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Quarterly Report For The Financial Period Ended 30 September 2017

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Unaudited Condensed Consolidated Income Statement

Unaudited Condensed Statement Of Financial Position

Performance Review

For the 3rd quarter of FY2017 (3QFY17), the Group registered a commendable pre-tax profit (PBT) of RM643.1 million, an increase of 434% over 3rd quarter of FY2016 (3QFY16) of RM120.4 million, on the back of gain on disposal of plantation land of RM554.9 million. The Group's after-tax profit (PAT) for 3QFY17 totalling RM581.4 million was also superior than 3QFY16 of RM93.3 million. The Group's PBT for the cumulative nine-month period of FY2017 (9MFY17) rose by 76% to RM876.5 million from RM497.9 million recorded in last year's corresponding period (9MFY16). The vast improvement was mainly due to higher gain on disposal of plantation land, better palm products prices and lower finance cost. The Group's PAT for 9MFY17 of RM749.3 million was also higher than 9MFY16 of RM404.2 million.

For 9MFY17, the Group posted a revenue of RM7.2 billion, up by 22% from RM5.9 billion recorded in 9MFY16. For the cumulative period, the Plantation Division's revenue increased by 6% on the back of better palm product prices and higher FFB production. The Trading & Industrial Division's revenue for 9MFY17 of RM3.3 billion was 28% better than 9MFY16 mainly due to higher fuel prices. For 9MFY17, the revenue for Heavy Industries Division was 80% better when compared to 9MFY16 on higher billing for LCS and ship repair projects as well as recognition of revenue from Littoral Mission Ship (LMS) project. Revenue from Pharmaceutical Division was also higher by 6% mainly due to higher orders from government hospitals and growth in Indonesian segment. On the other hand, Property Division's revenue for 9MFY17 reduced by 18% from 9MFY16 mainly due to lower contribution from property development activities in Taman Mutiara Rini, Johor. Revenue from Finance & Investment Division for 9MFY17 was also down by 3%.

For 9MFY17, the Plantation Division recorded a higher PBT of RM685.0 million (9MFY16: RM201.4 million) mainly due to better gain on disposal of plantation land of RM554.9 million (9MFY16: RM124.2 million). Excluding this gain, the PBT for the period was also higher by 69% on the back of better palm product prices and lower finance cost. The average CPO selling price for 9MFY17 was RM2,871 per MT, up by RM396 or 16% from RM2,475 per MT achieved in 9MFY16. Similarly, the average PK price of RM2,478 per MT for 9MFY17 was higher by RM183 or 8% from RM2,295 per MT attained in 9MFY16. FFB production for 9MFY17 stood at 696,668 MT, an increase of 5% from 9MFY16's crop, reflecting the improvement in yields post El-Nino. Oil and kernel extraction rates averaged at 20.9% (9MFY16: 21.5%) and 4.3% (9MFY16: 4.4%) respectively.

Trading & Industrial Division ended 9MFY17 with a higher PBT of RM87.3 million (9MFY16: RM80.9 million) mainly due to higher stockholding gain registered by Boustead Petroleum Marketing (BPM) as a result of improvement in fuel prices. In addition, contribution from UAC Berhad was also better in 9MFY17. Finance & Investment Division closed 9MFY17 with a PBT of RM47.5 million (9MFY16: RM45.5 million) as the Division's bottom line had benefitted from lower net finance cost of RM1.5 million (9MFY16: RM17.9 million) arising from reduced borrowings and placement of surplus funds from Right issue proceeds. Nevertheless, this favourable impact was partly negated by lower contribution from Affin Holdings. During the period, Affin Holdings registered a lower PBT as the increase in other operating income, Islamic banking income and net interest income was offset by the higher overhead expenses and allowance for loan impairment.

For 9MFY17, the Heavy Industries Division recorded a PBT of RM23.2 million, which was an improvement from the deficit of RM133.8 million recorded in 9MFY16. This was achieved on the back of better result from Boustead Naval Shipyard (BNS) and MHS Aviation (MHSA). BNS closed 9MFY17 with a surplus, mainly due to good progress of works on LCS and ship repair projects as well as recognising income from LMS project. BNS had also benefitted from reversal of provision for Liquidated Ascertain Damages on ship repair projects. MHSA also recorded a lower deficit for 9MFY17 mainly due to recognition of monthly standing charges that were previously deferred pending negotiation with Petronas on Joint Operations contract.

For 9MFY17, Pharmaceutical Division registered a lower PBT of RM39.3 million (9MFY16: RM52.9 million) as the good contribution from concession business and Indonesia segments was negated by the lower production from our manufacturing facilities in 2QFY17. Property Division ended 9MFY17 with a deficit of RM5.8 million (9MFY16: surplus of RM251.0 million). The bottom line for 9MFY16 had benefitted from the one-off gain in disposal of associate company of RM209.5 million. For 9MFY17, the Division's result was also impacted by higher share of loss in a joint venture due to start-up cost of MyTOWN, the newly opened shopping centre and lower earnings from property development activities in Taman Mutiara Rini, Johor. On the other hand, hotel segment achieved better result for 9MFY17 on the back of improved occupancy rate.

Statement of Financial Position

As at 30 September 2017, the Group's receivables was higher as compared to 31 December 2016 on increased in trade balances for Pharmaniaga Berhad and contribution for capital expenditure of joint ventures. The increase in due from customers on contracts and trade & other payables as compared with the audited for last year was mainly due to variation in milestones achieved for LCS project under BNS. Meanwhile, the decrease in cash and bank balances from 31 December 2016's position was mainly due to the settlement of borrowings during 9MFY2017.

Statement of Cash Flows

For 9MFY17, the Group recorded a higher cash flow from operating activities of RM317.1 million (9MFY16: RM91.9 million) mainly due to better palm product and fuel prices as well as higher collection for projects under BNS and concession business under Pharmaniaga Berhad. During the period, the Group also received RM618.0 million from the sale of plantation assets which was partly used to pare down borrowings

Prospects

The remainder of the year is expected to continue to be challenging, on both global and domestic fronts. Whilst global economy is projected to expand in 2017, downside risks such as sluggish productivity in major economies, rising protectionism, geopolitical tensions, effect of climate changes and volatility in the financial markets might hamper growth. On the domestic front, volatility of commodity price and concern on rising cost of living may impede growth. Nevertheless, long-term prospects are positive for Malaysian economy, which is 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 the Malaysian economy certainly augurs well for the Group.

Plantation Division's prospect for the rest of 2017 is dependent on the price direction of CPO and crop production. Although Peninsular Malaysia and Sabah regions have shown some improvements in FFB yields, the erratic weather conditions and labour shortage coupled with difficult ground conditions in Sarawak may dampen crop production. For the current financial year, the gain on disposal of plantation land of RM554.9 million should contribute significantly to the Group's and Division's profit. To-date CPO prices have outperformed expectations as production recovery was not as strong as expected after 2015/2016 El-Nino. September's CPO stockpiles rose to their highest since February 2016, 2.02 million tonnes on the back of weaker than expected export growth, as more of Malaysia's export share was lost to Indonesia which catered to price-sensitive customers such as India and China. However, this did not give rise to extreme selling pressure. The current price levels are expected to continue, if not move upward, should CPO production fail to meet recovery expectations. In addition, good global import demand and comfortable stock levels are also expected to lend continuing support to prices.

Pharmaceutical Division, driven by research and development effort, is on track to deliver new products offering for both local and overseas markets in the coming years ahead which should further strengthen earnings potential. 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. Meanwhile, 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 Holding.

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