ANNUAL REPORT 2014 - malaysiastock.biz 223 Share Buy-Backs Summary ... OCBC Bank (Malaysia) Berhad GROUP ... Sdn Bhd, a subsidiary of Boustead Heavy Industries Corporation Berhad.

ANNUAL REPORT 2014

Menara Hap SengJalan P. Ramlee 50250 Kuala Lumpur Malaysia

39th

ANNUAL GENERAL MEETING

Thursday, 4 June 2015 at 10am.

2 Corporate Information 3 Directors’Profile 13 GroupFinancialHighlights 16 Chairman’sStatement 22 Review of Operations 47 StatementonCorporateGovernance 59 StatementonRiskManagementand InternalControl 65 BoardCommittees 75 CorporateSocialResponsibility

81 FinancialStatements217 AdditionalInformation219 ParticularsofTopTenPropertiesoftheGroup221 PlantationStatistics223 ShareBuy-BacksSummary224 AnalysisofShareholdings227 AnalysisofWarrantholdings229 Directors’Shareholdings230 NoticeofAnnualGeneralMeeting• ProxyForm

CONTENTS

75Corporate Social

Responsibility

81Financial

Statements

16Chairman’sStatement

Hap Seng Consolidated Berhad |AnnualReport2014

CORPORATEINFORMATION

DATO’ JORGEN BORNHOFTIndependentNon-ExecutiveChairman

DATUK EDWARD LEE MING FOO, JPManagingDirector

LEE WEE YONGExecutiveDirector

CHEAH YEE LENGExecutiveDirector

DATUK SIMON SHIM KONG YIP, JPNon-IndependentNon-ExecutiveDirector

BOARD OF DIRECTORS

LT. GEN. (R) DATUK ABDUL AZIZ BIN HASANIndependentNon-ExecutiveDirector

DATO’ MOHAMMED BIN HAJI CHE HUSSEINIndependentNon-ExecutiveDirector

TAN GHEE KIATIndependentNon-ExecutiveDirector

CH’NG KOK PHANNon-IndependentNon-ExecutiveDirector

COMPANY SECRETARIESLimGuanNee(MAICSA7009321)QuanSheetMei(MIA6742)

REGISTERED OFFICE21stFloor,MenaraHapSeng,JalanP.Ramlee50250KualaLumpurTel : 603-21725228Fax :603-21725286Website:www.hapseng.com.myE-mail :[email protected]

PLACE OF INCORPORATIONMalaysia

SHARE REGISTRARSymphonyShareRegistrarsSdnBhd(378993-D)Level6,SymphonyHouse,PusatDaganganDana1JalanPJU1A/46,47301PetalingJayaTel :603-78418000Fax : 603-78418151/8152

AUDITORSErnst&Young(AF:0039)CharteredAccountantsLevel23A,MenaraMileniumJalanDamanlela,PusatBandarDamansara50490KualaLumpur

PRINCIPAL BANKERS MalayanBankingBerhadDBSBankLtdHSBCBankMalaysiaBerhadHongLeongBankBerhadAmBank(M)BerhadAffinBankBerhadRHBBankBerhadOCBCBank(Malaysia)Berhad

GROUPHapSengConsolidatedBerhadtogetherwithitssubsidiaries

2

Hap Seng Consolidated Berhad | Annual Report 2014

DIRECTORS’PROFILE

Dato’ Jorgen Bornhoft, a Dane, aged 73, is theindependent non-executive chairman of Hap SengConsolidatedBerhad.HewasfirstappointedtotheBoard as an independent non-executive directoron 24 January 2005 andbecame the chairmanon1 February 2007. He is also the chairman of theAudit Committee, Remuneration Committee andNominatingCommittee.

Inaddition,Dato’Bornhoft isan independentnon-executivedirectorofHapSengPlantationsHoldingsBerhad,theCompany’ssubsidiarylistedontheMainMarketofBursaMalaysiaSecuritiesBerhad.He isanon-independentnon-executivedirectorofFraser&NeaveHoldingsBhdandalso thevice-chairmanofInternationalBeverageHoldingsLimited.

