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Quarterly Report For The Financial Period Ended 31 March 2017

Financials Archive

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Unaudited Condensed Consolidated Income Statement

Unaudited Condensed Statement Of Financial Position

Performance Review

For the 1stquarter, the Group registered an unaudited pre-tax profit of RM71 6 million, which was almost double the last year's corresponding period's profit of RM36 3 million, on the back of better contribution from Plantation, Finance & Investment and Trading & Industrial Divisions. The Group's profit after taxation of RM40 9 million for the current quarter was also better than corresponding period last year's profit of RM9.5 million

The Group's revenue for the current quarter of RM2.4 billion was 28% above last year's corresponding period's revenue of RM1.9 million Plantation Division's revenue was better by 38%, driven by buoyant palm product prices and better PI-13 production. Similarly, Trading & Industrial Division's revenue was higher by 45% against previous year mainly due to increase in fuel price. The revenue for Heavy Industries Division was up by 29% on the back of higher revenue for LCS and ship repair projects. Pharmaceutical Division's revenue was also better by 11% on improved demands from Government hospitals under concession business and growth in private sector business and Indonesia operation. The current quarter's revenue for Property and Finance & Investment Divisions was at par with previous year.

For the 3-month period, Plantation Division posted a higher pre-tax profit of RM57.1 million (2016: RM44 4 million) on the back of better palm product prices and 141413 production. Excluding the gain on disposal of plantation assets in the last year's corresponding period of RM34.6 million, the Division's profit was up by 483%. CPO achieved an average selling price of RM3,166 per MT, up by RM899 or 40% from last year's corresponding period's price of RM2,267 per MT. Similarly, PK price of RM3,204 per MT was better by RM1,297 or 68% against last year's corresponding period's price of RM1,907 per MT. 1414B production for the current quarter of 209,526 MT was an increase of 13% from 185,205 MT achieved in the same period last year. The crop uptrend was largely attributed to improvement in yields as the palms recover from the effect of El-Nino. Oil and kernel extraction rates averaged at 20.7% (2016: 21.5%) and 4.5% (2016: 4.5%) respectively.

Pharmaceutical Division closed the quarter with a higher pre-tax profit of RM23.2 million (2016: RM21 5 million) on increased contribution from concession business segment and lower amortisation of Pharmacy Information System. In addition, finance cost for the quarter was also lower by 15% as compared with last year's corresponding period. Trading & Industrial Division also ended the 1st quarter with a higher pre-tax profit of RM28.5 million (2016: RM18.9 million). During the period, BHPetrol registered a better contribution on lower stockholding loss as a result of better fuel prices and higher sales volume attained. UAC Berhad also contributed higher profit during the current quarter.

For the 1st quarter, Finance & Investment Division recorded a higher pre-tax profit of RM20.8 million (2016: RM13.2 million). The Division's bottom line had benefitted from the lower net finance cost of RM0.9 million (2016: RM10.1 million) on reduced borrowings and placement of surplus funds from Right Issue proceeds. The contribution from Affin Holdings was also higher mainly due to better other operating income, Islamic banking income and net interest income.

In the 1st quarter, Property Division incurred a deficit of RM7.4 million (2016: surplus of RM11 3 million) mainly due to start-up cost for the newly opened MyTOWN shopping complex under a joint venture, Boustead Ikano. In addition, the Division's bottom line for the previous year was bolstered by the higher margin from the sale of bungalow and petrol station lots.

Heavy Industries Division ended the period with a lower deficit of RM50.6 million (2016: RM73 0 million) mainly due to turnaround by Boustead Naval Shipyard (BNS) and Boustead Heavy Industries Corporation, which had partly compensated for the deficit incurred by MHS Aviation (MHSA). For the period, BNS registered a strong result on the back of better progress of works for the LCS and ship repair projects. The bottom line also benefitted from the reversal of provision for cost on KD Perantau and reversal of long outstanding debts pertaining to the salvage work for Service Life Extension Program (SLEP). On the other hand, the higher deficit incurred by MHSA was mainly due to continued suspension of operation for H225 aircraft in Kerteh.

Prospects

We anticipate 2017 to be a challenging year, in both domestic and international fronts, as the presence of new and prevailing downside risks will continue to dominate the global economy. These include future changes in US policies, uncertainties over the length and outcome of Brexit negotiation between UK and EU as well as other geopolitical risks. On the domestic front, volatility of major commodity prices and slower domestic demand may impede growth. Nevertheless, prospects will continue to be positive as the Malaysian economy is well supported by the underlying strong economic fundamentals, sound financial system, accommodative monetary policy 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 profitability in 2017 is dependent on the price direction for CPO and crop production. FFB yields has improved since the damaging effects of El Nino and the uptrend is anticipated to continue. Crop recovery from the Sarawak estates with land issues is however uncertain. The buoyant CPO prices enjoyed during the quarter has somewhat softened amid bearish news of bumper soybean crop in the United States and South America. This, together with growing pressures over supplies of biodiesel to USA and Europe as well as low crude oil prices has led to a less optimistic price outlook for palm oil. The Group is of the view that market is expected to remain volatile in the second half of the year on expectations of improved CPO production and the build up in inventories.

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

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 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, Affm Holdings.

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