Operational Review

Manufacturing efficiency, time to market and high product quality are essential to the business of the Group.

With improved technology and workflow, we have been able to achieve higher throughout and with less wastage. We continue to strive for "Zero Defects" in order to ensure product integrity and high product quality.

The Group changed to a closed distributorship system to better manage our logistics and distribution processes. The result is an improvement in response time to meet consumer orders at lower costs.

We are upgrading our information technology systems to integrate the financial, manufacturing and distribution systems in order to serve our customers better.

Brand Building and New Products

YHSM's brand building and marketing efforts are aimed at bringing our products closer to our consumers, and building consumer loyalty and brand affinity at the same time.

During the year, we carried out advertising and promotions activities for our core products: YEO'S Soy Milk, tea beverages and canned food, and CINTAN High Protein Instant Noodles. We introduced several new value-added products: SOYRICH No Sugar High Protein Soy Milk, SOYRICH Vitaminised A and E High Protein Soy Milk as well as ISOGAIN Isotonic Drink.

In order to serve our customers better, the Group regularly conducts market research to understand their changing needs and buying habits. Research and Development efforts are on-going to create new and value-added products which our customers want. In the international arena, the Group is tapping the fast-growing HALAL market by expanding our distribution network in the Middle East and Indonesia.

Human Resource

Our staff are our most important assets and Human Resource development remains one of our top priorities. We conducted courses and training workshops throughout the year to enhance the knowledge and skills of our workforce to prepare them for the challenges ahead.

In 2002, a Voluntary Separation Scheme was amicably carried out as we changed to a closed distribution system.

Corporate Governance

Good corporate governance plays a key role in the Group's growth and development. We will continue to improve on transparency and corporate governance processes in the interest of our shareholders.

Prospects

Despite a weak global and regional economic condition, the Group will press on with our mission of being a forerunner in the Food & Beverage industry in Malaysia.

We will continue to upgrade and improve our production competencies with new equipment, processes and training in order to derive greater efficiency and margins. Now that we have reorganised our sales and distribution operations, we will strive to bring our products closer and quicker to our consumers to meet their growing needs.

In the current year, the Group expects to see an increase in capital expenditure as we continue to invest in equipment and technology.

Barring unforeseen circumstances, the Group will continue to be profitable in the Financial Year 2003.

Board of Directors

A number of changes occurred at the Board. I am pleased to announce the appointment of Mr Tjong Yik Min as Director and Deputy Chairman. Encik Mohamed Nizam bin Abdul Razak has joined us as an Independent Director. Mr Chan Wai Ming, an executive of the Group, has also been appointed to the Board. The wealth of experience of our new directors will help to steer us towards achieving our goals.

During the year, Dato' Borhan bin Kuntom resigned as Chairman of the Group for health reasons. I would like to express my sincere gratitude for his invaluable contribution to the Group over the years. I was appointed Chairman of the Board with effect 1 December 2002 after Mr Robert Ng Chee Siong relinquished the position due to his heavy work commitments in Hong Kong. I must also thank the other outgoing directors from the previous Board, namely Mr Chew Eng Chai, Mr Donald Reginald Gadsden, Mr Leong Horn Kee, Mr Jacob Gan Nga Kok and Mr Lim Keng Teck for their contributions to the Group.

Acknowledgements

On behalf of the Board, I would like to extend a hearty note of thanks to our shareholders for their support and belief in us. I would also like to thank our staff for their dedication, commitment and hard work.

Philip Ng
Chairman