Dato’ Bornhoft holds a degree in Accountancyand Finance (Bachelor of Commerce) from theCopenhagenBusinessSchoolandattendedexecutivemanagementcoursesatINSEAD.

Dato’ Bornhoft joined Carlsberg Brewery MalaysiaBerhad (Carlsberg Malaysia) in 1991 as its chiefexecutive officer, and assumed the position ofmanagingdirectorfrom1995to2002,afterwhichhewas thechairman from2002to2005.Here-joinedtheboardofCarlsbergMalaysiaasanon-executivedirector from 2006 to 2007. He also assumed theposition as the chief executive officer of CarlsbergAsiaPteLtdinSingaporefromJanuary2003toJune2004.PriortohimjoiningCarlsbergMalaysia,hewasthe vice-president of Carlsberg International A/S,Denmark responsible for foreign subsidiaries andnewprojects.

Dato’Bornhoftdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswith theCompanysave for the related party transaction disclosed inNote 38 to the Financial Statements. He has notbeenconvictedofanyoffenceinthepast10years.

He attended all the 5 boardmeetings held duringthefinancialyearended31December2014.

DATO’ JORGEN BORNHOFT

Independent Non-Executive Chairman

3


Datuk Edward Lee Ming Foo, JP, a Malaysian,aged 60, is the managing director of Hap SengConsolidatedBerhad.HewasfirstappointedtotheBoardon 1November2000asanon-independentnon-executivedirector,becameanexecutivedirectoron25March2002andassumedthecurrentpositionsince 31March 2005. He is also amember of theRemunerationCommittee.

In addition, Datuk Edward Lee is the managingdirector of bothGek Poh (Holdings) Sdn Bhd (GekPoh) and Hap Seng Plantations Holdings Berhad.Gek Poh is the holding company of Hap SengConsolidatedBerhad.

Datuk Edward Lee graduated with a degree inBachelor of Arts from the McMaster University inCanada in 1977. He joined the Malaysian MosaicsSdnBhd(formerlyMalaysianMosaicsBerhad)groupof companies in 1980, became the group chiefoperating officer in 1995 and was the managingdirectorfrom31March2005to31January2007.

DatukEdwardLeedoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswith theCompanysave for the related party transactions disclosed inNote 38 to the Financial Statements. He has notbeenconvictedofanyoffenceinthepast10years.


DIRECTORS’ PROFILE

DATUK EDWARD LEE MING FOO, JP

Managing Director

4


Lee Wee Yong,aMalaysian,aged67,isanexecutivedirectorofHapSengConsolidatedBerhadandwasappointed to this position on 2 February 2011. Inaddition,Mr.LeeisadirectorofGekPoh(Holdings)Sdn Bhd and an executive director of Hap SengPlantationsHoldingsBerhad.

Mr. Lee holds a degree in Bachelor of CommerceandAdministration fromVictoriaUniversity inNewZealandandisamemberoftheMalaysianInstituteofAccountantsandInstituteofCharteredAccountantsofNewZealand.He joinedMalaysianMosaics SdnBhd (formerly Malaysian Mosaics Berhad) group of

companies in 1992, assumed thepositionofgroupchief financial officer from 1 March 2003 to 15December2005,andwasanexecutivedirectorfrom1March1999to6March2007.

Mr. Leedoes not have any family relationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehas not been convicted of any offence in the past 10years.



LEE WEE YONG

Executive Director

5



Cheah Yee Leng, a Malaysian, aged 46, is anexecutivedirectorofHapSengConsolidatedBerhadandwasappointedtothispositionon1June2014.

Ms. Cheah joined Hap Seng Consolidated Berhadgroup of companies in 1997 and is presently itsCorporate Affairs Director. She is also the GroupCompany Secretary of Hap Seng PlantationsHoldings Berhad and a non-independent non-executivedirectorofPaosHoldingsBerhad.

Ms. Cheah holds a Bachelor of Economics DegreeandBachelorofLawsDegreefromMonashUniversityinAustralia.

Ms.Cheahdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoesshehaveanyconflictofinterestswiththeCompany.Shehas not been convicted of any offence in the past 10years.

