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FINANCIAL STATEMENT AND RELATED ANNOUNCEMENT
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Print this page First Quarter Results * Financial Statement And Related Announcement * Asterisks denote mandatory information Name of Announcer * Company Registration No. Announcement submitted on behalf of Announcement respect to * is submitted with HONG LEONG ASIA LTD. 196300306G HONG LEONG ASIA LTD. HONG LEONG ASIA LTD.
Announcement is submitted by * Designation * Date & Time of Broadcast Announcement No.
NG SIEW PING, JASLIN COMPANY SECRETARY 12-May-2011 18:33:40 00181
>> Announcement Details The details of the announcement start here ... For the Financial Period Ended * 31-03-2011
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12/5/2011
HONG LEONG ASIA LTD. (REGISTRATION NO. 196300306G)
Unaudited First Quarter Financial Statement For The Period Ended 31 March 2011
PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS The Board of Directors announces the results of the Group for the first quarter ended 31 March (â1Qâ) 2011. These figures have not been audited. Certain comparative figures for 1Q 2010 have been restated to be consistent with the classification for 1Q 2011. 1(a) An income statement (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year. 1(a)(i) Income statement
Group 1Q 2010 (restated) $'000 1,493,364 (1,152,414) 340,950 10,075 (148,184) (17,236) (50,963) (12,452) 122,190 680 122,870 (20,059) 102,811
1Q 2011 $'000 Continuing operations Revenue Cost of sales Gross profit Other income Selling and distribution expenses Research and development costs General and administrative expenses Finance costs Profit from continuing operations Share of profit of associates, net of tax Profit before income tax from continuing operations Income tax expense Profit from continuing operations, net of tax Discontinued operations Profit from discontinued operations, net of tax Profit for the period Attributable to : Owners of the parent Profit from continuing operations, net of tax Profit from discontinued operations, net of tax 28,469 28,469 75,595 1,245,769 (953,770) 291,999 5,925 (141,413) (18,556) (52,208) (14,347) 71,400 16,144 87,544 (11,949) 75,595
Change % -16.6% -17.2% -14.4% -41.2% -4.6% 7.7% 2.4% 15.2% -41.6% 2274.1% -28.8% -40.4% -26.5%
267 103,078
NM -26.7%
35,664 194 35,858
-20.2% NM -20.6%
Non-controlling interests Profit from continuing operations, net of tax Profit from discontinued operations, net of tax 47,126 47,126 67,147 73 67,220 -29.8% NM -29.9%
1
1(a)(ii) Notes to the income statement
Group 1Q 2010 $'000 2,087 (1,719) 573 1,539 (28,102) (701)
Profit from operations include the following: (Loss)/gain on disposal of property, plant and equipm ent (1) Impairment written back/( losses) on property, plant and equipm ent and developm ent properties (2) Allowance (m ade)/written back for trade and other receivables/(bad debts written off) (3) Allowance written back for stock obsolescence (4) Depreciation and am ortisation (5) Foreign exchange gain/(loss)
1Q 2011 $'000 (156) 2,311 (4,090) 3,458 (34,699) 1,950
Change % NM NM NM 124.7% 23.5% NM
NM: Not meaningful
(1) The gain from disposal of property, plant and equipment in 1Q 2010 arose largely from sale of a factory located in Singapore. (2) Impairment written back in 1Q 2011 arose from the re-evaluation of the performance of the cash generating units which held the property, plant and equipment. Impairment charge in 1Q 2010 relates entirely to the Groupâs hospitality business. (3) Allowances for doubtful debts were made by one of the Groupâs China subsidiaries to reflect the ageing of those debts. (4) Allowance for stock obsolescence was written back as those stocks were subsequently sold. (5) Further depreciation charge was made in 1Q 2011 to reflect fair value adjustments in respect of purchase of property, plant and equipment relating to the hospitality industry by a subsidiary of the Group. 1(a)(iii) Amount of any adjustment for under or overprovision of tax in respect of prior years The Groupâs tax charge for the period included an accrual for tax refund of $4,128,000 (1Q 2010: over provision of $397,000) in respect of prior years.
