notes to the financial statements - Investor Relations

CWT Limited
OPERATIONS
REVIEW
“Amidst the challenging economic climate, 2011 was a defining
year for the CWT Group as we continue to build capabilities
around our core to address market volatility and pursue our
strategic growth path”
Group Revenue for the year under review rose
245% to hit a record S$2.58 billion with our
commodity supply chain management business
arm making up approximately 70% of total
revenue. The Group also saw sustained and
improved performance across its other divisions.
On an operating basis, net profit (excluding nonrecurring
items) increased by 81% to S$51.6
million and operating earnings per share by the
same percentage to 8.7 Singapore cents as
compared to the same period in the preceding
year.
Our sustained ability to consistently deliver
good performance whilst investing in growth has
translated into shareholder gains over the years.
CWT’s Total Shareholder Returns (TSR) over the
past five years was 206%*, which was well above
the benchmark Straits Times Index’s (STI) TSR of
-11%* in the corresponding period.
As at 31 December 2011, shareholder equity
expanded to a record S$509 million. Our balance
sheet strength gives us the financial muscle
and leverage to secure financing and expand
business operations. We remain prudent in cost
management and continue to periodically review
our risk management policies to mitigate business
risk and safeguard shareholder interests.
COMMODITY SUPPLY CHAIN MANAGEMENT
Amidst the challenging economic climate, 2011
was a defining year for the CWT Group as we
continue to build capabilities around our core to
address market volatility and pursue our strategic
growth path. One of the major developments in
2011 was our deliberate entry into commodity
marketing and supply chain management which
has widened our playing field and further extended
our competitive advantage in the commodities
market.
In July 2011 the Group acquired MRI Trading AG
(MRI), an established Swiss-based commodities
marketer which actively markets physical nonferrous
metal concentrates and bulk minerals in
resource rich and target demand countries. The
combination of MRI and CWT is aimed at creating
a platform for growth and increased earnings
potential through complementary geographical
networks and significant synergies between CWT’s
core logistics competencies and MRI’s marketing
and trading expertise as well as the resilient
trading flows to be generated. CWT has also set
* Source: Bloomberg
up an entity in Singapore to handle our coal supply
chain management business.
As part of our Group strategy to become an
integrated commodity service provider, CWT
formed Straits Financial Group, a wholly-owned
subsidiary, to offer futures and derivatives
trade, forex, bullion and over-the-counter (OTC)
brokerage services as a complementary extension
to our commodities business. Straits Financial
currently has offices in Singapore, Shanghai,
Jakarta and Chicago, where our US subsidiary
obtained Chicago Mercantile Exchange (CME) and
Chicago Board of Trade (CBOT) full clearing status
and became a licensed US Futures Commission
Merchant (FCM) in March 2011. Early this year
it added the New York Mercantile Exchange
(NYMEX) clearing membership to expand its
product offerings and services. Moving forward,
we plan to expand our financial services division
by establishing international offices, primarily
throughout Asia and growing our client base.
LOGISTICS
Commodity Logistics
We remain focused in growing our existing
commodity logistics business which forms the
backbone of our extended presence in the
commodities market. Last year we continued to
expand our geographical networks and broadened
our capabilities through strategic investment tieups
as well as organically. We started operating
in Chicago, New Orleans and Baltimore and
were first to deliver LME steel billet into US
storage facilities early last year. We further
expanded to Latin America to tap into the huge
market potential by entering into a joint venture
with a leading logistics provider in the region to
carry out commodity logistics operations across
Latin America with a focus on Brazil, Argentina,
Uruguay, Chile, Peru and Mexico.
Another important part of our game plan is to
establish operational capabilities in Southern Africa
to facilitate trade flows between Africa and China,
India, the Middle East and Europe. We have
completed the acquisition of CWT ASI in Africa and
commenced operations in Malawi, Mozambique,
South Africa, Zambia and Zimbabwe. In March
2011, we restructured all our European and African
operations to come under CWT Europe B.V. to
better align the interests of all parties concerned in
the Group’s existing commodity logistics business