Sheattendedallthe2meetingsheldsubsequenttoherappointmenttotheboardon1June2014duringthefinancialyearended31December2014.

CHEAH YEE LENG

Executive Director

6


Datuk Simon Shim Kong Yip, JP,aMalaysian,aged58, isanon-independentnon-executivedirectorofHapSengConsolidatedBerhadandwasappointedto this position on 16 February 1996. He is also amember of the Audit Committee, RemunerationCommitteeandNominatingCommittee.

Inaddition,DatukSimonShimwasappointedasanon-independent non-executive director of HapSengPlantationsHoldingsBerhadon9August2007and became the deputy chairman on 23 February2015. He is also an independent non-executivedirector of Lam Soon (Thailand) Public CompanyLimited,acompanylistedontheStockExchangeofThailand.

DatukSimonShimisadirectorofbothLeiShingHongLimited and Lei Shing Hong Securities Limited. LeiShingHongSecuritiesLimited,acompanyregisteredwith the Securities and Futures Commission HongKong,isawholly-ownedsubsidiaryofLeiShingHongLimited,acompanyincorporatedinHongKong.

DatukSimonShimisthemanagingpartnerofMessrsShimPang&Co.HeholdsaMasterDegree in lawfromUniversityCollege London, LondonUniversityandisaBarrister-at-lawoftheLincoln’sInn,London,anAdvocateandSolicitoroftheHighCourtinSabahand Sarawak, aNotary Public and a Justice of thePeace inSabah.He isaCharteredArbitratorandaFellowofboththeCharteredInstituteofArbitrators,United Kingdom and the Malaysian Institute ofArbitrators. He was a member of the MalaysianCorporate Law ReformCommittee and its workinggrouponCorporateGovernanceandShareholders’Rights.

DatukSimonShimdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswith theCompanysave for the related party transactions disclosed inNote 38 to the Financial Statements. He has notbeenconvictedofanyoffenceinthepast10years.



DATUK SIMON SHIM KONG YIP, JP

Non-Independent Non-Executive Director

7



Lt. Gen. (R) Datuk Abdul Aziz Bin Hasan, a Malaysian,aged69,isanindependentnon-executivedirectorofHapSengConsolidatedBerhad.HewasfirstappointedtotheBoardon24September2003as a non-independent non-executive director andwassubsequentlyre-designatedasan independentnon-executivedirectoron29November2012.

DatukAbdulAzizstartedhiscareerintheMalaysianArmysince1964andretiredin2001asDeputyChiefofArmy.Uponretirementfrom2001to2002,hewasanexecutivedirectorofArsenalIndustries(M)SdnBhd,a subsidiary of Penang Shipyard and ConstructionIndustries.HewasalsoadirectorofJotechHoldingsBerhad from 2001 to 2006, Konsortium MuhibbahEngineering/Lembaga Tabung Angkatan Tenterafrom 2001 to 2007 and Transnational InsuranceBrokers Sdn Bhd from 2003 to 2010. He was thechairmanofTienWahPressHoldingsBerhadanditsaudit committee from 2000 to 2005, the chairmanof Tabung Haji Plantations Sdn Bhd and its auditcommitteefrom2002to2005aswellasthechairmanof Hospital Pusrawi Sdn Bhd and amember of itsauditcommitteefrom2008to2012.

Currently, Datuk Abdul Aziz is a non-independentnon-executive director of NCB Holdings Berhadand its audit committee, an independent non-executivedirectorofNamFattCorporationBerhad(in liquidation) and Pyrotechnical Ordinance (M)SdnBhd,asubsidiaryofBousteadHeavyIndustriesCorporationBerhad.

DatukAbdulAzizholdsaBachelorofSocialSciencedegree with Honours from USM (1981), a Mastersin Business Administration from UKM (1986) anda Diploma in Islamic Studies from UKM (1987). HealsocompletedtheWolfsonProgrammeinWolfsonCollege,UniversityofCambridgein1992.

DatukAbdulAzizdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.


