Fu Yu : Annual Report (FU-YU-COR-AR2023)

CORPORATE INFORMATION

CONTENTS

01 Corporate Profile

02 Vision, Mission and Core Values

03 Chairman's Message

06 Operations Review

08 Financial Highlights

1. Group Structure
2. Board of Directors

12 Key Executives

1. Our Network
2. Awards and Certifications
3. Sustainability Report

72 Financial Contents

BOARD OF DIRECTORS

Huang Junli, Christopher,

Chairman

Seow Jun Hao David

Hew Lien Lee

Poh Kai Ren, Daniel

Tan Tong Loong Royston

EXECUTIVE DIRECTORS

Seow Jun Hao David

Hew Lien Lee

NON-EXECUTIVE

DIRECTORS

Huang Junli, Christopher

Poh Kai Ren, Daniel

Tan Tong Loong Royston

AUDIT COMMITTEE

Poh Kai Ren, Daniel,

Chairman

Huang Junli, Christopher

Tan Tong Loong Royston

NOMINATING COMMITTEE

Tan Tong Loong Royston,

Chairman

Huang Junli, Christopher

Poh Kai Ren, Daniel

REMUNERATION

COMMITTEE

Huang Junli, Christopher,

Chairman

Tan Tong Loong Royston

Poh Kai Ren, Daniel

COMPANY SECRETARY

Janet Tan

REGISTERED OFFICE 8 Tuas Drive 1 Singapore 638675

Tel : [phone]

Website: www.fuyucorp.com

SHARE REGISTRAR

Boardroom Corporate &

Advisory Services Pte. Ltd.

1 Harbourfront Avenue

#14-07, Keppel Bay Tower

Singapore 098632

EXTERNAL AUDITORS

Baker Tilly TFW LLP

600 North Bridge Road

#05-01 Parkview Square

Singapore 188778

Audit Partner: Guo Shuqi Since financial year 2023

PRINCIPAL BANKERS

DBS Bank Ltd

Malayan Banking Berhad

Oversea-Chinese Banking

Corporation Limited

The Bank of East Asia, Limited

United Overseas Bank Limited

Citibank, N.A.,

Singapore Branch

INVESTOR RELATIONS Fu Yu Corporation Limited Tel: [phone] Daisy Ong

Email: [e-mail]

WeR1 Consultants Pte. Ltd.

1 Raffles Place

#02-01 One Raffles Place Mall Suite 332 Singapore 048616 Tel: [phone]

Isaac Tang

Email: [e-mail]

CORPORATE PROFILE

Fu Yu Corporation Limited ("Fu Yu", and together with its subsidiaries, the "Group") is Singapore's oldest and one of Asia's largest manufacturers of high-end precision plastic and metal components and products. Established in 1978, Fu Yu has been listed on the Mainboard of the Singapore Exchange (SGX: F13) since 14 June 1995.

Backed by more than 45 years of operating knowledge, Fu Yu provides vertically-integrated manufacturing services to an international, diverse and loyal customer base across the life science, medical, consumer, automotive and industrial sectors.

Headquartered in Singapore, the Group operates 6 strategic manufacturing sites across Singapore, Malaysia, and China, and has more than 1.5 million square feet of production floor capacity.

To enhance its value add to customers and build mutually beneficial long-term partnerships, the Group provides a one-stop solution for its customers' manufacturing needs, including product design, tooling design and fabrication, production, assembly and testing.

In 2023, the Group launched Fu Yu Biomedical, focusing on the development of high-precision devices, life sciences products, and consumables within the Medical Technology and Biotechnology sectors.

The Group's supply chain solutions arm was established in 2021 to provide supply chain management services for its customers.

Fuelled by an unyielding dedication to sustainable practices, Fu Yu's relentless pursuit of excellence ensures precision engineering while fostering a greener, more responsible footprint in every aspect of its operations.

FU YU CORPORATION LIMITED Annual Report 2023

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VISION

To be the best in manufacturing through our commitment to quality, operational excellence, and continuous improvement.

