good governance practices and in response to feedback from our shareholders, the Group announced on 2 September 2015 that we have adopted a dividend policy of paying annual dividends of not less than 40% of the consolidated net profit as stated in the audited report, subject to the Group’s retained earnings, financial position, capital expenditure requirements, future expansion, investment plans, and other relevant factors. We believe this new dividend policy is in the best interests of our shareholders and other stakeholders.