LT. GEN. (R) DATUK ABDUL AZIZ BIN HASAN

Independent Non-Executive Director

8



Dato’ Mohammed Hussein, a Malaysian, aged64,isanindependentnon-executivedirectorofHapSengConsolidatedBerhadandwasappointedtothispositionon15July2008.HeisalsoamemberoftheAuditCommitteeandNominatingCommittee.

Dato’Mohammedistheindependentnon-executivechairman of Gamuda Berhad and DanajaminNasional Berhad. In addition, he is also a directorofPNBCommercialSdnBhdandamemberof theCorporate Debt Resolution Committee sponsoredby Bank Negara Malaysia to facilitate resolutionand restructuring of major corporate debts. Priorto 31 March 2015, Dato’ Mohammed was the non-independent non-executive chairman of QuillCapitaManagementSdnBhdwhichmanagesQuillCapitaTrust,arealestate investmenttrust listedontheMainMarketofBursaMalaysiaSecuritiesBerhad.

He is also an independent non-executivedirector of Bank of America Malaysia Berhad andCapitaCommercial Trust Management Ltd whichmanages CapitaCommercial Trust, a real estateinvestment trust listed on the Singapore StockExchange.

Dato’ Mohammed graduated with a degree inBachelor of Commerce (Accounting) from theUniversity of Newcastle, Australia in 1971 andcompleted the Harvard Business School AdvancedManagementPrograminBoston,USAin2003.

Duringhis31-yearcareerwiththeMalayanBankingBerhad (Maybank) group,Dato’Mohammedwas amember of the seniormanagement committee for20yearstocatalyzetheprogressionofMaybankintoMalaysia’sleadingfinancialservicesgroup.ThevariousseniormanagementpositionsheheldincludeHeadofCorporateBanking,HeadofCommercialBanking,HeadofMalaysianOperations,Headof InvestmentBankingGroup,ExecutiveDirector(BusinessGroup).Prior tohis retirement in January2008,hewas thedeputy president/executive director/chief financialofficer.

Dato’ Mohammed does not have any familyrelationship with any director and/or majorshareholdernordoeshehaveanyconflictofinterestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.

Heattended4ofthe5boardmeetingsheldduringthefinancialyearended31December2014.

DATO’ MOHAMMED HUSSEIN


9



Tan Ghee Kiat, a Malaysian, aged 66, is anindependent non-executive director of Hap SengConsolidated Berhad and was appointed to thisposition on 1 January 2011. Prior to this, he was anon-executive director of the Company from 31December 2002 to 31 January 2007. He is also amemberoftheAuditCommittee.

Mr. Tan has more than 30 years of experience inauditandcorporateadvisoryservices.HeisafellowmemberoftheInstituteofCharteredAccountantsinEngland&Walesaswell asamemberofboth theMalaysianInstituteofAccountantsandtheMalaysianInstituteofCertifiedPublicAccountants.

HeisapartnerinSekhar&Tan,afirmofcharteredaccountants which he founded in 1993 after heleftDeloitte, Touche&Tohmatsu,Malaysia.He is adirector of Prestige Jaya Labuan Limited and alsoa trustee of Yaw Teck Seng Foundation andDijayaTropicanaFoundation.

Mr. Tan does not have any family relationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.


TAN GHEE KIAT


10



Ch’ng Kok Phan,aMalaysian,aged64, isanon-independent non-executive director of Hap SengConsolidated Berhad and was appointed to thispositionon1June2014.

Mr.Ch’nghasover30yearsofseniormanagementexperience in the automotive industry and hasworked in several Asian countries. He has beenwith the Lei Shing Hong group of companies formore than 18 years.He is also the chairmanof LeiShingHongAuto (China)Management Co. Ltd. Inaddition,Mr. Ch’ng is also an executive director of LeiShingHongLimited,acompanyincorporatedinHongKong.

Mr.Ch’ngdoesnothaveanyfamilyrelationshipwithanydirectorand/ormajorshareholdernordoeshehaveanyconflictof interestswiththeCompany.Hehasnotbeenconvictedofanyoffenceinthepast10years.