MISSION

To redefine the standards of precision engineering for our customers, through innovations and excellence.

5CORE VALUES

Safety is our top priority. We take all necessary preventive measures to ensure a safe working environment for our employees.

Quality is our focus. We manufacture products of exceptional quality and always strive to exceed our customers' expectations.

Integrity lies at the heart of our company. This guides us to be ethical and honest in all our interactions and decisions.

Sustainability is embedded in our practices and products. We are committed to a better world for our future generations.

Continuous improvement is in our DNA.

We strive for operational excellence and are always looking for ways to improve our performance as a team.

2 FU YU CORPORATION LIMITED Annual Report 2023

CHAIRMAN'S MESSAGE

DEAR SHAREHOLDERS,

2023 marked a year of profound global challenges, and tested our resilience amid a challenging operating environment. This annual report is of special significance as it outlines the strategic transformation the Group has embarked on to chart a clear direction for sustainable growth. The roadmap takes into account the fresh challenges arising from the pandemic and 5 major initiatives. But first, allow me to outline our performance for the financial year ended 31 December 2023 ("FY2023").

FY2023 FINANCIAL PERFORMANCE

As shareholders would be aware, manufacturing companies worldwide were deeply impacted by the movement restrictions and the supply chain disruptions which lingered on even after the pandemic eased. Indeed, the disruptions had led many customers to over-stock components or products. The consequence of this inventory overhang has been slower orders despite the economic recovery.

The Group felt the impact of softer customer demand in the first half of 2023. While the pandemic had abated, new uncertainties arose in the global economy amid geopolitical tensions, in particular the conflict in Ukraine, and elevated interest rates.

Hence, the year under review must be seen against the backdrop of these multiple challenges.

Fu Yu recorded revenue of S$190.4 million in FY2023, a 20.7% decline from S$240.1 million in FY2022. Our manufacturing business generated revenue of S$103.9 million (FY2022: S$140.1 million), while our supply chain management segment reported S$86.5 million (FY2022: S$100.0 million).

Gross profit for FY2023 softened to S$13.3 million from S$37.6 million in FY2022. We recorded lower revenue at a time when operating costs (especially for labour and energy) increased. Gross profit margin for the manufacturing and supply chain management services segments declined to 11.6% and 1.4%, respectively, compared to 24.2% and 3.7%, respectively, a year ago. As a result of the change in revenue mix, overall FY2023 gross profit margin narrowed to 7.0% from 15.7% in FY2022.

The Group incurred a net loss of S$10.1 million in FY2023 compared to a net profit of S$14.6 million in FY2022. Apart from the above factors, Fu Yu also incurred expenses related to developing its Smart Factory in Singapore, a S$2.7 million non-cash impairment of goodwill related to our investment in Fu Yu Supply Chain Solutions Pte. Ltd, loss on liquidation of a subsidiary of S$0.4 million and foreign exchange loss of S$0.1 million.

Mr Christopher Huang

Independent Non-Executive Chairman

Excluding the impairment, liquidation loss and foreign exchange loss, net loss for FY2023 would have been S$6.9 million. Our supply chain management services generated net profit of S$0.3 million in FY2023, compared to S$1.5 million a year ago. Meanwhile, the manufacturing business recorded net loss of S$7.2 million.

We continue to maintain a strong balance sheet with net cash of S$57.0 million and shareholders' equity of S$137.4 million as at 31 December 2023. This robust financial position provides a strong ballast as we embark on a major transformation.

FU YU CORPORATION LIMITED Annual Report 2023

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CHAIRMAN'S MESSAGE

FORWARD STRATEGIES

In November 2023, we undertook a strategic review led by our Group Chief Executive Officer ("Group CEO"), Mr David Seow, and unveiled several transformation strategies to propel us to the next stage of growth. The key thrusts are to lay a stronger foundation for a more resilient and competitive Fu Yu which would be more responsive to the changing needs of customers.