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1(a)(iv) Statement of Comprehensive Income
1Q 2011 $'000 Profit for the period 75,595 Group 1Q 2010 (restated) $'000 103,078 Change % -26.7%
Other comprehensive income: Exchange differences on translation of financial statements of foreign subsidiaries and associated corporations Net fair value changes Total other comprehensive income for the year, net of tax Total comprehensive income for the period (39,815) 1,380 (38,435) 37,160 5,184 (105) 5,079 108,157 NM NM NM -65.6%
Attributable to: Owners of the parent Non-controlling interests Total comprehensive income for the period 16,034 21,126 37,160 37,860 70,297 108,157 -57.6% -69.9% -65.6%
Attributable to: Owners of the parent Total comprehensive income from continuing operations, net of tax Total comprehensive income from discontinued operations, net of tax Total comprehensive income for the period attributable to owners of the parent 16,034 16,034 37,666 194 37,860 -57.4% NM -57.6%
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1(b)(i) A Statement of Financial Position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year.
Group $'000 Non-current assets Property, plant and equipment Land use rights Intangible assets Investment in subsidiaries Interests in associates Investment properties Other investments Deferred tax assets Non-current receivables Current assets Other investments Inventories Developm ent properties Trade and other receivables Cash and short-term deposits Assets classified as held-for-sale Current liabilities Trade and other payables Provisions Loans and borrowings Current tax payable Liabilities classified as held-for-sale 31/03/11 1,121,721 133,637 70,349 55,544 7,055 1,927 80,849 4,782 1,475,864 10,943 788,270 11,960 1,496,394 1,156,772 36,123 3,500,462 2,093,664 87,893 382,276 55,937 19,043 2,638,813 Net current assets Non-current liabilities Loans and borrowings Deferred tax liabilities Deferred grants Other non-current payables Retirement benefits 861,649 31/12/10 1,141,147 123,438 69,580 22,534 7,055 2,101 87,502 12,666 1,466,023 12,596 746,397 15,764 1,285,517 1,168,143 58,252 3,286,669 2,097,200 89,938 235,333 49,648 19,066 2,491,185 795,484 Company 31/03/11 316 511 210,824 13,726 225,377 31 201,779 1,725 36,483 240,018 22,111 107,910 130,021 109,997 31/12/10 351 583 213,824 13,816 3 228,577 37 183,608 1,125 36,499 221,269 27,442 116,597 144,039 77,230
250,092 38,637 59,089 650 239 348,707
220,680 37,999 46,192 241 305,112 1,956,395
42 42 335,332
45 45 305,762
Net assets Capital and reserves Share capital Reserves Non-controlling interests Total Equity
1,988,806
266,692 515,557 782,249 1,206,557 1,988,806
266,143 502,253 768,396 1,187,999 1,956,395
266,692 68,640 335,332 335,332
266,143 39,619 305,762 305,762
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Explanatory Notes to Statement of Financial Position Group ďˇ Compared to 31 December 2010, the increase in total assets and liabilities was primarily due to an increase in inventories and trade and other receivables as a result of increased business volumes in 1Q 2011 compared to 4Q 2010. Trade and other payables however fell marginally as curbs on bank lending and higher interest rates in China resulted in a tightening of suppliersâ credit terms. Consequently, loans and borrowings increased and cash holdings reduced. Loans and borrowings also rose as Yuchai issued RMB1 billion in corporate bonds during the quarter under review to fund its expansion program and to take advantage of current interest rate level in China in anticipation of further interest rate increases. Net current assets increased for the two comparative periods due to higher working capital requirements. The reduction in âAssets classified as held-for-saleâ as at 31 March 2011 compared to 31 December 2010 relates to two associates of Tasek Corporation Berhad, which had been put up for sale since mid February 2009 but the sale exercise has since been aborted. These investments are now accounted for as âInterests in associatesâ. Non-current liabilities rose due largely to two reasons, viz., (1) higher grants being given by the Chinese Government to one of the Groupâs China subsidiaries for research and development activities and (2) higher bank borrowings to fund the construction of a plant for the manufacture of heavy duty engines and to redeem preference shares issued by a subsidiary of the Group.
ďˇ
ďˇ
Company ďˇ Trade and other receivables rose primarily due to dividend receivable from a subsidiary of the Company.
1(b)(ii) Aggregate amount of groupâs borrowings and debt securities. Amount repayable in one year or less, or on demand
As at 31/03/2011 Secured $12,538,808 Unsecured $369,737,632 As at 31/12/2010 Secured $32,268,494 Unsecured $203,064,463
Amount repayable after one year
As at 31/03/2011 Secured $184,636,040 Unsecured $65,455,691 As at 31/12/2010 Secured $176,820,695 Unsecured $43,858,998
Details of any collateral The secured banking facilities of the Group, comprising term loans, are secured on the assets of certain subsidiaries with a total carrying value as at 31 March 2011 of $246,135,000 (31 December 2010: $289,524,000).