Heattendedall the2meetingsheldsubsequenttohisappointmenttotheboardon1June2014duringthefinancialyearended31December2014.

CH’NG KOK PHAN

Non-Independent Non-Executive Director

11


GROUPFINANCIAL HIGHLIGHTS

Notes:a Restatedtoreflecttheretrospectiveadjustmentsarisingfromthebonusissueandrightsissuecompletedinthefinancialyearended31.12.2011

inaccordanceto“FRS133,EarningsperShare”.b Restatedtoreflecttheretrospectiveadjustmentsarisingfromthebonusissuecompletedduringthefinancialyearended31.12.2011.c Dividendpershareforthefinancialyearended31.12.2011wasontheenlargedsharecapitalaftertheprivateplacement,bonusissueandrights

issue.d Includesprivateplacementof43,800,000shares,bonusissuesof1,214,643,000andrightsissueof364,392,900shares.e Netgearingratioiscomputedafterdeductingmoneymarketdepositsandcashandbankbalances.

FINANCIAL YEAR ENDED 31 DECEMBER2010 2011 2012 2013 2014

INCOME (RM’000)(i) Revenue 2,789,410 3,628,380 3,958,899 3,486,747 3,768,049(ii) Profitbeforetax 506,350 636,894 681,579 801,581 1,024,625(iii) ProfitattributabletoOwnersoftheCompany 325,026 377,497 427,104 588,257 753,467

FINANCIAL POSITION (RM’000)Key dataAssets(i) Totaltangibleassets 5,359,060 6,797,298 6,634,122 7,071,373 7,748,832(ii) Netassets 2,591,243 3,300,341 3,410,037 3,353,874 3,951,775(iii) Currentassets 1,904,502 3,049,349 2,692,028 3,065,574 3,303,173Liabilities and Shareholders' Funds (i) Currentliabilities 1,509,219 1,634,653 1,728,966 2,214,740 2,476,372(ii) Paid-upsharecapital 622,660 2,186,357 2,186,364 2,205,709 2,226,779(iii) Shareholders’funds 2,591,243 3,300,341 3,410,037 3,353,874 3,951,775

PER SHARE(i) Basicearnings(sen)* 17.92 a 18.94 19.79 28.70 36.67(ii) Netassets(RM)** 4.60 1.51 1.61 1.68 1.85(iii) Dividend(sen) 8.80 b 8.60c 10.50 16.00 25.00

* Basedonweightedaveragenumberofsharesinissuenetoftreasuryshares(‘000) 1,813,525a 1,993,085 2,158,584 2,049,324 2,054,505

** Basedonnumberofsharesinissuenetoftreasuryshares(‘000) 563,524a 2,180,927d 2,113,108 2,001,678 2,137,597

FINANCIAL RATIOS(i) Returnontotaltangibleassets(%) 6.06 5.55 6.44 8.32 9.72(ii) Returnonshareholders’funds(%) 12.54 11.44 12.52 17.54 19.07(iii) Currentratio(times) 1.26 1.87 1.56 1.38 1.33(iv) Gearingratio(times) 0.74 0.77 0.66 0.74 0.66(v) Netgearingratio(times) e 0.66 0.57 0.51 0.56 0.54

13


Dividend Per Share(sen)

Current Ratio(times)

Shareholders’Funds(RM’000)

Net Gearing Ratio(times)

2014

2014

2013

2013

25.00

1.33

16.00

1.38

2012

2012

10.50

1.56

2011

2011

2010

2010

8.60

1.87

8.80

1.26

2014

2014

3,951,775

0.54

3,353,874

0.56

3,410,037

0.51

3,300,341

0.57

2013

2013

2012

2012

2011

2011

2,591,243

0.66

2010

2010

GROUP FINANCIAL HIGHLIGHTS

14


4.6017.92

19.79

28.70

2,591,2435,359,060

6,797,2983,300,341

3,410,0376,634,122

3,353,8747,071,373

3,951,7757,748,832

Revenue(RM’000)

Total Tangible Assets/Net Assets(RM’000)

Basic Earnings Per Share/Net Assets Per Share

Profit Before Tax (RM’000)

