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Quarterly Report For The Financial Period Ended 30 September 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 3rd quarter ended 30 September 2018 (3QFY18), the Group registered a lower profit before tax (PBT) of RM63.8 million compared with RM641.0 million in last year's corresponding quarter (3QFY17). In 3QFY17, the Group has benefitted from the sale of plantation land of RM554.9 million. The Group's after-tax profit (PAT) for 3QFY18 totalling RM40.1 million was also lower than 3QFY17 of RM578.0 million. After allocation to non-controlling interests and perpetual sukuk holders, the Group's net profit stood at RM7.3 million (3QFY17: RM310.6 million).

For the nine-month period ended 30 September 2018 (9MFY18), the Group registered a lower PBT of RM154.5 million compared with RM847.9 million in last year's corresponding period (9MFY17) as the Group's bottom line was bolstered by the disposal of the said plantation land in 9MFY17. Excluding the disposal, the Group's PBT for 9MFY18 of RM154.5 million was lower by 47% from RM293.0 million in 9MFY17 mainly due to weaker contributions from the Plantation, Property and Heavy Industries Divisions. Cumulative PAT stood at RM76.9 million (9MFY17: RM718.1 million). After considering the allocation to noncontrolling interests and perpetual sukuk holders, the Group incurred a net loss of RM14.2 million compared with a net profit of RM359.1 million in 9MFY17.

For 9MFY18, the Group recorded an undeviating revenue with 9MFY17 of RM7.2 billion. The Plantation Division registered a revenue of RM427.4 million, a drop of 21% from RM541.9 million for 9MFY17, mainly due to declines in palm product prices and FFB production. For the nine-month period, the Heavy Industries Division also posted a lower revenue of RM578.9 million (9MFY17: RM1,170.3 million) primarily due to lack of ship repair activities. In addition, the 9MFY17's revenue for Heavy Industries Division was bolstered by contribution from MHS Aviation which had since been scaled down. The Property Division's revenue decreased by 7%, 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 an 18% increase in revenue to RM3.9 billion (9MFY17: RM3.3 billion), largely due to higher fuel prices. Revenue for the Finance & Investment Division also improved to RM147.3 million (9MFY17: RM141.2 million). For 9MFY18, the Pharmaceutical Division's revenue was largely consistent with last year's corresponding period.

The Plantation Division ended 9MFY18 with a deficit of RM41.6 million (9MFY17: PBT of RM656.4 million), as the bottom line was impacted by declines in palm product prices and FFB production, as well as the start-up expenses for Pertama estate. The huge disparity in result was also due to gain on disposal of plantation land recognised in 9MFY17 as mentioned above. For 9MFY18, the average selling price of CPO was RM2,391 per MT, down by RM480 or 17% from RM2,871 per MT in 9MFY17. Similarly, the average PK price of RM1,924 per MT was lower by RM554 or 22% from RM2,478 per MT in 9MFY17. FFB production for 9MFY18 stood at 660,088 MT, down by 5% from 696,668 MT recorded in 9MFY17. Oil and kernel extraction rates averaged at 21.1% (9MFY17: 20.9%) and 4.4% (9MFY17: 4.3%) respectively.

The Trading & Industrial Division achieved a higher PBT for 9MFY18 of RM117.4 million (9MFY17: RM87.3 million) mainly due to stockholding gains as well as better operating margins and sales volumes attained by Boustead Petroleum Marketing (BPM). The Pharmaceutical Division posted a higher cumulative PBT of RM45.0 million (9MFY17: RM39.3 million) mainly due to higher demand from Government hospitals and lower operating costs.

The Finance & Investment Division closed the nine-month period with a higher PBT of RM77.1 million (9MFY17: RM47.5 million). This was accomplished on the back of better contributions from Affin Bank, Boustead Cruise Centre, Cadbury and Kao. In addition, Irat Properties, a joint venture, recorded a lower deficit largely due to reduced direct operating costs. For 9MFY18, Affin Bank registered a higher contribution mainly due to increase in Islamic banking income, net fees and commission income and net gain on financial instruments.

The Property Division ended 9MFY18 with a higher deficit of RM13.3 million (9MFY17: RM5.8 million). Despite the progress made by property development activities and reduced share of loss in Boustead Ikano, a joint venture, the result was negated by weaker contribution by hotel segment from lower occupancy rate attained.

For 9MFY18, the Heavy Industries Division incurred a deficit of RM30.1 million (9MFY17: surplus of RM23.2 million) on weaker results from Boustead Naval Shipyards and MHS Aviation. For the nine-month period, Boustead Naval Shipyard (BNS) incurred a deficit mainly due to weaker performance in both shipbuilding and ship repair activities. MHS Aviation (MHSA) also registered a higher deficit in 9MFY18 as its current operation has been scaled down. Boustead Heavy Industries Corporation (BHIC) on the other hand, registered a higher pre-tax profit of RM32.1 million (9MFY17: RM30.1 million) mainly due to profits recognised upon finalisation of the submarine's Second Extended ISS (EISS 2) contract with the Royal Malaysian Navy.

Statement of Financial Position

As at 30 September 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 9MFY18, the Group recorded a higher cash inflow from operation of RM449.3 million (9MFY17: RM317.1 million) mainly due to higher collection from Heavy Industries Division. The investing activity incurred a cash outflow for the nine-month period of RM1,119.7 million mainly due to payment for the purchase of Pertama estate in Sabah. On the other hand, the cash inflow from investing acticity in 9MFY17 of RM327.3 million was primarily from the disposal of plantation land. The financing activity for the nine-month period recorded cash inflow of RM807.8 million (9MFY17: cash outflow of RM847.2 million) on the drawdown of revolving credit to finance the purchase of the said estate.

Prospects

The economy is expected to be challenging for the rest of 2018, as the growth in global and domestic fronts has settled into a slower pace. The global economy has been disrupted by the moderating international trade due to the heightened trade tensions and protectionist sentiments. A reduction in global demand will dim the trade and export prospects of Malaysia. However, the domestic economy is expected to remain favourable although moderate, underpinned by continued strong growth in private consumption as a result of fiscal reforms such as the removal of goods and services tax (GST) and the standardisation of minimum wage across the country. Despite the easing of public investment, the long-term prospects for Malaysia 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 are two key factors that influence the Plantation Division's profitability. The Division's crop production is much affected by labour shortages and operating issues in the Sarawak region but supported by the contribution from the recently acquired Pertama estates. CPO prices slid downwards during the 3rd quarter in the midst of increased supplies and stockpiles. The trade war between China and United States had caused soy oil prices to fall and this also led to lower palm oil prices. However, demand remained lacklustre as the purchasing power of India was hit by its week currency against US currency. The forecast of bumper soyabean production in Brazil for 2018/19 growing season is also putting a damper on CPO prices. The price outlook for the remaining months of the year is expected to remain challenging due to high palm oil inventories and slow export growth.

The Pharmaceutical Division delivered an improved performance, achieved on the back of higher demand from Government hospitals coupled with lower operating expenses. The Division is confident on a positive outlook ahead, particularly in light of the Government's recent Budget 2019 announcement, which reflects a strong commitment towards scaling up the healthcare sector. This includes an increased allocation of approximately RM29.0 billion for the Ministry of Health with RM10.8 billion slated for the provision of medicine and upgrading efforts for health services at clinics and hospitals. This certainly bodes well for the Division's prospects, as the Division is well-positioned to tap these opportunities. Moving forward, the Division remains committed to expanding its market presence in the private sector via strategic marketing initiatives alongside concurrent focus 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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