At company level, the profit before tax for the year under review was RM12.7 million (2004: RM 34.0 million).The 62.6% decline in profit was due mainly to the lower dividends received.

Because of the abovementioned acquisition and other investment commitments, LSPSB paid a much lower dividend of RM2.0 million for the year (2004: RM22.8 million). To reflect the size of its current operations, the paid-up capital of the company was increased from RM14.8 million to RM82.9 million by way of two bonus issues.

Manufacturing

Over the years, your Group has placed strategic emphasis on technology development and innovation. The modernisation of production facilities has given it the flexibility and ability to response to the ever-changing needs of the customers.

LSEO’s state-of-the-art manufacturing plant in Telok Panglima Garang is capable of producing soaps of the highest quality in various shapes, sizes and packaging design. A fully automated Margarine processing plant, newly installed in LSEO’s Pasir Gudang factory, offers a wide range of tailor-made fats for industrial and institutional end-users. Both facilities will continue to add value to LSEO manufacturing business.

Marketing

In 2005 rising costs of goods and operating costs due to petroleum price surge and increasing competition were principal challenges faced by your Group. However, with long term planning and judicious brand and channel management programmes in place, LSEO was able to improve on both overall sales volume and profit margins.

Brand building was intensified with the revamping and line extensions of Knife, Naturel margarine and Fruitale soap with a more contemporary design to satisfy evolving consumers’ needs. Our anti-bacterial soap Antabax was launched in April 2004 targeting healthy lifestyle segment.

These younger brands will complement key LAM SOON brands such as Knife, Buruh, May and Daisy which continue to enjoy strong consumer preference in their respective segments. Knife maintained its Superbrand Gold Award from Reader’s Digest Asia for the 6th consecutive year in 2005 and was awarded the Reader’s Digest Trusted Brand Gold Award in 2006, along with Buruh.

Management experience with attractive packaging and presentation of our consumer product portfolio enabled LSEO to win the “Most Innovative Booth Design Award” at Malaysian International Food & Beverage (MIFB 2005) exhibition, held in Kuala Lumpur in July 2005.

The rapid growth of major retail chains in Malaysia reflects the economic development of the country. It is your Company’s objective to build mutually beneficial business relationships with such retailers, whether foreign or local chains. Having consolidated its key accounts management programme, LSEO over the past year expanded its category captaincy of cooking oil, oyster sauce, bath care and detergent to local chains. With better category focus, merchandising and display we are confident of achieving growth in all major categories in 2006 and beyond.

As part of its long term plan for the Group’s business, the Company is renovating its newly acquired industrial building in Senai, Johor into a state-of-the-art Office cum Distribution Centre incorporating many innovative features. The centre will boost the marketing and distribution capabilities of the Group.

SOUTHERN LION SDN. BHD. (SLB)
Sales at SLSB, your Company’s joint venture with Lion Corporation, Japan, continue to grow at a healthy rate. However, higher operating cost and continuous investment in brand building resulted in a lower profit before tax compared to the preceding year. A number of its products, namely Shokubutsu shower foam, Bio-Zip detergent powder, Top detergent have become familiar names in the Malaysian household.

In order to realize such objectives, investment in developing our human resources, stringent costs control, improved productivity, efficient customers response especially sensitivity to consumer demands and managing the rising petroleum/energy costs are very critical.

Once again, we would also like to thank all our valued customers, shareholders, bankers, business associates and Government authorities for their valuable support.