2014

2014

2013

2013

3,768,049

36.67

3,486,747

2012

2012

3,958,899

2011

2011

2010

2010

2010

3,628,380

18.94

2,789,410

1.61

1.68

1.85

2014 1,024,625

801,581

681,579

636,894

2013

2012

2011

506,3502010

GROUP FINANCIAL HIGHLIGHTS

20122013

TotalTangibleAssets BasicEarningsPerShare(sen)1Net Assets NetAssetsPerShare(RM)2

Notes:1 Basicearningspershareforthefinancialyearended31.12.2010hasbeenrestatedtoreflecttheretrospectiveadjustmentsarisingfromthebonus

issueandrightsissuecompletedinthefinancialyearended31.12.2011inaccordanceto“FRS133,EarningsperShare”.2 Netassetspersharewerecomputedbasedonthenumberofsharesinissuenetoftreasuryshares(‘000)asfollows:- •Financialyearended31.12.2010:563,524shares •Financialyearended31.12.2011:2,180,927shares •Financialyearended31.12.2012:2,113,108shares

•Financialyearended31.12.2013:2,001,678shares •Financialyearended31.12.2014:2,137,597shares

2014

1.51

2011

15


CHAIRMAN’SSTATEMENT

Profit After Taxation

RM816million

Earnings Per Share

36.67sen

Net Earnings Growth

28%

DATO’ JORGEN BORNHOFTIndependentNon-ExecutiveChairman

DEAR SHAREHOLDERS,

It gives me much pleasure to report to you another year of record performance by your Company despite the challenging business environment of 2014.

The Group’s profit after tax increased 28% to RM816.3 million (2013: RM635.8 million) which translated to a corresponding 28% increase in earnings per share to 36.67 sen (2013: 28.70 sen).

16


CHAIRMAN’S STATEMENT

2014 ECONOMY OVERVIEWOnreflection,2014wasavolatileyearunderpinnedbythe subdued and uneven global economic recovery.Amongstothers,theplummetingBrentcrudepricesbyalmost50%inthefinalquarter,depreciatingcurrenciesoftheemergingeconomiesandringgitbeingthesecondworst-performingcurrencyinAsia.

Thebetter-than-forecast recovery in theUnitedStatescontributed to the outflows of foreign funds fromemergingmarkets.AslowereconomicgrowthinChina,being Malaysia’s second largest export market, alsolimitedthenation’sexportgrowth.

Against theodds,Malaysiagrewat 6% in2014 (2013:4.7%), among the strongest in the region, anddrivenprincipally by strong domestic demand and resilientexports.

2014 FINANCIAL RESULTS Onthebackofhigherprofitaftertaxandearningspershare, theCompany increased its dividendpayout fortheyearto25senpershare(2013:16sen).

BUSINESS DIVISIONS OVERVIEWPLANTATIONSDespitethevolatilecrudepalmoil(CPO)prices(rangingfrom RM2,144 per tonne to RM2,855 per tonne) andthe challenging operating environment, the divisionrecorded an improved average CPO price realisationofRM2,386per tonne (2013:RM2,343per tonne)anda much higher average palm kernel price realisationatRM1,654per tonne (2013:RM1,288per tonne). TheimprovedCPOpricerealisationwascomparabletotheaverageCPOpricerealisationforSabahatRM2,404pertonne.

Coupled with the increase in the CPO sales volumeat 170,506 tonnes (2013: 161,170 tonnes), the divisionregisteredahigheroperatingprofitatRM179.0million(2013:RM140.6million).

PROPERTY HOLDING AND DEVELOPMENTRevenue and operating profit of the division grew toRM932.1million (2013: RM527.5million) and RM705.3million(2013:RM255.8million)respectively,mainlyduetohighervalueunlockedfromongoingprojects,fairvaluegainsadjustmentsrelatingtoinvestmentpropertiesandgainsfromthesaleofcertainnon-coreassets. IntheKlangValley,thedivisionlauncheditslow-densitygated and guarded Andana residential developmentin PuchongSouth.D’Alpinia Business Park, anupscalecommercial development next to the Andanadevelopment,wasalsolaunched.Bothlaunchesenjoyedbrisksaleswithmorethan50%sold.

