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Quarterly Report For The Financial Period Ended 31 December 2016

Financials Archive

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Unaudited Condensed Consolidated Income Statement

Unaudited Condensed Statement Of Financial Position

Performance Review

For the 4th quarter, the Group posted anunaudited pre-tax profit of RM261.2 million, which was significantly higher than the profit for the corresponding period's last year of RM49.7 million. The Group's profit after tax for the quarter totaling RM184.9 million was aturnaround against last year's net loss after tax of RM0.8 million. Cumulatively,the Group's pre-tax profit stood at RM740.4 million, an increase of 175% over previous year's pre-tax profit of RM269.2 millionmainly due to gain on divestments of Jendela Hikmat and Boustead Sedili as well as sale of lands. In addition, the operating results from Plantation and Trading & Industrial Divisions were also better.

The Group's revenue for the full year totaling RM8.4 billion was 3% down from the corresponding period last year. Plantation Division's revenue was 15% higher on the back of improved palm products prices. For the year, Property Division was marginally better mainly due to higher progress billings.The cumulative revenue for Pharmaceutical and Trading & Industrial Divisions were largely inline with the previous year. On the other hand, Heavy Industries Division's cumulative revenue was 30% below the previous year mainly on lower revenue contribution from LCS project and suspension of operation for H225 aircraft in Kerteh and slowdown in oil & gas industry.

For the cumulative period, Plantation Division registered an improved pre-tax profit of RM276.1 million (2015:RM95.1 million) mainly due to higher gain on disposal of lands of RM124.2 million (2015:RM57.1 million) and profit on divestment Boustead Sedili of RM33.4 million. The bottom line was also bolstered by the higher palm products prices and lower operating expenditure. For the cumulative period,CPO registered an average price of RM2,584 per MT, an increase of RM436 or 20% over last year's corresponding period's average of RM2,148 per MT. PK also recorded a better price of RM2,460 per MT, up by RM927 or 60% over last year's corresponding period's average price of RM1,533 per MT. Cumulative FFB crops of 908,576 MT was 12% below previous year's crop of 1,037,163 MT. The short fall in production was mainly due to adverse effect of the El-Ninophenomenon, land disputes in Sarawak and shortage of labour for tall palms. For the cumulative period, oil and kernel extraction rates were marginally lower at 21.5% (2015:21.9%) and 4.4% (2015:4.6%) respectively.

Property Division's pre-tax profit for the financial year increased to RM323.5m illion (2015:RM138.8 million)on the back of gain ondisposal of an associate, Jendela Hikmat of RM209.6 million. Nevertheless, the operating profit attained was lower at RM127.0 million (2015:RM144.7 million) mainly due to weakened hotel segment's performance and unrealised forex loss. Pharmaceutical Division closed the year with a lower pre-tax profit of RM51.9 million (2015:RM90.2 million)mainly due to reduced Government orders while the operating and finance costs were higher.

For the year, Finance & Investment Divisions recorded a higher pre-tax profit of RM61.5 million (2015:RM44.2 million) mainly due to better contribution from Affin Group, which recorded lower allowance for loan impairment as well as improve dother operating income, Islamic banking income and net interest income. The Division's bottom linea lso benefitted from the higher interest income from placement of surplus funds from Right Issue proceeds. Trading &Industrial Division also ended the year with a better pre-tax profit of RM147.4 million (2015:RM37.7 million) on the back of better contribution from Boustead Petroleum Marketing (BPM) and UAC Berhad as well as gain on disposal of assets by BPM.

For year 2016, Heavy Industries Division recorded a lowerd eficit of RM120.0 million (2015:RM136.8 million) mainly due to improved performance from Boustead Heavy Industries Corporation, which had partly compensated for the deficit incurred by Boustead Naval Shipyard (BNS) and MHS Aviation (MHSA).For the cumulative period, BNS's bottom line was impacted by the variation orders for LCS project, additional cost to completion for KD Perantau as well as lack of new ship repair and ship building projects. The deficit incurred by MHSA was mainly due to suspension of operation for H225 aircraft in Kerteh and slowdown in oil & gas industry.

Prospects

We expect 2017 to be another challenging year, both globally and domestically, due mainly to uncertainties surrounding global economy, contagious effect of Brexit in Euro market, future changes in US policies and other geopolitical risks. On the domestic front, the economy is expected to expand between 4% to 5%, notwithstanding the depreciation of Ringgit and volatile commodity prices which may impede growth. The diversified nature of the Group's business in six segments of Malaysian economy would augur well for the Group.

Plantation Division's prospects for the coming year will be much driven by CPO prices and crop production. The Group is positive on crop production as the effect of El-Nino should be tapering off and field blockades in Sarawak will be closely monitored and kept in check. CPO prices surged to its highest in four years during the last quarter of 2016 and ended the year at RM3,218 per MT. Slower production, dwindling stocks, weaker Ringgit and higher crude mineral oil price lent support to the price. For the first half of 2017, improving demand from India and low based palm oil stocks should be supportive for palm oil price despite the shrinking support from China who appears to favour soybean oil consumption. However,as the ElNino impact fades coupled with positive out look for soya bean crop in South America, the softening of palm oil prices is possible.

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 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, Affin Holdings.

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