Chairman's MessageLiu San San
Executive Chairman
PERFORMANCE IN 2008
For the year ended 31 December 2008 (“FY2008”), Shanghai Turbo turned around and strengthened its foundation for sustainable growth. Innovative, high performance solutions that exceed customer expectations have helped to boost turnover by 124% to RMB125 million from RMB55.8 million for the year ended 31 December 2007 (“FY2007”). In particular, strong performance seen in the last quarter of 2008 led to an increase in turnover by 164% to RMB31.1 million over that was recorded in the corresponding period in FY2007 of RMB11.8 million. Correspondingly, gross profit for FY2008 increased by 134% to RMB24.0 million, from RMB10.3 million in FY2007. To achieve the top-line growth, we have tried to exploit our existing markets, increase of our output and acquired strategic capabilities for the achievement of the
growth acceleration in FY2008.
Three key factors contribute to our turnaround year. First is that we are competing in market segments that we have created speciality niches and that we have focused on for years. Second, our capabilities are focused on a limited set of markets where we are committed to performing to our best ability in the jobs undertaken and expanding every customer relationship we have. And finally, we have a strategic advantage afforded by our size relative to others, combining focus, agility and unique capabilities that enable us to improve our market share in the Chinese market.
MARKET PERSPECTIVE
According to the International Energy Agency*, China will invest a total of nearly USD2 trillion in electricity generation, transmission, and distribution over the next 30 years to meet rapidly growing electricity demand. Half of that investment will be in power generation, while the other half will go to transmission and distribution. Currently, thermal energy comprises most (77.82%) of China’s generating capacity, while hydropower provides 20.67% and nuclear power less than 1.6% of total capacity. With the limited supply of fossil fuels for power generation, the Chinese government is encouraging alternative forms of power supply, such as hydropower, wind power and others.
The year 2009 will be challenging as the global economy continues to deteriorate and the financial crisis deepens. Coordinated efforts by governments in the US, the UK
and China and many others to increase fiscal spending to address the slide have seen little progress to date. A planned RMB4 trillion public spending programme by the Chinese government particularly in infrastructural developments, if successful, may improve overall prospects and restore confidence in the market. The Chinese government, faced with several competing priorities, will need to carefully evaluate and allocate the quantum of fiscal spending in selected key infrastructural installations. New investments, if any, in the energy market are indeterminable. As such, it remains uncertain how our business would be impacted.
Outlook and Strategy
Due to rapid development in power generation facilities in the past five years, China has become the world’s second-largest country in power capacity and consumption. The burgeoning market in power generation has offered us immerse opportunities to grow our business further and we have capitalised on this positive trend to deliver a reasonably positive performance in FY2008 notwithstanding the generally depressed market conditions.
The onset of the global economic crisis has eroded confidence and the impact of decreasing exports from China will likely to translate to fall in demand for power for commercial and industrial needs. Sustained investment in power generation projects may be adversely affected.
These emerging challenges will make it more imperative for the Group to remain vigilant and to build on our unique capabilities. By maintaining momentum in our development of both short and long-term initiatives, we can strengthen our ability to deal with the challenges in 2009.
Equally as important, we enter 2009 with a stronger balance sheet. We will maintain an even stricter discipline in operational and financial spending and exercise greater diligence to achieve our goals. We will continue to preserve liquidity and reduce our overall cost structure to maintain our financial flexibility in the future.
