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Chairman's Statement

Extracted from Annual Report 2017

Dear Shareholders,

Lorenzo International has made progress in steadying its business but we are still beset by challenging market conditions.

We changed our financial year-end from December to March: Revenue achieved amounted to $54.14 million for the 15 months ended March 2017. This compares with $53.75 million for the 12 months ended December 2015.

Our gross profit margin strengthened further, rising from 40.0% in FY2015 to 45.4% in FY2017.

Though still a loss, our bottom line improved markedly, as we strove to get closer to the break-even level, and beyond. We pared our net loss from $18.77 million in FY2015 to $9.18 million in FY2017.

Another area of improvement: We shrank our borrowings by $4.59 million to $14.67 million as at end-FY2017, partly with the help of two rounds of placement of new shares in 2016.

New Major Shareholder

Beyond the financial figures, we wish to highlight the new substantial shareholder, Mr Ding Lei, who has shown confidence in our turnaround.

We stand to benefit from Mr Ding's corporate and management experience and business connections – in diverse fields ranging from finance and real estate to tourism development and investment management.

Another positive development is, after a long - drawn legal affair, we have been involved in preliminary negotiations with a vendor of a medical practice with a view to participate in the equity of the medical vendor. If negotiations are successful, a refundable deposit (less cost and expenses) that Lorenzo has paid shall be applied to the acquisition of equity of the medical practice.

Unlocking value by divesting manufacturing business in China

We are in the midst of restructuring our business in order to further strengthen our balance sheet and lift our business performance to desirable levels.

The China subsidiaries Supreme Furniture (Kunshan) Co., Ltd (sofa factory) and Lorenzo Kunshan Co., Ltd (wood furniture factory) have been one of the main contributors to the company's losses – carrying high operation cost, high fixed overhead, low utilization and high labour cost. A decision has been made to dispose Supreme Furniture (Kunshan) Co., Ltd and to rent out Lorenzo Kunshan Co., Ltd's factory.

We are currently in the midst of entering into a sale and purchase agreement with an independent third party, Kunshan Gao Er Garment Co., Ltd (昆山高尔服 装有限公司) for the sales of one of the wholly-owned subsidiary, Supreme Furniture (Kunshan) Co., Ltd at RMB19,000,000. The buyer had already made a deposit payment of RMB6,500,000. Supreme Furnishing Centre Pte Ltd will be disposing off the entire registered share capital of Supreme Furniture (Kunshan) Co., Ltd upon completion of the sales.

Lorenzo Kunshan Co., Ltd is also in the midst of finalizing a lease agreement with a potential tenant for the factory at RMB6, 000,000 per annum for a tenure of three (3) years.

This divestment will unlock value, improve the company's cash flow and cut the losses contributed by China subsidiaries.

With the divestment in China, our furniture production needs will be met by our existing factory in Malaysia. In addition, we envisage that we will be doing higher value-added R&D, design and prototyping work at the soon-to-be constructed nine-storey building on a 5,800 square metres land in Sungei Kadut in Singapore. Upon completion, the factory will house the head office, showroom, warehouse, and also the building materials business.

Moving forward

Our manufacturing activities will be channeled to focus on:

We will expand our Lorenzo product range into fabric and wood which will be manufactured by selected OEMs. The upside of this is that our showrooms will offer a more diverse range of products and will be nimbler in showcasing new trends in furniture design.

The Lorenzo brand, nurtured since 1983, is a well-recognised one among consumers in several markets and, though it has lost some lustre in recent years, it can shine brighter again.

In Appreciation

On behalf of the Board of Directors, I would like to express my sincere thanks to all our valued customers, suppliers, business associates and shareholders for their long-standing support of Lorenzo. My Board of Directors and management and staff also deserve appreciation for their professionalism in their work.