The post-pandemic operating environment has undergone significant change. Corporations are seeking reliable manufacturers who can produce higher- precision components, even while reducing costs and shortening time-to-market. Meanwhile, geopolitical uncertainties and supply chain disruptions have led corporations to diversify their manufacturing footprint from China into Southeast Asia. Against this backdrop, the Group intends to offer its more than 45 years of experience to new industries and geographies, and move up the value chain with even higher- precision products.

Let me elaborate on the major strategic initiatives led by Mr David Seow.

The first is to re-focus on mould design and manufacturing. Fu Yu's business is only as good as our tooling capabilities. Hence, we are taking our capabilities to the next level.

A core aspect of this strategy involves our Smart Factory at 9 Tuas Drive 1, Singapore. It features advanced injection moulding, 3D metal printing, and state-of-the- art cooling technologies. High levels of automation mean the manufacturing process from raw materials to finished products will require minimal human intervention. This reduces downtime, and production can continue over the weekend. We can now manufacture components of 2 - 5 micron precision, sharply reduced from 10 - 20 microns previously. I am confident that it is one of the most advanced of its kind in Asia.

Already, we have scored new projects for American, European and Asia customers in the medical and consumer sectors. These higher-precision products command better profit margins. We expect this business to eventually become our core revenue generator in the next 2 years.

The second initiative is to expand our geographical footprint and penetrate the biomedical sector. The pandemic catalysed a major shift in this sector with players reviewing not just their product portfolio but also their business models. This sea of change offers Fu Yu a unique opportunity to showcase our expertise propelled by precision tooling. In

February 2023, we established Fu Yu Biomedical Pte. Ltd. to capture the opportunities in the biomedical sector. This wholly-owned subsidiary produces components for higher- precision biomedical devices such as endoscopes, vials, syringes and in-vitro diagnostics devices that require stringent tolerances and highly complex designs.

We are constructing new cleanroom facilities and expect to have 7 Class-100,000 cleanrooms and 1 Class-10,000 cleanroom within our manufacturing locations across Singapore, Malaysia and China, with add-onbio-laboratories in Singapore.

Our re-focus on back-to-basics excellence in tooling opens new opportunities for us to export to our high-precision moulds. Demand for advanced manufacturing capabilities inevitably increases alongside the development of new technologies, particularly in sectors such as electric vehicles, and new medical devices, pharmaceuticals and consumable goods. To capture this higher-margin export tooling business, we have established an advanced automated toolroom for customers, and have already secured several orders; moving forward, we expect revenue contribution from this segment to continue growing.

We have also established partnerships with other leading manufacturers who complement the Group's business, unlock adjacent opportunities, and tap into new markets.

The third initiative relates to sustainability. In line with our commitment to reduce Scope 2 emissions by 30% by 2030 and optimise energy consumption, we are installing photovoltaic solar panels across the rooftops of our Singapore and Malaysia facilities to power in- house operations. We are investing in electrically-powered machinery which will progressively replace our hydraulic ones that rely on oil consumption. We have also added 3D printing and additive manufacturing technologies, which minimise waste materials, as they use only the exact amount of materials required.

We have also transitioned to an integrated cloud-based platform, allowing us to go completely paperless in the mould-making process. In terms of new materials, we are working closely with our partners to offer biodegradable bio-resin which can be used to produce disposables, consumables and packaging caps.

Finally, to help our partners achieve sustainability, our Smart Factory has been fitted out with sensors and hardware to allow customers to track their carbon footprint across the entire process. This allows them to showcase hard metrics and strong green credentials.

4 FU YU CORPORATION LIMITED Annual Report 2023

To move up the value chain, our fourth strategy involves a fresh approach to achieve early-state customer engagement. Even before starting mass production, our New Product Introduction team offers bespoke product design to ensure the process is optimised. This also reduces scrap rates, improves product yields, and accelerates time-to-market.Early-stage engagement will also provide more opportunities for collaboration and new business, which in turn expands our customer base and increases "stickiness".

