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Quarterly Report For The Financial Period Ended 30 June 2018

Financials Archive

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Unaudited Condensed Consolidated Income Statement

Income Statement

Unaudited Condensed Statement Of Financial Position

Balance Sheet

Performance Review

Performance Review

For the 2nd quarter ended 30 June 2018 (2QFY18), the Group registered a lower profit before tax (PBT) of RM20.4 million compared with RM150.0 million in last year's corresponding quarter (2QFY17). This was mainly due to reduced contributions from the Plantation, Heavy Industries and Property Divisions. After-tax loss stood at RM1.3 million (2QFY17: after-tax profit of RM114.4 million) while net loss after allocation to non-controlling interests and perpetual sukuk holders stood at RM27.6 million (2QFY17: net profit of RM52.5 million).

For the half-year period ended 30 June 2018 (6MFY18), the Group registered a lower PBT of RM90.7 million compared with RM206.9 million in last year's corresponding period (6MFY17). This was due to weaker contributions from the Plantation, Property and Heavy Industries Divisions. Cumulative profit after tax stood at RM36.8 million (6MFY17: RM140.1 million). After taking into account the allocation to non-controlling interests and perpetual sukuk holders, the Group incurred a net loss of RM21.5 million compared with a net profit of RM48.5 million in the previous year's corresponding period.

For 6MFY18, the Group recorded a revenue of RM4.6 billion, down by 3% from RM4.8 billion in 6MFY17. The Plantation Division registered a revenue of RM296.4 million, a drop of 17% from RM358.5 million for 6MFY17, mainly due to lower palm product prices and FFB production. For the six-month period, the Heavy Industries Division also posted a lower revenue of RM340.8 million (6MFY17: RM725.3 million) primarily due to slower progress of work for the Littoral Combat Ship (LCS), Littoral Mission Ship (LMS) and ship repair projects. The Property Division's revenue decreased by 13%, mainly as a result of lower contribution from property development activities in Taman Mutiara Rini, Johor and hotel operations. Meanwhile, the Trading & Industrial Division recorded a 13% increase in revenue to RM2.4 billion (6MFY17: RM2.2 billion), largely due to higher fuel prices. Revenue for the Pharmaceutical Division also improved to RM1.2 billion (6MFY17: RM1.1 billion) on the back of increased demand from Government hospitals. For 6MFY18, the Finance & Investment Division's revenue was largely consistent with 6MFY17.

The Plantation Division ended 6MFY18 with a deficit of RM18.4 million (6MFY17: PBT of RM59.4 million), as the bottom line was impacted by sharp fall in palm product prices and higher operating costs. For 6MFY18, the average selling price of CPO was RM2,457 per MT, down by RM512 or 17% from RM2,969 per MT in 6MFY17. Similarly, the average PK price of RM2,001 per MT was lower by RM619 or 24% from RM2,620 per MT in 6MFY17. FFB production for 6MFY18 was 431,349 MT, down by 2% from 440,075 MT in 6MFY17. Oil and kernel extraction rates averaged at 20.7% (6MFY17: 20.8%) and 4.4% (6MFY17: 4.3%) respectively.

The Trading & Industrial Division registered a commendable PBT of RM74.1 million (6MFY17: RM47.4 million) mainly due to stockholding gains as well as better operating margins and sales volumes by Boustead Petroleum Marketing (BPM).

The Finance & Investment Division closed the six-month period with a higher PBT of RM51.3 million (6MFY17: RM40.5 million). This was achieved on the back of better contributions from Boustead Cruise Centre, Cadbury and Kao. In addition, Irat Properties, a joint venture, recorded a lower deficit largely due to reduced direct operating costs. However, Affin Bank, an associate, recorded a lower contribution mainly due to increase in credit impairment losses as well as reduction in interest income and net gain on financial instruments.

The Heavy Industries Division closed 6MFY18 with a deficit of RM29.5 million (6MFY17: PBT of RM45.9 million), as a result of weaker performances from all operating units. Boustead Heavy Industries Corporation (BHIC) registered a lower contribution of RM14.4 million (6MFY17: RM19.1 million), as the bottom line for 6MFY17 was bolstered by conditional variation order claims for the Belum topside project. For the six-month period, Boustead Naval Shipyard (BNS) incurred a deficit mainly due to weaker performance from both shipbuilding and ship repair activities. MHS Aviation (MHSA) also registered a deficit in 6MFY18 as its current operation is being scaled down.

