With the completion of the commissioning of Plant 16 in end-July, the existing annual glove production capacity of the Group has since enlarged to 25 billion pieces, an increase of 3.0 billion pieces of nitrile gloves with the patented Low Derma technology. This plant is expected to contribute to the Group’s earnings gradually from the end of third quarter onward.
Keeping up with the expansion momentum and in need of new glove capacity to cater for increasing demand for the Low Derma technology nitrile gloves, the Group has since commenced the construction works for Plant 17 and 18. These 2 new plants which are equipped with high speed dipping technology and a high degree of automation are capable of producing up to 4.5 billion pieces (1.5 and 3.0 billion pieces respectively) of nitrile gloves per annum once completed in 2018.
The construction works of the integrated Research and Development cum Training Centre (“RDTC”) are progressing well and are expected to complete by end of the year. The RDTC once completed, will propel the Group to another level of achievement and breakthrough of the Group’s R&D efforts as the centre will focus on all areas of new innovations and quality improvements of our products. It will also involve research into engineering and robotic implementations to provide higher automation systems to new and existing facilities with the aim of lowering dependence on manpower.
The expansion and modernization project for our latex division is near completion. The new line would potentially increase our capacity by 30% and increase the varieties of latex pillows in productions.
Key Raw Material – Centrifuged latex price which had risen by more than 80% in Quarter 1 for the current financial year, has softened recently. The lower latex price would be beneficial to the Group’s margin in the coming months.
The Group is negotiating to acquire the plant & machineries of a small bedding company. The Group would also absorb the key managers as well as a group of skilled production workers from that company.
The outlook of integrated public transportation terminal operations segment is expected to the favorable driven by the Group’s plans for expansion in other parts of Perak, whereby the construction of the Terminal Kampar has commenced and it is on schedule. It is expected to be completed by the 4th quarter of 2018. In addition to Terminal Kampar, the Group’s plans include similar integrated public transportation terminal in Bidor and Tronoh. As of this juncture, the Group is unable to determine the construction cost for the terminals to be built as the construction project is still at its preliminary stage and the approvals for construction have yet to be obtained from the relevant authorities.
The group is scheduled to commission its second nano layer stretch film line and its 8th PVC food wrap line during the current quarter.
The Pangkalan Ikan Central Sdn Bhd LKIM deep sea fishing port facilities management contract located at Tanjong Bako, Kuching Sarawak commence operations on 22 July 2017. This project will contribute positively to the Group earnings this year.
Accordingly, the results of the Plantation and Property businesses have been classified as Discontinuing Operations and, upon completion of the Proposal, both Sime Darby Plantation Berhad and Sime Darby Property Berhad would be deconsolidated from the Sime Darby Berhad Group. Going forward, the Group’s businesses would be Industrial, Motors, Logistics and Others.
With the successful rationalization of the manufacturing business and successfully position itself to be an Original Equipment Manufacturer (OEM), manufacturing segment has shown positive growth in profitability.
Pan Cambodian Lottery Corporation Limited (PCL), a 60% owned subsidiary of LIB has successfully grow the business in gaming & leisure segment by increasing the network of agents. The Group is also looking at strategy to increase the number of the digit game products. As for the plan to establish a gaming entertainment center, PCL is looking at the option of leasing the land and building and is currently in the process of discussion with several gaming operators.
In line with DRB-HICOM’s effort to turnaround PROTON, the Group had on 23 June 2017 entered into a strategic collaboration with Zhejiang Geely Holding Group Co., Ltd. (“ZGH”) vide a share subscription agreement for ZGH to acquire 49.9% equity interest in PROTON Holdings Berhad (“PROTON”) and for PROTON to divest its indirect 100% entire stake in Lotus Advance Technologies Sdn. Bhd. to ZGH and Etika Automotive Sdn. Bhd. The entry of ZGH as the Strategic Partner is expected to improve PROTON’s competitiveness through infusion of competitive products and technology, advanced manufacturing systems, quality and brand confidence which will allow PROTON to improve its sales domestically and globally especially in South East Asia and the right hand drive markets. In addition, PROTON will also be able to leverage on ZGH Group’s advanced technology, global resources through its extensive business network as well as global best practices. An Extraordinary General Meeting will be convened on 30 August 2017 to seek the shareholders’ approval on the above mentioned transactions.
For the remainder of this year, we will continue to roll out even more Cash Recycling Machine from the robust orders we have received in the second quarter of this year.
The Board believes that the upward price trend of industrial paper will support the domestic selling price for the rest of the year. However, tight supply of waste paper in the domestic market which will translate into higher production cost, coupled with higher depreciation charge and interest cost from the new corrugating production line, will assert negative pressure on the profitability of the Manufacturing Division.
