DEAR SHAREHOLDERS,
We are pleased to report a slight increase in our net
sales for the year, along with continued strength in
our balance sheet, which recorded $35.6 million in
cash and cash equivalents and no debt as of March
31, 2011.
Net sales for the year ended March 31, 2011
amounted to $84.0 million, an increase of 3.0%
compared to the $81.6 million in sales achieved for
the year ended March 31, 2010. This increase in
sales was mainly attributable to an increase in sales
revenue of $6.6 million from our electronics and
metallics segment, which offset a decrease in sales
revenue from our plastics segment of $4.2 million.
Our plastics and electronics divisions enjoy sectorleading
reputations, and they each possess a broad
array of manufacturing capabilities. Even so, the
challenges of the global economic downturn, which
included persistent pressure from lower-priced
competitors and ongoing changes in customer mix,
had proved difficult to overcome.
Gross profit for fiscal year 2011 was approximately
$9.5 million, representing a gross profit margin
of 11.4%. This compares with gross profit of
approximately $12.7 million and a gross profit
margin of 15.5% in fiscal 2010. Gross profit from
our plastics segment decreased to $5.8 million or
13.6% of net sales for the year ended March 31,
2011, compared to $9.8 million or 20.9% of net
sales for fiscal 2010. The decrease in gross profit
margin in the plastics segment was due to increased
labor costs arising from regulatory increases in the
minimum wage rates for factory workers, and higher
overtime allowances. These costs offset a decrease
in materials costs compared with fiscal 2010.
Gross profit from our electronics and metallics
segment increased to $3.7 million or 9.0% of net
sales in fiscal 2011, compared to $2.8 million or
8.1% of sales in 2010. This increase in gross margin
in the electronics and metallics segment was mainly
attributable to an increase in the sales volumes of
higher margin items, and a decrease in our factory
overhead expenses, factors which offset an increase
in labor costs as a result of regulatory increases in
the minimum wage rates of factory workers, higher
overtime allowances, and a higher average number
of workers compared with fiscal 2010.
Deswell is continuing to focus on finding ways
of reducing its overhead costs and boosting
the development of new business. Faced
with challenging factors that have driven up
manufacturing costs, such as the China labor
shortage, the recent minimum wage increase,
and the fluctuation of the renminbi, our company
has maintained disciplined cost controls and has
emerged with a very solid balance sheet. At the end
of fiscal 2011, our cash and cash equivalents totaled
$35.6 million, compared to $35.1 million for the
fiscal year ended March 31, 2010, while our working
capital totaled $59.7 million compared to working
capital of $59.8 million as of March 31, 2010. In
addition, the Company currently has no long-term
or short-term borrowings.
On June 28, 2011 our board of directors declared
a dividend of $0.05 per share for the fiscal fourth
quarter ended March 31, 2011.
Deswell has maintained sound financial health
while extending its reputation as a leading provider
of electronic and plastic assemblies. Because our
customer base includes many of the major audio
equipment and video gaming providers, who rely
on our ability to meet their demanding quality
standards and produce state-of-the-art equipment,
we believe we can expect good growth once these
sectors recover and move forward again.
I would like to thank our shareholders for their
continued support and patience throughout this
difficult fiscal year, and I look forward with them to a
successful fiscal 2012.
Sincerely,
Franki S.F. Tse
Chief Executive Officer
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