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Quarterly Report For The Financial Period Ended 31 December 2017

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Unaudited Condensed Consolidated Income Statement

Unaudited Condensed Statement Of Financial Position

Performance Review

For the 4th quarter of FY2017 (4QFY17), the Group recorded a profit before tax (PBT) of RM240.5 million, a 8% decline from RM261.2 million registered in 4th quarter of FY2016 (4QFY16). Despite the fact that operating profit was higher in 4QFY17, this was offset by weaker other operating income and share of loss in joint venture companies. The Group posted after-tax profit (PAT) of RM174.0 million for the quarter under review, lower than RM184.9 million recorded in 4QFY16.

For the 2017 financial year (FY2017), the Group's PBT jumped to RM1,117.0 million, a 51% increase from last financial year's (FY2016) contribution of RM740.4 million. This commendable performance was mainly due to higher gain on disposal of plantation land and lower finance cost as well as better operating results from Plantation and Heavy Industries Divisions.

For FY2017, the Group's revenue stood at RM10.0 billion, up by 20% from RM8.4 billion registered in FY2016. Plantation Division's revenue for FY2017 was RM760.1 million, 7% higher than RM707.9 million recorded in FY2016 on the back of better palm products prices and increase in FFB production. The Trading & Industrial Division's revenue improved to RM4.5 billion from RM3.6 billion in FY2016, primarily due to higher fuel prices. For Heavy Industries Division, revenue grew by 69% on higher billing for Littoral Combat Ship (LCS) and ship repair projects as well as recognition of revenue from Littoral Mission Ship project. The Pharmaceutical Division recorded 6% increase in revenue, mainly due to higher orders from concession business and growth in Indonesia segment. On the other hand, Property Division recorded a lower revenue of RM595.8 million, a reduction of 11%, on lower contribution from property development activities in Taman Mutiara Rini, Johor. Similarly, revenue from Finance & Investment Division declined by 8% to RM181.3 million.

TPlantation Division ended FY2017 with a commendable pre-tax profit of RM732.7 million (FY2016: RM276.1 million). This was mainly due to the higher gain on disposal of plantation land of RM554.9 million (FY2016: RM124.2 million). Excluding this gain and FY2016’s profit on disposal of a Subsidiary of RM33.4 million, PBT for FY2017 improved by 50%, on the back of better CPO prices. The average selling price of CPO for FY2017 was RM2,810 per MT, up by RM226 or 9% from RM2,584 per MT last year. Similarly, the average price for PK of RM2,505 per MT grew by RM45 or 2% compared with RM2,460 per MT recorded last year. FFB production for FY2017 stood at 973,513 MT, an improvement of 7% from last year. The better crop was mainly due to recovery in yield post El-Nino in the 1 st half of the year under review. Oil and kernel extraction rates averaged at 21.0% (FY2016: 21.5%) and 4.3% (FY2016: 4.4%) respectively.

For FY2017, Trading & Industrial Division posted a lower PBT of RM132.2 million compared with RM147.4 million for FY2016, which benefitted from a gain on disposal of BPM's lands of RM34.0 million. Excluding this gain, the PBT for the year was higher by 17%, mainly due to better contribution from both BPM and UAC. Finance & Investment Division closed FY2017 with a higher PBT of RM70.7 million (FY2016: RM61.5 million). This was primarily due to reduced net finance cost of RM3.9 million (FY2016: RM17.8 million) arising from lower borrowings and placement of surplus funds from Right issue proceeds. Nevertheless, share of profit in associates was lower mainly due to weaker result from Affin Holdings, which recorded reduced PBT. Despite an increase in net fee and commission income, this was offset by higher overhead expenses and allowance for loan impairment.

In FY2017, Heavy Industries Division registered a surplus of RM73.2 million, which was an improvement from FY2016's deficit of RM120.0 million. This was mainly driven by stronger contribution from Boustead Naval Shipyard (BNS) and MHS Aviation (MHSA) although was partly offset by the impairment of goodwill for MHSA. BNS continued to make good progress on LSC and ship repair projects. BNS's bottom line had also benefitted from income on Littoral Mission Ship project and reversal of provision for Liquidated Ascertain Damages (LAD) on ship repair project. In FY2017, MHSA recorded a surplus, on the back of compensation accrued for the termination of Joint Operation contract and recognition of monthly standing charges that was previously deferred pending the negotiation of the settlement for Joint Operation contract. On the other hand, Boustead Heavy Industries Corporation (BHIC) posted a weaker results as the bottom line was impacted by the share of loss in joint venture company which resulted from provision from LAD for In-Service Support for the Royal Malaysian Navy SCORPENE Submarines contract.

Pharmaceutical Division registered a higher PBT for FY2017 of RM54.1 million (Y2016: RM51.9 million) on the back of better result from Indonesia segment, reduction in finance cost as well as compensation received in relation to a previous joint venture company in China. For FY2017, the Property Division recorded a lower PBT of RM54.1 million, compared with RM323.5 million in FY2016, which benefitted from the one-off gain on disposal of an associate company amounting to RM209.6 million. In the year under review, the Division was impacted by the share of loss in a joint venture due to start-up cost of the newly opened MyTOWN shopping centre and lower earnings from property development activities in Taman Mutiara Rini, Johor.

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

During the year, the Group recorded a lower cash flow from operating activities of RM885.0 million (FY2016: RM1,112.2 million) mainly due to reduced collection from BNS projects and property development activities, which had offset the effect of higher palm product prices and better collection from Pharmaniaga's concession business. In FY2017, the Group also received RM615.0 million from the sale of plantation assets which was partly used to pare down borrowings.

Prospects

The outlook is positive for the year ahead, on the back of sustained growth in advanced economies and key emerging markets. On the domestic front, growth momentum is anticipated to continue, underpinned once again by domestic demand and private consumptions. Nevertheless, global downside risk such as sluggish productivities in major economies and geopolitical uncertainties as well as volatility of commodity prices and concern on cost of living on domestic front may impede growth. Longterm 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 the Malaysian economy certainly augurs well for the Group.

In the last quarter of 2017, palm oil prices declined because supplies outstripped demand leading to high stockpiles. The market sentiment also became bearish when the Indian government raised import taxes for edible oils to curb imports. To spur demand and boost prices, the Malaysian government has suspended export taxes for CPO for three months. In the coming year, CPO prices are anticipated to soften after 1 st quarter 2018 on expectations of robust output, increased soybean acreages in the US and competition from Indonesia for the Indian market share. The likelihood of Indonesia increasing its biodiesel mandate will lend support to palm oil prices. In 2018, the operating conditions in Sugut, Sabah and Sarawak regions will continue to influence the Division's crop production. Nonetheless, the proposed acquisition of approximately 11,579 hectares of oil palm plantations in the district of Labuk and Sugut in Sabah, upon completion in the 2 nd quarter of 2018, should contribute positively to the Division’s crop production.

Pharmaceutical Division, driven by research and development efforts, remains on track to deliver new product offerings to both local and overseas market for the coming years ahead, which would further strengthen the Division's earnings potential as we scale new heights in the pharmaceutical arena. In 2018, the Division is focused on ensuring sustainable business growth and improving operational efficiencies whilst unlocking strategic prospects domestically, regionally and internationally.

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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