17



Thedivision’sluxuryserviceresidencedevelopmentsintheKlangValleycontinuedtogeneratestronginterests,with limited units left for theHorizon Residences andmorethan70%take-upraterecordedforNadiBangsarServiceResidences.

In Sabah, thedivision continuedwith its developmentin Astana Heights in Sandakan, Bandar Seri Indah inTawau and Palm Heights in Lahad Datu. These threedevelopments have continued to generate strongdemand.

Occupancy rates of Menara Hap Seng and MenaraCitibankremainedstrongat97%and99%respectively. During the year, the division also attained anothermilestonewith the launch of its newGrade A, GreenBuilding Index-certified corporate office and retailbuilding,MenaraHapSeng2.Standingtallat31storeys,MenaraHapSeng2isanewdistinctivelandmarkinthecentralbusinessdistrictofKualaLumpur.

CREDIT FINANCINGBenefittingfromrobustfinancingactivitiesbysmallandmedium enterprises (SMEs), the gross loan base andoperating profit of the division grew to RM1.9 billion(2013:RM1.7billion)andRM104.1million(2013:RM91.5million)respectively.

Premised on disciplined lending practices and vigilantmonitoring, credit risks remained comfortable. Thedivision’sgrossnon-performingloansratioimprovedto0.91%in2014(2013:1.44%)whichcomparedfavourablywiththeindustryaveragenon-performingloansratioof1.66%.

MenaraHapSeng2isanewdistinctivelandmarkinthecentralbusinessdistrictofKualaLumpur.

18



AUTOMOTIVE Thedivision turnedaroundduring theperiodwithanoperating profit of RM10.5 million against a RM18.1millionlossinthepreviousyear.

The launches of several highly-anticipated Mercedesmodels, namely the new flagship S-Class, the newC-ClassandtwobrandnewA-segmentmodels,theCLAandGLA,generatedimmenseinterests.Asaresult,thedivision recordedahigher sales volumeat 2,310units(2013:1,976units)anda32%marketshareinMalaysia.

Duringtheyear,ourMercedes-BenzAutohausinKinrara,Puchongwasappointedadealerfor“Fuso”trucksinWestMalaysia,whichfurtherenhancesitsrangeofvehicles.Inaddition,thedivisioncontinuedtobuilditspresenceintheMercedes-Benzcommercialvehiclessegment.

Thelaunchesofseveralhighly-anticipatedMercedesmodelsgeneratedimmenseinterests.

19



FERTILIZERS TRADING InMalaysia, the division recorded a lower revenue atRM729.5million (2013:RM861.5milllion)due to softerglobalfertilizersprices.InIndonesia,thedivisionscaledback its operations largely due to the weakness andextremevolatilityoftherupiah.

Notwithstanding the lower revenue, the divisionregisteredahigheroperatingprofitatRM71.1millionasagainstalossofRM8.2millioninthepreviousyear.Thiswasattributable to improvedgrossprofitmarginsandone-off gains from the sale of certain non-core fixedassets. QUARRY AND BUILDING MATERIALS Duetooverallweakermarketdemandandnewquarriesrelated start-up costs, the division recorded loweroperatingprofitatRM16.9million(2013:RM17.9million).

TRADING ThedivisionrecordedahigheroperatingprofitatRM23.9million(2013:RM6.6million)duetohigherprofitmarginproductsandgainsfromsaleofnon-corefixedassets.

SIGNIFICANT EVENTS IN AND SUBSEQUENT TO 2O14 On27June,2014,theGroupcompletedthedisposalofvariousparcelsoflandwithnoimmediatedevelopmentpotentialinSabahforRM278million.ThisresultedinagainofRM199.5milliontotheGroup.

InFebruary2015,theGroupcompletedtheacquisitionofthe51%equityintheSingapore-listedHafaryHoldingsLimited(Hafary)forS$52.5million.