As we embark on this transformation our fifth strategy is to raise our international profile and investor awareness. I am also pleased to share that Fu Yu has been selected as 1 of 12 companies to participate in Enterprise Singapore's Scale-Up Programme. Offered to companies will strong growth potential, the programme will allow us to enhance our expansion strategies and extend the brand of Singapore manufacturing to the broader Asia market.

We continue to look out for opportunities for collaboration and partnerships and explore M&A opportunities to complement our core capabilities and long-term vision.

CONCLUSION AND OUTLOOK

Our strategic investments and transformation efforts are already starting to bear fruit, with new revenue streams from our export tooling and biomedical businesses. We expect revenue to increase as our Smart Factory accelerates production activities. Our strong balance sheet gives us the flexibility to invest in growth opportunities while also managing the uncertainties in the operating environment. FY2024 will be a better year.

Throughout the years, Fu Yu has overcome various challenges and emerged stronger. We will continue to innovate and remain committed to providing value to our customers and shareholders, and persevere through the challenges ahead. Such is the DNA of Fu Yu, and we will work hard to implement our transformation strategies.

APPRECIATION

On behalf of the board of directors (the "Board"), I would like to convey our appreciation to our customers and business partners for your loyalty and contributions throughout the year.

CHAIRMAN'S MESSAGE

I would like to express my gratitude to my fellow Board members for their counsel and commitment, as well as the Fu Yu management team and staff, whose hard work and commitment have been integral to the growth of the Group. In particular, I would like to express my appreciation to our Group CEO Mr David Seow, whose strong leadership and foresight have allowed us to make progress in our transformation, even as we navigate through the challenging operating environment.

I would also like to thank our General Manager Mr Ong Kang Lye, and Chief Executive Officer and Executive Director Mr Elson Hew for their contributions to the Group, and wish them all the best in their future endeavours.

We also warmly welcome new additions to our management team.

Ms Daisy Ong joined us as Chief Financial Officer in January 2023, bringing over 18 years of audit, accounting, investments and finance experience will be instrumental as we leverage our balance sheet to capture new market opportunities.

In February 2023, Mr Jason Lim and Mr Adriel Low joined us as Chief Operating Officer and Deputy Chief Operating Officer, respectively, to spearhead our efforts to enhance operations and produce higher-precision products. I am confident their skills and contributions will propel Fu Yu to the next level of growth, and look forward to working alongside them.

Last but not least, thank you, our shareholders, for your continued support and faith in our long-term vision. Together, we look forward to seizing new opportunities and building upon our achievement to further enhance shareholder value.

Mr Christopher Huang

Independent Non-Executive Chairman

FU YU CORPORATION LIMITED Annual Report 2023

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OPERATIONS REVIEW

REVENUE

For the year ended 31 December 2023 ("FY2023"), the Group recorded revenue of S$190.4 million, a 20.7% decline from S$240.1 million in FY2022, mainly due to softer customer demand during the first half of 2023 amid heightened economic uncertainty, geopolitical tensions and elevated interest rates.

For FY2023, the Group's manufacturing division and supply chain management division reported lower revenue contributions of S$103.9 million and S$86.5 million, respectively, compared to S$140.1 million and S$100.0 million, respectively, in FY2022.

GROSS PROFIT AND GROSS PROFIT MARGIN

Group-wide gross profit declined to S$13.3 million in FY2023 from S$37.6 million in FY2022, while overall gross profit margin narrowed to 7.0% for FY2023 from 15.7% in FY2022 due to changes in revenue mix for the manufacturing division and higher operating costs.

Gross profit for the manufacturing segment declined 64.3% to S$12.1 million in FY2023 (FY2022: S$33.9 million); gross profit margin for the segment stood at 11.6% compared to 24.2% in FY2022. Meanwhile, supply chain management services generated gross profit of S$1.2 million in FY2023 compared to S$3.7 million in FY2022, while gross profit margin softened to 1.4% from 3.7% a year ago.

OTHER INCOME

Other income increased 48.2% to S$3.7 million from S$2.5 million a year ago, mainly due to higher income from interest income and rental income, as well as higher sales of scrap and raw materials.

