Chairman’s Statement

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The global economy was full of uncertainties in 2018, with overall market sentiment and economic growth dampened at the impact of the escalating trade disputes between China and the US, Brexit related concerns and emerging markets weakening. Despite the unfavourable factors, Dream International Limited (the “Company”), together with its subsidiaries (the “Group”) continued to record revenue growth and profit during the review year, thanks to its well executed two pronged strategy, developing plastic figures and plush stuffed toys businesses side by side, supported by its scale advantage and timely capacity expansion.

Where there are challenges, there are opportunities. To minimise the impact of the Sino US trade conflicts on their business, toy character owners and licensors have turned to look for production capacity outside China and that has hastened consolidation of the industry in the country. As less competent players are ousted, orders in increasing volume are flowing into the hands of industry leaders like the Group. Armed with first mover advantage and low cost production facilities in Vietnam, and a portfolio of top quality products widely recognised in the industry, the Group has been able to win customers in new top tier toy companies placing orders. For example, during the year under review, the Group made a strategic move to offer a competitive package entailing cross selling to enthral top tier customer(s) to place new orders. Our aims are to bring in more orders and benefit the Group’s business performance in the long run, help the Group achieve stable revenue growth, encourage improvement of production efficiency and quickly build sustainable business relationship with customers. In addition, an addendum was included in the master sourcing agreement with a major customer during the review year, with new pricing and new terms related to ordering added including incentives on making certain annual volume thresholds for different products. Being able to secure such long term sourcing agreements rare in the toy industry is proof of the Group having strong trusting relationship with its customers.

The Group’s two pronged strategy has been effective. Plush stuffed toys continued to generate stable income for the Group during the review year, while the plastic figures segment continued to serve as a growth driver and delivered significant revenue contribution. Capitalising on its well established foundation, the Group has strived for business diversification to broaden its income stream and strengthen profitability. We have also started the baby doll business to meet customer requirements and it has been contributing increasing revenue to the Group. To meet the growing demand for products under the segment, we are setting up a dedicated production line in phase two of our fifth plant. Our plastic figures and baby doll businesses together are also presenting us with cross selling opportunities. Taking into account the deteriorating performance of the ride on toys segment, the Group will cease to produce ride-on toys projects and utilise certain facilities under this segment to manufacture other products of the Group.

Looking ahead, downside risks remain a threat to global economic growth and keen competition and consolidation of the toy industry will prevail. Nevertheless, the Group is cautiously optimistic about its business prospects. With production bases in China and Vietnam, the Group can offer customers production flexibility and consistently high quality products, conducive to it maintaining good relationship with existing customers as well as attracting new customers looking for production capacity outside China. To handle the increasing orders all its different business segments receive, the Group needs to increase backup production capacity. Thus, with growing customer demand in mind, it has drawn up plans to raise output capacity in Vietnam. It will also strive to improve production efficiency at its Vietnam factories so as to enhance overall operational efficiency and achieve greater economies of scale. In addition, the Group will closely monitor market demand trends for opportunities to expand business in the future. It will continue to optimise operational efficiency and explore new development leads, to the ends of reinforcing its industry leadership and achieving sustainable growth.

APPRECIATION

On behalf of the Board, I would like to thank our shareholders, business partners and customers for their continuous and unwavering support. I would also like to express my appreciation to the management team and the entire staff for their steadfast commitment and constant contribution to helping the Group’s business thrive.

Kyoo Yoon Choi
Chairman
25 March 2019