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Quarterly Report For The Financial Period Ended 30 September 2016

Financials Archive

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Unaudited Condensed Consolidated Income Statement

Unaudited Condensed Statement Of Financial Position

Performance Review

For the 3rd quarter, the Group registered an unaudited profit before tax of RM120.4 million, an increase of 81% over last year's corresponding period's pre-tax profit of RM66.7 million. The Group's profit after tax totalling RM93.3 million was also better than last year's corresponding period's profit of RM46.3 million. Cumulatively, the Group's pre-tax profit stood at RM479.2 million, a huge improvement over last year's corresponding period's pre-tax profit of RM219.5 million on the back of gain on disposal of Jendela Hikmat and sale of lands. The Group's profit after tax for the nine-month period of RM404.2 million was also higher from last year's corresponding period of RM140.2 million.

For the nine-month period, the Group registered revenue of RM5.9 billion, downed 4% from the corresponding period last year. Plantation Division's revenue was 13% higher mainly due to better palm products prices. Pharmaceutical Division's revenue was up by 6% on improved contribution from Indonesian operations. On the other hand, Heavy Industries Division's cumulative revenue was 28% below last year's corresponding period mainly due to lower contribution from LCS project and suspension of operation for H225 aircraft in Kerteh and slowdown in oil & gas industry. Trading & Industrial Division's turnover was 7% short of previous year, mainly due to weaker fuel price. For the nine-month period, Property Division's revenue was marginally lower mainly due to weaker contribution from hotel segment.

Plantation Division closed the cumulative period with an improved pre-tax profit of RM195.0 million (2015:RM88.7million) mainly due to higher gain on disposal of lands of RM117.8 million (2015:RM57.2million). The bottom line also benefitted from better palm products prices. For the nine-month period, CPO registered an average price of RM2,475 per MT, an increase of RM315 or 15% against last year's corresponding period's average of RM2,160 per MT. PK also achieved a better average price of RM2,295 per MT, up by RM790 or 52% as compared to last year's corresponding period's average price of RM1,505 per MT. Cumulative FFB crop totalling 660,497 MT was 14% below last year's corresponding period's crop of 772,083 MT. The shortfall in FFB production was mainly due to extreme dry weather effects of the El-Nino phenomenon, land disputes in Sarawak and shortage of skilled labour for tall palms. For the nine-month period, oil and kernel extraction rates were marginally lower at 21.5% (2015: 21.8%) and 4.4% (2015: 4.6%) respectively.

Property Division's pre-tax profit for the nine-month period increased to RM239.3 million (2015:RM31.2million) on the back of gain on disposal of an associate, Jendela Hikmat of RM198.3 million. Nevertheless, the operating profit attained was lower at RM95.5 million (2015:RM98.9million) mainly due to weakened hotel segment's performance and unrealised forex loss. On the other hand, Pharmaceutical Division ended the cumulative period with a lower pre-tax profit of RM52.9 million (Lastyear:RM70.7million) mainly due to weaker operating profit and higher finance cost. For the cumulative period, the Division's operating profit stood at RM84.9 million (Last year:RM 97.0 million) on lower contribution from concession business segment. Included in the operating profit for the current period is the reversal on amortisation of Pharmacy Information System cost as mentioned in Note 6 above.

For the nine-month period, Finance & Investment Division registered a higher pre-tax profit of RM45.5 million(2015:RM21.4 million) on improved contribution from Affin Group, which recorded a lower allowance for loan impairment. In addition, interest income was also higher mainly due to placement of surplus funds from Right Issue proceeds. Trading & Industrial Division also ended the nine-month period with a better pre-tax profit of RM80.4 million(2015:RM39.1million) on the back of better contribution from UAC Berhad and Boustead Petroleum Marketing (BPM) as well as gain on disposal of assets by Johan Ceramics Berhad and BPM.

Heavy Industries Division closed the cumulative period with a higher loss of RM133.9 million (2015: RM31.6million) mainly due to deficit incurred by Boustead Naval Shipyard and MHS Aviation. For the nine-month period, Boustead Naval Shipyard recorded a higher deficit mainly due to downward revision of margin for LCS project, additional cost to completion for KD Perantau as well as lack of new ship repair and ship buildin gprojects. MHS Aviation ended the cumulative period with a loss as the bottom line was impeded by suspension of operation for H225 aircraft in Kerteh and slowdown in oil & gas industry.

Prospects

The remainder of the year is expected to continue to be challenging, both globally and domestically, amid uncertainties of post-Brexit referendum, the outcome of US Presidential election, capital market volatility and other geopolitical risks. On domestic front, prolonged low oil price and slower domestic consumption may impede growth. Nevertheless, the prospect will continue to be positive as the country's fundamentals remain strong, including a stable labour market with full employment, manageable inflation, healthy foreign reserve, sound financial system as well as the implementation of various government initiatives. The diversified nature of the Group's business in six segments of the Malaysia economy would augur well for the Group.

Plantation Division's prospects for the rest of the year will be much driven by CPO prices and crop production. Nonetheless, the Group expects to achieve reasonable prices for CPO and some improvements in crop production, which is likely to be moderated by unresolved conflicts in certain Sarawak estates. CPO price reached a new high in September 2016 on the back of higher than expected surge in market demand coupled with the continuing dampened crop prodution after El Nino. The prevailing weak global economy and adverse effects of El Nino on production is expected to remain while demand could be affected by further release of rapeseed oil reserves in China and weaker Renminbi currency against the greenback. Never the less CPO prices are expected to remain encouraging thus allaying concerns and contributing towards favourable outcomes.

We are optimistic that Pharmaceutical Division is well positioned to capitalise on opportunities in the growing health care sector, both domestically and internationally. The Division remains committed to reinforcing its leadership position in Malaysia's pharmacuetical sector by leveraging this growth potential, coupled with its on going drive to tighten operational efficiencies.

Progress billings from the on going 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 project and 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 Holdings.

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