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1(c) A cash flow statement (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year.
1Q 2011 $'000 Operating Activities Profit before income tax from continuing operations Profit before income tax from discontinued operations Adjustment for : Depreciation and amortisation Write back of stock obsolescence Impairment losses made for trade and other receivables Cost of share-based payment Fair value loss on investments Impairment losses (written back)/made for property, plant and equipment and assets held for sale Loss/(gain) on disposal of property, plant and equipment Gain on liquidation of a subsidiary Loss on liquidation of an associate Finance costs Dividends and interest income Provision for warranties and other costs, net Share of profit of associates Operating profit before working capital changes Changes in working capital: Inventories Trade and other receivables Trade and other payables Provisions utilised Income tax paid Cash flows (used in)/from operating activities Investing Activities Interests and dividends received Royalty payments received Proceeds from disposal of a subsidiary, net of cash disposed Proceeds from disposal of associates and joint ventures Proceeds from disposal of property, plant and equipment Proceeds from disposal of land use rights Acquisition of non-controlling interests in a subsidiary Purchase of property, plant and equipment Payment of land use rights Purchase of intangible assets Cash flows used in investing activities Financing Activities Proceeds from share issue Grant received from government Capital contribution by minority shareholders of a subsidiary Proceeds from bank borrowings Proceeds from issuance of bond Repayment of bank borrowings Repayment of obligations under finance leases Dividends paid to minority shareholders of subsidiaries Release of fixed deposits pledged with banks Interest paid Cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of the period Comprising: Fixed deposit, bank and cash balances Less: Bank overdraft Fixed deposits pledged 87,544 34,699 (3,458) 4,090 248 1,347 (2,311) 156 682 14,347 (3,708) 17,967 (16,144) 135,459 (53,069) (228,258) 45,385 (18,166) (118,649) (2,572) (121,221) 1Q 2010 (restated) $'000 122,870 348 28,102 (1,539) (573) 54 1,719 (2,087) (453) 12,452 (3,822) 27,273 (680) 183,664 (48,486) (520,682) 404,345 (15,230) 3,611 (3,469) 142
4,353 765 102 386 367 (40,659) (13,347) (1,052) (49,085)
4,524 (3) 7,959 (6,210) (31,107) (8,565) (182) (33,584)
549 14,034 39,846 193,733 (47,731) (5,065) 27 (15,586) 179,807 9,501 1,167,479 (21,493) 1,155,487
1,062 22,431 5,962 47,347 (48,159) (9,499) 59 (13,606) 5,597 (27,845) 1,054,674 1,739 1,028,568
1,156,772 (1,285) 1,155,487
1,049,863 (412) (20,883) 1,028,568
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The attributable net assets of a subsidiary disposed during the period are as follows: 1Q 2011 $'000 Disposals Realisation of translation difference Gain on liquidation of a subsidiary Disposal of a subsidiary, net of cash disposed 1Q 2010 $'000 (456) 453 (3)
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1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year.
