Year 2021 was a tough year for the Group and industry, with the pandemic inducing more Covid-19 pandemic related challenges for our Group such as supply chain disruption, weaker business growth and loading volatilities from our customers. Despite the yearlong border shutdown and restrictions, our team responded with solid operational excellence to qualify new customers, new businesses and new projects.

Our senior management team led by the strong leadership and outstanding business acumen of Ms Heng Charng Yee (COO) went through extreme test and challenges in ensuring our total operational commitment and excellence for our key business units.

The operational team overcame all the challenges like human resource shortages due to restriction in foreign workers’ hiring and material supply chain disruptions that had impacted our operational productivity and profitability. 

Border-closure and overseas-travels restriction did not hinder or stop us from engaging many new projects. Our business development and new product introduction (“NPI”) teams had done an outstanding job in positioning us to secure four (4) to five (5) potential new projects that will create significant diversification and growth opportunities in the next two to three years. 

The goal to achieve a fully automated or “lights off” factory for some of the key product lines within the next two years remains intact with continued investments and partner selections being the progress made in year 2021. Milestones in automating many manual processes and analyzing production line data have also been achieved to optimize our pilot line, with plans to use augmented reality to assist operators in identifying issues and improving line performance. There would be a continued focus on automation to reduce manual labour and bigger use of analytics to identify line improvements, thus reducing dependence on direct workers and improving line efficiency and productivity. The first phase of our pilot line was successfully implemented and went live in Quarter 4, 2021. We are happy and excited with the results and productivity gain to date, with the second phase expected to go live in Quarter 2, 2022. 

Notwithstanding the challenges faced during the year, our subsidiaries managed to deliver a respectable set of financial performance for the year. GMSB, our sensor business subsidiary continued to deliver 100% delivery-commitment to our customer’s product and service demands. The team had also successfully qualified 2 new projects that went into mass production in June’21.

As for our Group’s business in GSB-KL, due to severe price competition and volume erosion caused by technology replacement, our Japanese customer decided to End-of-Life (“EOL”) all the matured products that were manufactured in GSB-KL. With the tight cost management implemented, we managed to improve GSB-KL’s financial position to avoid causing any major erosion to our Group performance in spite of having to cater to employee severance packages during the year. 

ISO Tech led by our Vice President of Business and Operation, Ms GL Lim, did an outstanding job in managing and balancing all the controls and customer requirements in spite of the same Covid-19 pandemic related restrictions and constraints. Through improved loadings from certain key customers coupled with tight operations cost controls, ISO Tech managed to achieve a double-digit growth in its financial performance versus year 2020.

On the ESG front, with the commitment of the Board and our entire senior management, the Group successfully developed and started to implement a comprehensive strategy and plan that would steer us towards a carbon neutral future. To this end, we have seen an increased contribution from our energy saving initiatives like more efficient compressor system and improved contribution from renewable energy from rooftop solar system initiatives. We have also factored in “green efforts” in our new building expansion where we will be implementing multi facet activities like environmentally friendly roofing, glass panels, chillers and condenser water pumps that are expected to achieve energy avoidance of close to 300,000 kwH per year once implemented. The new building would also come with a rain water harvesting system that is targeted to collect, rainwater for general purposes once implemented. Our commitment to address some of the climate change issue would be through all our various other efforts like 3R, energy reduction, waste management, emissions controls that can be found in more detail in the Sustainability Statement. On the adoption of corporate liability provision under Section 17A of MACC Act 2018, the Group continues to uphold its anti-corruption and bribery stand seriously with refresher courses conducted via self-learning to all level of employees and where employees are required to complete and score more than 90% for theory test paper that can be submitted electronically.

For the year, the Group posted a respectable set of financial results with revenue of RM206 million and a net profit of RM52.9 million, which represents a drop of 9% and increase of 4% respectively over year 2020. In terms of liquidity, the operations continue to generate healthy cash flows and closed the year with cash and cash equivalents of RM195.1 million which is higher than year 2020 of RM163.7 million. As a result of this healthy cash position, we are expected to internally fund our Capex requirements for year 2022 which is currently projected at around RM40 to 50 million to support all the new projects in the pipeline, implementation of industry 4.0 project and facilitation of the new space with class 100 and class 1K cleanrooms.