SELLING AND ADMINISTRATIVE EXPENSES

The Group's selling and administrative expenses in FY2023 increased by 2.4% to S$23.5 million from S$22.9 million a year ago. This increase was attributed mainly to higher energy costs, depreciation related to the Group's Smart Factory, and higher employee remuneration as the Group strengthened its engineering resources and in-house tooling capabilities to increase market exposure to the biomedical segment.

OTHER OPERATING (EXPENSE)/INCOME

The Group recorded other operating expenses of S$3.2 million in FY2023, as opposed to other operating income of S$0.6 million in FY2022. The difference is due to provision for impairment of goodwill of S$2.7 million, loss on liquidation

of a subsidiary of S$0.4 million and foreign exchange loss of S$0.1 million in FY2023, compared to a S$0.7 million foreign exchange gain in FY2022.

The Group recognises foreign exchange gain or loss as a result of transactions denominated in foreign currencies, and the revaluation of receivables, cash and payables denominated in foreign currencies to the functional currencies of the respective companies in the Group as at each reporting date. As the Group is in a net US Dollar assets position, the depreciation of the US Dollar against the Singapore Dollar and Malaysia Ringgit contributed to the foreign exchange loss in FY2023.

PROFITABILITY

For FY2023, the Group recorded a loss before income tax of S$10.6 million, compared to a profit before tax of S$17.4 million in FY2022, mainly due to lower revenue, a S$2.7 million non-cash impairment of goodwill in connection with its investment in Fu Yu Supply Chain Solutions Pte Ltd., loss in liquidation of a subsidiary of S$0.4 million and foreign exchange loss of S$0.1 million. Excluding the non-cash impairment of goodwill, loss on liquidation of a subsidiary and foreign exchange loss, FY2023 loss before tax would have been S$6.9 million compared to a profit of S$16.7 million a year ago.

Fu Yu's manufacturing business recorded net loss of S$7.2 million in FY2023 compared to net profit of S$12.4 million in FY2022, while the Group's supply chain management services contributed net profit of S$0.3 million in FY2023 (FY2022: S$1.5 million).

FINANCIAL POSITION

Fu Yu's financial position remains robust, with net cash of S$57.0 million as at 31 December 2023. Cash and bank balances stood at S$60.3 million, while total bank loans amounted to S$3.3 million as at 31 December 2023.

Shareholders' equity stood at S$137.4 million, equivalent to net asset value of 18.16 cents per share (based on the total number of issued shares of approximately 757.0 million shares) which includes net cash of approximately 7.53 cents per share.

As at 31 December 2023, total assets declined to S$176.2 million, compared to S$207.2 million a year ago, mainly due to lower cash and bank balances, decrease in assets related to trade and other receivables, inventories, property, plant and equipment, as well as an impairment of goodwill.

The Group's total liabilities decreased to S$38.7 million as at 31 December 2023 (31 December 2022: S$52.0 million), mainly due to a reduction in loans and borrowings as well as trade and other payables.

6 FU YU CORPORATION LIMITED Annual Report 2023

In FY2023, the Group incurred net operating cash outflows of S$4.5 million compared to net cash inflows from operating activities of S$21.7 million in FY2022, mainly due to the net loss recognised for FY2023, and the repayment of trade and other payables, offset by a reduction in inventories.

Fu Yu also recorded capital expenditure of S$4.0 million, which was mainly used for the purchase of factory equipment, plant and machineries, partially offset by interest income.

Net cash used in financing activities stood at S$7.9 million during the year under review, attributed mainly to the payment of dividends to shareholders of the Company and repayment of bank loans.

Accordingly, the Group's cash and cash equivalents amounted to S$60.3 million, which includes S$0.1 million in cash deposits pledged and cash restricted-in-use of S$5.1 million, as at 31 December 2023, compared to S$79.3 million a year ago.

BUSINESS SEGMENT REVIEW

MANUFACTURING BUSINESS

Revenue from the Group's manufacturing segment declined 25.8% to S$103.9 million in FY2023 from S$140.1 million in FY2022, equivalent to 54.6% of the Group's FY2023 revenue (FY2022: 58.4%). The decline was partially offset by new customers secured in China and higher sales from existing customers in Malaysia and Singapore.

