FEDERAL INTERNATIONAL (2000) LTD
LOWER PROFITS FOR FINANCIAL
We refer to your letter of 21 February 2001.
Further to the announcement made on 13 February 2001, the Board of Directors of
the Company would like to provide additional information for the lower profit
for the group.
Turnover was lower than forecast due to changes in the factors taken into
consideration in preparing the forecast presented in the prospectus. The
projects in the Company's flowline control products and services activities that
the Board expected to commence in year 2000 were delayed. A few of the Company's
China and Singapore customers have postponed the commencement date of their
projects. In addition, the Company held back shipment of US$2 million worth of
goods to its Indonesian customer that the Board included in its forecast pending
for the approval of their bank financing. The approval was subsequently granted
to the Company's Indonesian customer in December 2000.
The recovery of the oilfield drilling equipment activities in view of the
improvement in the economy and increase in the price of crude oil is below the
Company's management expectation. The orders expected to derive from one of the
Company's contracts to supply some of its exclusive products to one of the
largest offshore drilling contractors were lower. In addition, the Company has
lost a few orders due to stiff competition in the oilfield equipment industry.
The Company's profit before tax and profit after tax are lower than forecast in
view of the lower turnover and lower than anticipated sales margin. Lower sales
margin was due to stiff competition in the last quarter of the year in the
Company's oilfield drilling equipment activities and fire protection activities.