Globetronics Sdn Bhd / Globetronics Manufacturing Sdn Bhd

Our Group’s Sensors Division went through extreme test and challenges in ensuring our customer demand and changes are 100% supported without fail. This accomplishment was achieved through the outstanding operational focus and execution, despite the challenges with tighter Covid-19 pandemic SOPs, material supply chain disruption and increased operational costs in instituting stringent Covid-19 containment requirements. 

Our team further prevailed and excelled throughout year 2021 to achieve 100% performance-scores for all the critical lines and ensured Zero customer-lines-down situation throughout the whole period. We also successfully launched 2 new products that are extremely crucial to our end customer 5G’s smartphone introduction in September 2021.

Globetronics Sdn Bhd, Kuala Lumpur (“GSB-KL”) 

Year 2021 was tough and challenging for GSB-KL. Due to severe price competition and volume erosion caused by technology replacement, our Japanese customer decided to EOL all their products manufactured by GSB-KL. Coupled with MCO and Covid-19 pandemic restriction, we were expected to suffer losses or at best achieve breakeven due to the shrinking volume-loadings and also voluntary separation scheme (“VSS”) expenses to be incurred for our employees.

As a result of the outstanding effort in cost control and VSS management, there was no major financial impact to the Group as a result of the EOL. 

ISO Technology Sdn Bhd (“ISO”)

ISO faced a challenging but in hindsight, a good recovery year by doing an outstanding job in managing and balancing all the controls and customer requirements in spite of facing workers’ shortages. While all of its product lines were affected by MCO, ISO saw a strong recovery in their various key production loadings. 

The scaling down of GSB-KL was timely to release all the extra workers who agreed to move to work in Penang to help in relieving some of the critical worker shortages in ISO. With improved loadings for certain key customers and coupled with a tight operation cost controls, ISO managed to turn around with an improved financial performance versus year 2020.

With most lines stabilizing, we are hopeful that year 2022 will see the sustainable positive momentum and improvement in its financial and operations performance. 

Risks

The clogging of the global supply chain that resulted in a shortage of chips has caused disruptions to many industries, some of them in the segments we operate in. Shortage of materials which initially hit mainly the automotive segment eventually reached other segments like consumer electronics, resulting in end demand of our products and therefore affecting our production loadings. We had to remain agile and creative in deploying our resources across the Group in order to counter this trend. We expect the normalization of the supply chain by end of first half of year 2022.

With one of our customers decided to EOL their products that were manufactured in our KL factory, we may face a short-term erosion in our topline while pending new business backfilling that affect our year 2022 performance, we are hopeful the  pipeline of new businesses will be coming to fruition soon.

Due to the aggressive efforts from our business development and NPI teams, we are excited with many new projects that are expected to go into mass production in the near future that will backfill the void left by the EOL, and that would also go a positive way in diversifying and expanding our customer’s base, thereby addressing some of the customer concentration risk. 

We are exposed to normal NPI risks that cause delays in revenue and profit contribution, due to product reliability concerns, delay in end customers engagement, supply chain disruption and also extended border closures restriction.

Prospects

The current pandemic did not end in year 2021 despite the introduction of vaccines globally, with demand and use of electronic gadgets, connectivity, cloud and virtual meetings continuing to be strong. The acceleration in the progress of 5G, artificial intelligent (“AI”) and IoT together with the adoption of electric vehicles (“EV”) are the technology themes that continue to create demand for chips and other components that help to proliferate the enabling of these technologies. 

We continue to leverage our experience in miniaturized sensors to explore new product development exposure in the areas like bio sensing, 5G and advanced packaging that is poised to reap the benefits of these technology rollout. We also expect our existing product of laser headlamp components to show healthy growth while complementing the growth from adoption of EV and satisfying the hunger for new power efficient technology.

The continued US-China trade tensions would also provide outsourcing opportunities for companies like us in Malaysia as our potential customers assess the viability of shifting and diversifying their supply chains. 

All these new opportunities are expected to fall nicely in place where our new factory expansion project of creating an additional 25,000 square feet of additional manufacturing space would be completed by Quarter 1 2022, thus ready to take on these new opportunities.