Singapore

Revenue from Singapore operations declined 26.4% to S$38.2 million in FY2023 from S$51.9 million a year ago, mainly due to lower sales in the medical segment, partially mitigated by higher sales from the consumer segment. As a percentage of total sales from the manufacturing business, the Singapore segment's revenue contribution declined marginally to 36.8% in FY2023 from 37.1%.

OPERATIONS REVIEW

China

The China segment generated revenue of S$36.4 million in FY2023 (FY2022: S$54.8 million), which accounted for 35.0% of the manufacturing segment's revenue for FY2023 (FY2022: 39.1%). The decline was mainly due to slower business activities due to a slower-than-expected recovery in the domestic economy.

As a result, the China segment posted a loss before tax of S$3.7 million, which includes the S$0.4 million liquidation loss compared to a profit before tax of S$0.3 million a year ago.

Malaysia

Revenue contribution from Malaysia for FY2023 declined 12.2% to S$29.3 million from S$33.4 million in FY2022, mainly due to slower demand from the medical and power tools segments, partially offset by higher orders of consumer products. Contribution from Malaysia increased to 28.2% of the segment's revenue in FY2023 from 23.8% in FY2022.

The Malaysia segment recorded a profit before tax of S$3.6 million, compared to a profit before tax of S$6.3 million in FY2022.

SUPPLY CHAIN MANAGEMENT SERVICES - FU YU SUPPLY CHAIN SOLUTIONS PTE LTD

For FY2023, the supply chain management services segment generated revenue of $86.5 million from physical commodities trading activities, a 13.6% decline from $100.0 million a year ago. This business made up 45.4% of the Group's total revenue in FY2023 (2022: 41.6%).

The segment recorded net profit	of S$0.3 million in FY2023,
compared to net profit of S$1.5	million in FY2022.

As the supply chain management services operations are based primarily in Singapore, there is no geographical breakdown for this business.

FINANCIAL HIGHLIGHTS

Financial year ended 31 December

INCOME STATEMENT SUMMARY

(S$ million)	FY2023	FY2022	Change
Revenue	190.4	240.1	(20.7%)
Gross Profit Margin	7.0%	15.7%	(8.7ppt)
(Loss)/Profit Before Tax	(10.6)	17.4	N.M
Operating (Loss)/Profit *	(10.5)	16.7	N.M
Net (Loss)/Profit	(10.1)	14.6	N.M
(Loss)/Earnings Per Share (cents)	(1.34)	1.93	N.M
*(Loss)/Profit Before Tax excluding foreign exchange impact
N.M - Not Meaningful
BALANCE SHEET SUMMARY
(S$ million)		As at 31 Dec 2023	As at 31 Dec 2022
Total Non-Current Assets		68.3	75.9
Total Current Assets		107.9	131.2
Total Non-Current Liabilities		7.9	11.3
Total Current Liabilities		30.9	40.7
Shareholders' Equity		137.4	155.1
Cash and bank balances		60.3	79.3
NAV per share (cents)		18.16	20.60
KEY FINANCIAL RATIOS
		FY2023	FY2022
Gearing		Net Cash	Net Cash
Return on Equity		(7.4%)	9.4%
Dividend Per Share		-	1.0 cent
Dividend Payout		-	52.6%

Revenue (S$ million)

Gross Profit Margin (%) Net (Loss)/Profit (S$ million) Dividend Per Share (cents)

			240.1
194.1		195.5		190.4
	153.4
2019	2020	2021	2022	2023

	24.0%
19.7%		18.6%
			15.7%
				7.0%
2019	2020	2021	2022	2023

	16.9	17.6
12.7			14.6
			2023
2019	2020	2021	2022
			-10.1

4.95*

1.6 1.6

1.0

Nil

2019 2020 2021 2022 2023

*Included special dividend of 3.3 cents per share

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