20



Asannouncedon11March2015,aspartoftheGroup’sstrategies to focus its credit business in Malaysia, theCompany proposed to dispose of its credit businessin Singapore for RM640.8million,which if completed,wouldgiverisetoagainofRM513.2million.Meanwhile,theCompanyalsoproposedtoacquireapurpose-built14-storey green commercial building in Kota KinabaluforRM395million tostrengthen itsprominence in thepropertymarketinSabah,EastMalaysia.TheCompanywill be seeking its shareholders’ approval in theforthcomingextraordinarygeneralmeeting.

ENHANCING SHAREHOLDER VALUETheCompanyiscommittedtocreatingandenhancingshareholdervalue.Accordingly,inlinewiththedividendpayoutpolicy, theBoard is pleased to report that theGroup had declared and paid two interim dividendstotalling25senpersharefor2014(2013:16sen).

TheGroup isalsoseekingapproval to renew its sharebuybackmandateinthebestinterestsofallshareholders.Thiswillundoubtedlyincreaseshareholdervalue.

2015 OUTLOOK2015isexpectedtobeanotherchallengingyearfortheMalaysianeconomywhichissusceptibletomovementsofcrudeoilpricesandringgitagainstitsmajortradingpartners.RecentconsecutiveinterestratecutsinChinaarealsosuggestiveofaslowingChineseeconomy,whichmaybealimitingfactortoMalaysia’sexportgrowth.

On a positive note, ringgit depreciation is likely toimproveMalaysia’sexportcompetitiveness.Theweakerringgit may also increase foreign direct investmentsintoMalaysiaduetolowercostsofdoingbusiness.Theinflationary pressure associatedwith the 6%GSTmaytosomeextentbeoffsetbylowercrudeoilpricesandenergycosts. TherecoveringCPOpricetrendinthelaterpartof2014maycontinueintotheearlypartof2015,primarilyduetoanticipatedlowerproductionoccasionedbydryweatherinMalaysiaandIndonesia.Suchtrendmaybecurtailedby thepotentialoversupplyofvegetableandsoybeanoilsgoingforward.

Notwithstandingthevariouspropertycoolingmeasures,theGroupiscautiouslyoptimisticthatdemandforhigh-valueand strategically-located residentialproperties intheKlangValleymayremainintact.InSabah,thedivisionwill continue to focus on affordable housing segmentwhichislessimpactedbysuchcoolingmeasures.

ConstructionactivitiesremainimportanttotheMalaysianeconomy. Indeed,with the impending implementationof the 11thMalaysiaPlanand thevariousgovernmenttransformationprogrammes,theresurgentactivitybodeswellforourQuarryandBuildingMaterialsdivision. The buying momentum sparked by the various newMercedes-Benz models launched in 2014 is expectedto extend into 2015, notwithstanding the competitiveenvironment in thepremium car segment. TheCreditFinancingDivisionwill continue togrow its loanbase,largelytobedrivenbytheSMEswhilstexercisingprudentlendingpolicies.Meanwhile,theTradingDivisionwillseektoexpanditsproductrangeaswellastofocusonhigher-marginproducts.AsfortheFertilizersTrading,theGroupwillfocusongrowingitsmarketshareinMalaysiawhiletrimmingtheexposureinIndonesia.

ACKNOWLEDGEMENTS Inconclusion,IwouldliketoexpressmysincerethankstothemanagementandallourstafffortheirsignificantcontributionstotheGroupovertheyears. MyheartfeltappreciationalsogoestotheBoardforitswisecounselandguidance.Andmanythankstoo,toourshareholders, business partners, clients, suppliers andotherstakeholdersfortheirunyieldingconfidenceintheGroup.

Letmealsotakethisopportunitytowelcomeourtwonewboardmembers,MsCheahYeeLengandMrCh’ngKokPhanwhobringwiththemawealthofknowledgeandexperience.

JORGEN BORNHOFT

21


ANNUAL REPORT 2014 - malaysiastock.biz 223 Share Buy-Backs Summary ... OCBC Bank (Malaysia) Berhad GROUP ... Sdn Bhd, a subsidiary of Boustead Heavy Industries Corporation Berhad.

Documents