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Quarterly Report For The Financial Period Ended 31 March 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 first quarter ended 31 March 2018 (1QFY18), the Group delivered a higher profit before tax (PBT) of RM70.3 million, reflecting a 24% increase compared with RM56.9 million in last year's corresponding quarter (1QFY17). This was achieved on the back of an improved performance by the Heavy Industries Division as well as better share of results from associates and joint ventures. The Group also posted a higher profit after tax of RM38.1 million for the quarter under review compared with RM25.7 million in the same quarter last year.

In 1QFY18, the Group recorded a revenue of RM2.2 billion, down by 5% from RM2.4 billion in 1QFY17. The Plantation Division turned in a revenue of RM154.6 million, a drop of 18% from RM189.0 million in 1QFY17. This was mainly due to lower palm product prices. The Heavy Industries Division also posted a lower revenue of RM157.2 million for the quarter under review (1QFY17: RM279.6 million) mainly due to slower progress for the Littoral Combat Ship project and ship repair projects. The Property Division's revenue decreased by 18%, mainly as a result of lower contribution from property development activities in Taman Mutiara Rini, Johor. Nevertheless, the Trading & Industrial Division recorded a 5% increase in revenue to RM1.2 billion (1QFY17: RM1.1 billion), primarily driven by volume growth for the retail petroleum business. Revenue for the Pharmaceutical and Finance & Investment Divisions for the quarter under review was largely consistent with 1QFY17.

The Plantation Division closed the 1st quarter with a lower PBT of RM7.8 million (1QFY17: RM42.4 million), as lower palm product prices impacted the bottom line. This offset the positive effect of lower finance costs of RM1.8 million (1QFY17: RM9.0 million), arising from reduced borrowings and higher FFB production. During the quarter under review, the average selling price of CPO was RM2,491 per MT, down by RM675 or 21% from RM3,166 per MT in 1QFY17. Similarly, the average PK price of RM2,188 per MT was lower by RM1,016 or 32% from RM3,204 per MT in 1QFY17. FFB production for 1QFY18 was 226,323 MT, up by 8% from 209,526 MT in 1QFY17, mainly due to recovery in yields post El Nino. Oil and kernel extraction rates averaged at 20.5% (1QFY17: 20.7%) and 4.5% (1QFY17: 4.3%) respectively.

The Finance & Investment Division closed the quarter with an increased PBT of RM30.8 million (1QFY17: RM20.8 million). This was achieved on the back of better share of results from associates and joint ventures. Affin Bank, an associate, recorded an improved contribution mainly due to a write back of loan impairment, increased net fee and commission income as well as lower overhead expenses. Irat Properties, a joint venture, recorded a lower deficit largely due to reduced direct operating costs. The Trading & Industrial Division registered a lower PBT of RM27.7 million (1QFY17: RM28.5 million). Whilst Boustead Petroleum Marketing (BPM) recorded a higher PBT primarily due to improved operating margins and sales volume, this was offset by a reduced PBT from UAC Berhad as a result of lower revenue.

The Heavy Industries Division closed the quarter with a deficit of RM12.3 million, an improvement from a deficit of RM50.6 million in 1QFY17. This was driven by stronger contributions from Boustead Heavy Industries Corporation (BHIC) and Boustead Naval Shipyard (BNS). BHIC posted a PBT of RM5.0 million for the quarter under review (1QFY17: RM2.8 million), primarily due to better share of profit from a joint venture, while BNS recorded a higher contribution as a result of lower operating costs. MHS Aviation (MHSA) also registered a lower deficit in the first quarter due to reduced operating costs, as its operations were downsized.

The Pharmaceutical Division recorded a higher PBT of RM24.4 million (1QFY17: RM23.2 million). This was mainly due to an increased contribution from the private sector business and continuous cost optimisation measures, although this was moderated by a lower contribution from the Indonesia segment. The Property Division recorded a higher deficit of RM8.1 million (1QFY17: RM7.4 million). Despite lower net finance costs and reduced share of loss from a joint venture, Boustead Ikano, this was moderated by weaker results from the hotel segment.

Statement of Financial Position

As at 31 March 2018, cash and bank balances increased as compared to 31 December 2017's position mainly due to drawdown made ahead of payment for acquisition of oil palm plantation in Sabah and working capital purpose.

Statement of Cash Flows

For the 1st quarter, the Group recorded a lower cash flow from operating activities of RM98.5 million (1QFY17: RM120.1 million) mainly due to lower palm products prices and reduced collection from Pharmaniaga Berhad. Nevertheless, this was compensated by the surplus in cash flow from financing activities of RM247.9 million (1QFY17: deficit of RM655.6 million) mainly due to drawdown of borrowings to finance working capital.

Prospects

The outlook for 2018 remains positive in both international and domestic fronts. The global economy is projected to expand at a faster pace in 2018, which will be driven primarily by private consumption. Domestic growth prospects are expected to be supported by strengthening global economic condition, continued expansion in private sector activities as well as positive spill overs from external sectors. Nevertheless, downside risks to growth persist. These include unfavourable monetary and regulatory policy shifts in advanced economies, rising trade protectionism by major trading partners and re-emergence of volatile commodity prices could also weigh down global and domestic economies. 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.

The Plantation Division's profitability is influenced by crop production and CPO prices. For the current financial year, the proposed sale of 138.89 hectares of Malakoff Estate, upon completion in the 3 rd quarter of 2018, will contribute positively to the Group's earnings. FFB yields are improving in Peninsular Malaysia and Sabah regions while labour shortage coupled with the difficult ground conditions are hampering operations in Sarawak. The recent acquisition of approximately 11,579 hectares of plantation land in the district of Labuk and Sugut, Sabah is expected to boost the Division's production. The global vegetable oil production for 2018 is forecasted to exceed consumption and this is likely to suppress demand for palm oil and in turn, pushes up inventory levels. Although the price outlook for CPO is not encouraging, EU's removal of anti-dumping duty for biodiesel from Indonesia is positive news for the sector coupled with the likelihood of higher tariffs on US soyabean by China may lend support to palm oil as a potential edible oil substitute. In addition, the possibility of crude mineral oil prices remaining above USD70 per barrel could encourage more biodiesel production in Indonesia using palm oil as feedstock.

The Pharmaceutical Division continues to solidify its business fundamentals, while making progress in its expansion plans despite persistently tough market conditions. The growing healthcare sector continues to offer robust prospects for the Division to leverage on as a leading pharmaceutical manufacturer. With improved contributions from its concession business as well as higher demand from the private sector business and its Indonesian operations, the Division is poised to further tap into vast market opportunities, both in Malaysia and abroad.

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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