Being a coal fired thermal plant, the tightening environmental protection policies in China also have the effect of pushing up steam production cost. Heavy investments are necessary to add or modify existing plant and machinery to comply with the new emission standards. Earnings contribution from China is therefore expected to remain weak.
Logistics division derived revenues and profits mainly from multinational electronic factories shipments for “loose cargo” or consol cargo trucking services for the routes Pg/Sin/Pg and Pg/Thai/Pg. Continuous pull out of multinational factories from Malaysia particularly the electronic companies from Penang has reduced the cargo volumes and revenues. Furthermore, with the improved infrastructure of Air and Sea Ports in Malaysia, fewer importers and exporters are using Singapore Air and Sea Ports nowadays.
Traditional long haul chartered load sector required a large fleet of trucks operating with low margins.
The group had switched to car parts sector to improve revenues moving consol cargo from Thai/Mal/Sin. Steps also had been taken to convince existing customers to accept the “monthly price adjustments format” based on the average of weekly fuel price adjustment announced by the government to pass on the extra cost to the customers. The effect of the price adjustments will only materialize during the 3rd quarter.
During the financial year, the Company recognized a tax incentive representing 70% tax exemption on its statutory income from outsourcing services. The Company’s achievement of the conditions and KPIs have been presented to the administrator, however, the assessment by the administrator has not been completed as at 30 June 2017. The Directors have assessed that the Company is able to meet the requirements for the tax incentive after taking into consideration that the Company has substantially met the stipulated conditions and KPIs, and their historical experience where confirmations from the administrator were obtained to recognize the tax incentive when conditions and KPIs were substantially met.
Therefore, the Directors are of the view that there is a reasonable basis for the Company to recognize the tax incentive during the financial year ended 30 June 2017.
Where the final outcome of the assessment of income tax exemption by the administrator is different from the Company’s assessment, this will result in higher income tax expense on the statutory income from outsourcing services recognized during the financial year.
…the positive growth from the existing stores with 8% same stores sales growth… the opening of fourteen new stores during the current 12-month quarter.
There is an increase of RM22 million on inventories losses, inventory written-off and inventory written-down as compared to last financial year. This is an initiative of the management to embark on a more stringent implementation of the inventory policy with the use of stricter write off/ write down estimates. Excluded the effect of the additional inventories losses, the gross profit margin stood at 40.8%.
The acquisition of AFE, which was completed on 31 March 2017, enhanced our coverage in Malaysia, Singapore, Indonesia, Philippines and the United States. With the addition of Hong Kong, Macau, and Vietnam resulting in N2N being one of the largest Asian base platform provider. The acquisition of AFE will positively contribute to the Group’s performance in the future. We are assessing a few more potential targets for acquisition to establish a Pan Asia presence and the network of inter broking activities powered by our latest platform.
The Philippines business is expanding beyond the provision of the platform to the Philippine Stock Exchange(“PSE”) as leading brokers are now coming directly to N2N to obtain a more advanced version of the trading system to complement the services currently obtained from N2N via PSE. New agreements are in the pipeline and more demonstration to prospects, including the Back Office Settlement system, which had gone live in April 2017.
Of late, flat strip products have begun to pick up in price prior to earlier moderation, mainly due to speculative buying activities in China’s futures market. The pick-up in prices will augur well for tubular products and manufacturers where they are expected to raise their selling prices for finished products in tandem with the rise in iron ore prices. However, global demand ex-China remains soft and as such, sustainability of this price increase remains uncertain.
With the completion of the new plant and the successful commissioning of the first more advance and efficient new printing and lamination machines, the Group is in the midst of working with major existing customers and potential customers to qualify this new plant to service these customers. Upon the successful certification of this new production process, the Group expects the overall performance to improve.
Another three sets of advance and efficient machines are schedule to be delivered in the last quarter of 2017, which will be commissioned and ready for production towards the end of the first quarter of 2018. The Group expects these machines to further improve the overall productivity and efficiency.
Due to lower sales volume and taking into consideration the Excise Duties (Amendment) Order 2016, whereby the excise duty of potable alcohol will be levied on the finished products and paid by the bottlers, our ethanol division’s revenue, which previously included excise duty for potable alcohol, was 66.1% lower.
The impact of the steep hike in excise duty for potable alcohol is still being felt as manufacturers of locally bottled alcohol products continued to adjust to the new market dynamics. In view of the challenges in the potable alcohol market, our strategy is to intensify our marketing efforts and deepen customer relationship. Our potable alcohol sales may be affected by new regulation introduced by the government but we expect our ethanol division to remain profitable during the financial year ending 30th June 2018.