letter to shareholders

Dear Shareholders,

Overview of Group's Performance and Strategy Ahead

2008 had been a difficult year where the economic crisis engulfed the world at an unprecedented pace and left many struggling to cope with the challenges brought upon by the turmoil. The aftermath saw a number of companies facing serious problems and in severe cases, imminent closure as well. We have felt the repercussions increasingly in the later half of 2008 where sales orders decreased and profit margins dipped.

Geographically, sales to our major markets in China, Europe and Australia decreased in 2008 as compared to 2007. The declines are not unexpected and have arisen mainly due to cautious spending attitudes among our customers. Notwithstanding, we saw encouraging results in Southeast Asia, Africa and South America as sales to these regions have grow. We believe that these markets have further potential for growth and will strive to increase our presence in these markets.

From the business sector perspective, sales from the Garden & Lawn segment continue to exceed sales from the Agriculture & Forestry segment, a trend which first became evident in 2007. On absolute terms, sales derived from both the Agriculture & Forestry segment as well as the Garden & Lawn segment registered lower figures compared to 2007. This indicates that the decline in sales ranges from all segments of products and spans across a number of geographical regions.

In the face of decreasing sales, margins have also come under pressure. An appreciating RMB affected our USD-denominated export sales while the worsening global economic climate also restricted our flexibility in terms of adjusting the selling prices of our products. In light of the lower sales and pressures on margins, profitability was adversely affected. 

Strategy Ahead

We expect the tough economic conditions to persist for some time. However, we will strive to overcome these challenges and maintain our competitiveness during this difficult period. While cost containment ranks high among our list of priority, we believe that cost savings should not be achieved at the expense of product quality. In this regard, we will continue to innovate and refine our products to meet the current trends, technology and needs of our customers while bearing in mind the importance of reining in costs. At the same time, we will further cultivate those markets where growth opportunities exist while reinforcing our presence in the existing markets.

The PRC central government continues to demonstrate their determination to improve the livelihood of China's rural population. Mechanisation of farming has been identified as a key strategy to achieve this. As we have our roots in this sector, we are well-placed to capitalise on this opportunity. However, the challenge ahead is great as China has a huge rural population with a low income base. We believe that a large scale shift towards mechanisation in farming will require a period of time and over the short term; demand will continue to fluctuate between high to low.

Acknowledgements

We would like to thank our fellow directors, our managers, and staff for their hard work and dedication and also our business associates and shareholders for their support.