The Pharmaceutical Division recorded a higher cumulative PBT of RM31.9 million (6MFY17: RM28.7 million) mainly due to increased contribution from the concession business, which compensated for higher operating expenses.

Meanwhile, the Property Division ended the six-month period with a higher deficit of RM18.7 million (6MFY17: RM15.0 million). Despite reduced share of loss from a joint venture, Boustead Ikano, this was dampened by weaker results from the property development and hotel segments, as well as unrealised exchange loss from the property investment segment.

Statement of Financial Position

As at 30 June 2018, property,plant and equipment increased as compared to 31 December 2017's position mainly due the acquisition of new estates in Sabah. Subsequently, the borrowings increased as compared to 31 December 2017's position from additional borrowings to finance the acquisition of these estates.

Statement of Cash Flows

For 6MFY18, the Group recorded a higher cash inflow from operation of RM408.3 million (6MFY17: RM183.3 million) mainly due to higher collection from Heavy Industries Division. On the other hand, the cash outflow from investing activity for the six-month period was higher at RM894.3 million (6MFY17: RM117.6 million) mainly due to payment for the purchase of Pertama estate in Sabah which was financed through the drawdown of revolving credit. Hence, the financing activity recorded cash inflow of RM664.2 million (6MFY17: cash outflow of RM699.1 million).

Prospects

The outlook for 2nd half of 2018 remains favourable in both global and domestic fronts. The global economy is projected to expand synchronically with the growth in private consumption, attributed to improvements in labour market conditions and the surge in trade activities due to better commodity prices. On the domestic front, the Malaysian economy is expected to grow at a moderate pace. Whilst the private consumption backed by stable employment continues to drive domestic demand, the public spending and investments are expected to expand at slower pace. Notwithstanding the positive view, the escalating US-China trade war poses risk on global trade and will have an impact on Malaysia. Long-term prospects for Malaysian economy are positive, which are supported by strong economic fundamentals, a sound financial system, an accommodative monetary policy as well as the implementation of various Government initiatives. As such, the diversified nature of BHB in six core areas of Malaysian economy certainly augurs well for the Group.

Crop production and selling prices influence the Plantation Division's profitability. For the current financial year, the expected gain from the proposed sale of 138.89 hectares of Malakoff Estate will uplift the Division's profit for the year. While the Division's productivity is influenced by availabilty of labour and difficult operating conditions in Sarawak, the recently acquired Pertama estates will contribute towards the Division's crop production. For the 2nd quarter of 2018, CPO prices came under pressure due to lacklustre exports caused by the reinstatement of CPO export duty in May 2018 and the US-China trade conflicts which had led to a sharp drop in soy prices. The price direction for palm oil for the rest of the year is likely to be governed by the production trend from Indonesia and Malaysia, soybean supplies, biodiesel offtake in Indonesia, Indian demand, development of US China trade tensions and its implications on prices of crude mineral oil. The Division is cautiously optimistic that palm oil price will pick up in the last quarter of 2018.

Despite challenging market conditions, Pharmaceutical Division was able to deliver sustained results for the 1st half of the year on the back of its solid fundamentals and continuous operational improvements. The Division expects to continue in delivering high standards of services and widening its product offerings for domestic and international markets via research and development efforts to meet the evolving needs of the healthcare sector. The Division is committed to expanding its market presence in the private sector, particularly in the consumer healthcare segment via strategic marketing initiatives. The Indonesia operations remain a key contributor and the Division is focused on strengthening business synergies between its subsidiaries, PT Millennium Pharmacon International and PT Errita Pharma, to tap into opportunities in this growing market.

Progress billings from the ongoing and upcoming housing projects will contribute positively to the Property Division's bottom line. The Division's portfolio of well-located investment properties will generate good rentals as well as appreciation in value over time. The Division's hotel activities are expected to achieve satisfactory performance going forward but will continue to face challenges of occupancies and rates.

The LCS and LMS projects as well as defence related maintenance, repair and overhaul activities will contribute to Heavy Industries Division's performance going forward. Finance & Investment Division's earnings will largely be driven by our associate, Affin Bank Berhad.

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