CEO's Letter To Shareholders

Extracted from Annual Report 2015

Dear Shareholders,

I am pleased to report a set of improved results for the financial year ended 31 December 2015 ("FY2015") in spite of the many difficulties and challenges we faced in 2015.

FY2015 REVIEW

The Group's gross profit surged 19.7% to S$61.4 million, from S$51.3 million in the preceding year ended 31 December 2014 ("FY2014"). This was achieved even though the revenue and sales tonnage was lower at S$647.0 million and 325,639 tons respectively. Comparatively, revenue was S$806.3 million and sales tonnage was 337,959 tons in FY2014. The improved financial performance was primarily due to higher gross profit margin, which rose to 9.5% against the 6.4% recorded in FY2014, because of better sales premium, increased efficiency in raw material procurement and processing cost management.

Boosted by stronger performance from its palm oil and rubber segments, our associate SIAT S.A. achieved a turnaround. Through our 35% shareholding, our share of profits was S$3.1 million for the period under review, compared with a loss of S$5.2 million a year ago. SIAT S.A. owns and invests in natural rubber and palm oil businesses spread across numerous parts of Africa.

Consequently, we managed to improve our performance by 61.8% with a loss before tax of S$20.1 million, against a loss of S$52.6 million the year before. The share of loss attributable to shareholders has also substantially decreased by 54.9% year-on-year, from S$40.6 million in FY2014 to S$18.3 million in FY2015. As at 31 December 2015, the Group registered cash and cash equivalents of S$40.2 million. Debt to equity ratio remained low at 0.29 times for the period under review.

CORPORATE DEVELOPMENTS

GMG has expanded across Asia and Africa by enlarging our plantation footprint and enhancing our processing capabilities during the year. In view of the macro challenges, we have deliberately exercised prudence at every juncture.

In FY2014, we entered into a long-term collaboration with the International Cooperation Centre in Agronomic Research and Development ("CIRAD") of France to help us maximise productivity and yield. CIRAD conducted an extensive study of the soil conditions of our African plantations and planting policies and made several recommendations which we have successfully implemented. Through CIRAD's research, we found that our Sudcam plantation in Cameroon, Africa, possesses one of the most excellent type of soil quality in the world for growing rubber trees. This is extremely exciting and very positive news for us as we continue our hard work of planting and replanting. We had added 4,121 hectares of planting and replanting for FY2015.

During the year under review, while our total annual processing capacity remained steady at around 527,000 tons, we are proud to share that the quality assurance production standards at our processing plants have continued to rise, with the quality index hitting 98% in FY2015, from 97% a year ago. As a result, we met the stringent quality standards and received accreditations from two of the world's top tyre manufacturers for another two of our factories in Africa. For the period under review, we maintained the utilisation rates of our processing plants at 60% and we intend to increase them to 70%.

We are set to continue with improving our production lines to ensure the quality of our processed rubber so that we will receive more quality certifications from our customers in 2016. That should further entrench our long-standing position as a choice supplier to the world's top 10 tyre manufacturers.

PLANS AND OUTLOOK FOR FY2016

GMG's unique value-proposition is that we are a fully-integrated natural rubber supply chain operator. We are involved all the way, starting from the planting of seeds and selection of budwood from the recommended clones right through to the sale of processed crumb rubber and latex concentrate.

Planting materials of seeds or tissue culture from established Research and Development organisations are nurtured in our own nurseries until they are ready to be planted in the field. Thereafter, the trees are then nurtured until they are ready to be tapped and natural rubber sent for processing at the factories. Our plantations are our fundamental assets from which we have built and will continue to build a solid base for long-term growth as they derive good margins during upturns in the business cycle. The Group's commitment for 2016 is to invest in new planting by 2,500 hectares and replanting by another 1,000 hectares. Each hectare holds an estimated 512 trees.

For our processing business, we have started and will continue to work towards increasing our quality index to 98.5% for 2016. We intend to meet this target - firstly, by optimising the processing methodology, and secondly, by motivating our staff to embrace quality as top priority. Underpinning all our activities are our efforts to constantly streamline both operational and management cost efficiency.

With the production from our own plantations and added procurement from elsewhere, our factories produce and supply top-quality products to the world's best tyre manufacturers. Our processing capabilities bring profitability and good cash-flow when the industry faces consolidation. These two complementary business segments form major pillars in our twin-pronged strategy in managing a cyclical business.

We will continue to focus on unlocking the value of these two cores and we believe the key to that lies in our most valuable asset yet - our people. With the launch of GROWTH of Sinochem International this year, we hope to coach our staff to achieve higher performance through a heightened sense of ownership and team spirit. We have maintained and will reinforce the highest ethical standards in all our internal and external dealings. While we work towards rejuvenating the organisation for sustained growth, we believe that our strong business model today, which is managed by a team of like-minded professionals, has and will pave the way for GMG's growth tomorrow.

It is clear that the global economic landscape has become increasingly unpredictable so we have adopted a cautious approach for 2016. However, even against that backdrop, we remain very confident and optimistic about the prospects of the natural rubber business.

APPRECIATION

In closing, I would like to express my personal thanks to the Board of Directors and each one of our staff for his/her hard work and dedication in making GMG stronger and more resilient. To our valued business partners, customers and shareholders who have stood by us, we are deeply appreciative of your trust, support and friendship, and we look forward to closer collaborations in years to come as we set our sights to scale greater heights!

LI XUETAO
Chief Executive Officer & Executive Director