On behalf of the Board of Directors, it is my pleasure to present to you the Annual Report of Kim Hin Industry Berhad and its subsidiary companies ("the Group") for the financial year ended 31 December 2008.

Business Environment

The year 2008 turned out to be a complex and challenging year globally where we had to grapple with the challenge of high inflation which was triggered mainly by the surge in energy and commodity price in the first half of the year. While, in second half of the year, intense global financial strain took a heavy toll on global economic activity. The Malaysian economy was negatively impacted by these adverse developments, as reflected in the rapid slowdown in export performance and industrial production. All economic sectors were affected by the global downturn and the sharp correction in the commodity price.

Our tile industry was also affected by the adverse effects from the deepening of the financial and economic crisis where the Group needs to equip itself in adjusting the Group's operations to the shrinking demand and possible negative economic growth in the coming year.

Financial Performance

For the financial year ended 31 December 2008 under review, the Group improved its revenue by 10.4% to RM251.5 million. However, the better performance in revenue was mitigated by the exchange loss suffered in the final quarter of 2008 as well as impairment made for certain assets in light of the current economic situation. Consequently, the operating profit of the Group declined to RM6.9 million for the financial year under review as compared to RM10.7 million for the previous financial year.

The Group performance was mainly impacted by lower revenue recorded as a result of stiff competition and low pricing strategies adopted by other players in the tile industry. Besides, the manufacturing costs have been escalating due to rising liquefied petroleum gas, diesel, electricity and raw material costs.

Notwithstanding the decline in the Group's operating profit, the Group has continued to pursue its prudent policy of conserving its cash resources, thereby maintaining its cash reserves at RM66.9 million as at the end of the financial year. As a result, the Group's financial position remained strong as evident from its balance sheet as at 31 December 2008.

Business Outlook and Prospects

The Malaysian economy is in the midst of experiencing the impact of the global downturn in 2009. In response, the Malaysian government has put in place several pump-priming policy measures with a primary focus on supporting domestic demand as well as mitigating the impact of the global slowdown on the affected segments of the economy. These included two economic stimulus packages of RM67 billion aimed at supporting private sector demand, creating employment and training opportunities, easing the burden of the affected sectors as well as building long term capacity of the economy.

The Group expects the business and trading environment to be very challenging during this period of heightened global uncertainty and the prospect of weakening demand from both domestic and export markets. However, the Group hopes to benefit from the spill-over effects from the roll-out of these economic stimulus packages which the domestic economic engine may be ignited and the property industry in particular, may start to re-gain momentum. However, the expected benefit is subject to the timely and quick implementation of these packages which is highly critical to ensure that the desired impact of the stimulus is put through the economy.

The Group shall continue to improve its operational efficiencies including cost-reduction measures in an effort to stay ‘lean and mean' to better position itself to overcome this economic slump.

Corporate Social Responsibility

The Group recognises the importance of being a socially responsible corporate citizen. The Group endeavours to treat its stakeholders to whom our business has an impact on, be it directly or indirectly, in a responsible manner.

During the year, the Group participated in various community activities including in the State Government's programme on tree planting. The Group aligned itself to the government's call of creating a greener environment through our sponsorship in this programme.

The Group has also been making financial contributions annually to various charitable organizations with the hope of making a positive difference to the lives of the less fortunate.

The Group also acknowledges that employees are its best asset and are able to steer the Group to greater heights. Various learning and development programmes have been conducted throughout the year so as to equip and develop both technical and soft skills of our work force. In addition, the Group provides financial assistance in the form of "Back-to-school Grant" to its low-income employees for their children education. Achievement awards were also presented to its employees' children who excel in the government examinations. Sports and family day activities were carried out with the full support and commitment of its employees, through Kimgres Club, the Group's sports club, with a view of providing a healthy lifestyle for our employees.

Appreciation

On behalf of the Board, I would like to express my sincere appreciation to our shareholders, the management and staff, our valued customers, vendors and all our stakeholders as well as business partners for their loyalty, perseverance, dedication and trust towards the Group. Together with the management and staff, we will continue to give our full commitment and strive for better performance in this challenging economic environment.

Lastly, I also wish to record my thanks to my fellow directors for their invaluable advice, support and continued commitment in driving the Group forward.

CHUA SENG HUAT
Executive Chairman

Dated this 30th day of April 2009