Dear Shareholders

On behalf of the Board of Directors and the management of WZ STEEL GROUP, I am pleased to present the Annual Report and Audited Financial Statements of the Group and the Company for the financial year ended 30th April 2011.

Financial Performance
The Group posted revenues of RM73 million in the financial year under review, a slight decrease of 2.2% compared to the preceding year.  Despite recording approximately the same sales volume for the two comparative periods, the Group’s net profit after tax saw a drop from RM2.2 million in the preceding year, to RM1.2 million in the financial year under review. The drop in the Group’s profit after tax is mainly attributed to the inherently low margins coupled with higher cost of sales despite continuous improvement in production efficiency. The decline in the Group’s revenue can also be attributed to intense competition, softening demand and heightened cost inflation.

Operational Review

Manufacturing Division
For the financial year under review, the Group’s Manufacturing Division recorded revenues of RM39.7 million, 6.6% lower than the previous year turnover of RM42.5 million. The revenue contraction was mainly due to the sluggish environment in the first half of the financial year 2011. The high average cost of existing inventory and slow recovery in the office automation industry both have resulted in weak market demand. Nevertheless, the Manufacturing Division managed to achieve the same amount of net profit of RM0.6 million as in the preceding year. This was achieved due to the Group’s effort in improving the productivity yields to bring product cost lower.

The export division recorded a slightly lower revenue of RM8.3 million as compared to RM8.4 million in the previous financial year. The lack of growth in this division was mainly due to lower than expected demand from the Chinese market.

Trading Division
The Group’s Trading Division recorded a marginally higher revenue of RM33.6 million against revenue of RM32.5 million in the preceding year. The increase in the revenue was mainly due to the success of new product launches in the previous year. However, the Trading Division’s net profit after tax saw a drop from RM1.6 million in the preceding year to RM0.6 million in the financial year under review. The drop was attributed to higher operational costs and lower margins.

Development / Prospects
The ensuing year is expected to be highly competitive and challenging despite the recent improvement in the domestic economy. The global economic situation remains uncertain in light of the financial crisis in Europe, political upheavals in the Middle East and the effects of the natural disasters in Japan. The Group is however cautiously optimistic that the business situation may improve in the coming quarters, driven by improving business conditions and new export markets.

The Group will strive to raise sales volume and bolster operating margins through more aggressive marketing in both domestic and foreign markets and to improve operational efficiency to keep the product cost lower and more competitive.

Dividend
In view of the Group’s overall performance in FY2011 and the need to accommodate the Group’s cash flow plan, the Board of Directors has decided not to recommend a dividend for this financial year.

Appreciation
On behalf of the Board of Directors, I would like to express my sincere gratitude and appreciation to the management and staff for their dedication, loyalty and commitment throughout the year.

I would also like to express my appreciation to all our loyal shareholders, customers, suppliers, financiers, advisors and business associates for their continuing support and unwavering confidence in us.

Last but not least, I wish to thank my fellow Board members for their invaluable insight and wise counsel.

Dato’ Amin Rafie Bin Othman
Group Chairman