Investors should read the following discussion and analysis of our financial condition and results of operations in conjunction with the pro forma consolidated financial information and the related notes thereon for the past four (4) Financial Year Ended (FYE) 31 December 2009 to 2012 as set out in Section 11.4 of our Prospectus dated 13 May 2013.

This discussion and analysis contains data derived from our audited financial statements as well as forward-looking statements that involve risks and uncertainties. The results may differ significantly from those projected in the forward-looking statements. Factors that may cause future results to differ significantly from those included in the forward-looking statements include, but are not limited to, those discussed below and elsewhere in our Prospectus, particularly the risk factors as set out in Section 4 of our Prospectus.



OVERVIEW

Our Group is principally involved in the following activities:

Our Principal Business Activities

For the past four (4) financial years under review, our revenue was derived from the following business segments:

Our revenue grew from RM355.42 million for FYE 31 December 2009 to RM437.20 million for FYE 31 December 2012. This represented an Average Annual Growth Rate (AAGR) of 7.15%. Our revenue is mainly derived from our two (2) major business segments, namely trading and processing of steel products, which collectively contributed 99.92%, 99.82%, 99.86% and 99.89% of our revenue for FYE 31 December 2009 to 2012 respectively. Between FYE 31 December 2009 and 2012, our trading segment recorded a negative AAGR of 7.78% while our processing segment registered an AAGR of 22.89%. Others only constituted 0.08%, 0.18%, 0.14% and 0.11% of our revenue during the past four (4) financial years under review respectively.

The main factor that contributed to the increase in our revenue from FYE 31 December 2009 to 2011 was growth in demand for our carbon steel products for both our trading and processing operations namely carbon steel coils. Revenue from carbon steel grew from RM303.36 million (approximately 112,174 tonnes) in FYE 31 December 2009 to RM451.30 million (approximately 161,770 tonnes) in FYE 31 December 2011. For FYE 31 December 2012, our revenue decreased by 19.48% from RM542.94 million in FYE 31 December 2011 to RM437.20 million in FYE 31 December 2012. This was the result of our Group’s strategy to scale down trading of low margin products, mainly flat carbon steel products.



FYE 31 December 2010 compared to FYE 31 December 2009

For FYE 31 December 2010, our revenue grew by 33.62% from RM355.42 million in FYE 31 December 2009 to RM474.92 million in FYE 31 December 2010. This was mainly due to increase in demand for our processing of steel products, particularly flat steel products.

Revenue from our processing of steel products overall grew by 56.54% or RM83.48 million. This was mainly contributed by processing of flat steel products which grew by 64.64% or RM80.81 million. Tonnage sales from our processing of steel products grew by 55.42% or approximately 26,914 tonnes, while processing of flat steel products grew by 58.58% or approximately 26,241 tonnes.

Our increase in revenue and tonnage for our processing of steel products was mainly supported by the following:

Our Profit After Tax (PAT) consequently increased by 20.83% from RM17.04 million in FYE 31 December 2009 to RM20.59 million in FYE 31 December 2010, which was in line with the increase in our revenue.



FYE 31 December 2011 compared to FYE 31 December 2010

For FYE 31 December 2011, our revenue grew by 14.32% from RM474.92 million in FYE 31 December 2010 to RM542.94 million in FYE 31 December 2011. This was mainly due to an increase in demand for our trading of flat carbon steel products particularly carbon steel coils from RM36.57 million in FYE 31 December 2010 to RM71.93 million in FYE 31 December 2011, and processing of other flat steel products, from RM19.71 million in FYE 31 December 2010 to RM42.55 million in FYE 31 December 2011. Tonnage sales of carbon steel coils increased by 101.93% from approximately 14,542 tonnes in FYE 31 December 2010 to approximately 29,364 tonnes in FYE 31 December 2011. Tonnage sales of processing of other flat steel products increased by 152.72% from approximately 1,307 tonnes in FYE 31 December 2010 to approximately 3,303 tonnes in FYE 31 December 2011.

Our PAT consequently increased by 22.20% or RM4.57 million, from RM20.59 million in FYE 31 December 2010 to RM25.16 million in FYE 31 December 2011, which was in line with the increase in our revenue.



FYE 31 December 2012 compared to FYE 31 December 2011

For FYE 31 December 2012, our revenue decreased by 19.48% from RM542.94 million in FYE 31 December 2011 to RM437.20 million in FYE 31 December 2012. The drop in our overall revenue was mainly due to a significant drop in our trading activities, where it declined from RM276.67 million (approximately 93,978 tonnes) for the FYE 31 December 2011 to RM162.70 million (approximately 52,052 tonnes) for the FYE December 2012. This was the result of our Group’s strategy to scale down trading activities on low margin products, mainly flat carbon steel products.

Despite the drop in our group’s overall revenue, our processing of steel products continued to grow from RM265.52 million (approximately 75,448 tonnes) for the FYE 31 December 2011 to RM274.03 million (approximately 77,759 tonnes) for the FYE 31 December 2012.

Our PAT consequently decreased by 4.17% from RM25.16 million in FYE 31 December 2011 to RM24.11 million in FYE 31 December 2012, which was in line with the decrease in our revenue.