Premium Reserve of Equity paid on disposal Compenacquisition group Capital Statutory Fair Value sation Translation of minority classified Revenue Reserve Reserve Reserve Reserve Reserve Interests held-for-sale Reserve $'000 $'000 $'000 $'000 $'000 $'000 S$'000 $'000 (28,672) 29,664 44,015 (105) 2,009 (18,757) 2,107 414,798 35,858
Statement of Changes in Equity
Share Capital $'000 264,996 -
Total $'000 708,053 37,860
Noncontrolling Interests $'000 1,006,596 70,297
Total Equity $'000 1,714,649 108,157
The Group At 1 January 2010 Total comprehensive income for the Transactions with owners, recorded directly in equity Contributions by and distributions to owners Share issued during the period Cost of share-based payments Acquisition of business combination and others Dividends paid/payable to noncontrolling interests of subsidiaries Shares issued to non-controlling interests of subsidiaries Changes in ownership interests in subsidiaries that do not result in a loss of control Acquisition of non-controlling interests Premium paid on acquisition of noncontrolling interests At 31 March 2010
1,062 -
-
-
-
54 -
-
-
-
(143) -
1,062 54 (143) -
217 (9,499) 5,962
1,062 54 74 (9,499) 5,962
266,058
-
-
43,910
2,063
(16,650)
(2,331) (2,331)
-
450,513
-
(3,879)
(3,879) (2,331) 1,814,249
(28,672) 29,664
(2,331) 744,555 1,069,694
At 1 January 2011 266,143 Total comprehensive income for the period Transactions with owners, recorded directly in equity Contributions by and distributions to owners Share issued during the period 549 Cost of share-based payment Realisation of reserves upon disposal of assets At 31 March 2011 266,692
(28,672) 32,568 -
48,395 1,380
1,477 -
(47,269) (13,815)
(1,451) -
2,353 -
494,852 28,469
768,396 16,034
1,187,999 21,126
1,956,395 37,160
-
-
(2,978) 46,797
248 1,725
(61,084)
(1,451)
2,353
523,321
549 248
-
549 248
(28,672) 32,568
(2,978) (2,568) (5,546) 782,249 1,206,557 1,988,806
Statement of Changes In Equity
Share Capital $'000
Capital Reserves $'000 9,199 9,199
Fair Value Reserves $'000 5 (2) 3
Compensation Reserves $'000 1,496 54 1,550
Revenue Reserves $'000 48,326 (3,429) 44,897
Total Equity $'000 324,022 (3,431) 1,062 54 321,707
The Company At 1 January 2010 Total comprehensive income for the period Share is sues during the period Cost of share-based payment At 31 March 2010 264,996 1,062 266,058
At 1 January 2011 Total comprehensive income for the period Share is sues during the period Cost of share-based payment At 31 March 2011
266,143 549 266,692
9,199 9,199
8 (6) 2
1,424 248 1,672
28,988 28,779 57,767
305,762 28,773 549 248 335,332
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1(d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles, as well as the number of shares held as treasury shares, if any, against the total number of issued shares excluding treasury shares of the issuer, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year. 1(d)(ii)(A) Movements in issued and paid-up capital
Number of Shares Ordinary Shares Balance as at 1 January 2011 Shares issued f or cash upon the exercise of options under the Hong Leong Asia Share Option Scheme 2000 (the " Scheme") Balance as at 31 March 2011 373,573,359 250,000 373,823,359 Issued and PaidUp Capital $'000 266,143 549 266,692
The Company did not hold any treasury shares as at 31 March 2011 and 31 March 2010. There had been no change in the number of ordinary shares in issue as at 31 December 2010 and 1 January 2011. 1(d)(ii)(B) Share Options During 1Q 2011, the following options were exercised pursuant to the terms of the Scheme:
Year of Grant 2001 2002 2003 2004 2005 2007 2008 2009 2011 Total Exercise Price Per Share $0.41 $1.00 $1.79 $1.51 $1.28 $1.88 $2.36 $1.42 $3.17 1Q 2011 85,000 165,000 250,000 Cum ulative To Date 6,107,000 1,153,800 809,000 247,700 1,031,400 361,800 33,000 9,743,700
As at 31 March 2011, there were a total of 1,745,200 (31 March 2010: 1,354,100) unissued shares under options granted pursuant to the Scheme. Details are as follows:
Year of Grant 2008 2009 2011 Total Exercise Price $2.36 $1.42 $3.17 Number of Outstanding Options 488,200 67,000 1,190,000 1,745,200
1(d)(iii) To show the total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of the immediately preceding year. Please refer to item 1(d)(ii)(A) above.
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1(d)(iv) A statement showing all sales, transfers, disposal, cancellation and/or use of treasury shares as at the end of the current financial period reported on. There was no sale, transfer, disposal, cancellation and/or use of treasury shares during the three months ended 31 March 2011. 2. Whether the figures have been audited or reviewed and in accordance with which auditing standard or practice. The figures have not been audited nor reviewed. 3. Where the figures have been audited or reviewed, the auditorsâ report (including any qualifications or emphasis of a matter). Not applicable 4. Whether the same accounting policies and methods of computation as in the issuerâs most recently audited annual financial statements have been applied. The Group has applied the same accounting policies and methods of computation as in the Group's audited financial statements for the year ended 31 December 2010. 5. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change. The Group adopted the following revised accounting standards that are effective for annual periods beginning on or after 1 February 2010. Insofar as the Group is concerned, these revised accounting standards are effective on 1 January 2011 as 2011 is the first annual period for the Group subsequent to 1 February 2010. Changes to the Groupâs accounting policies have been made as required, in accordance with the transitional provisions in the respective FRS and INT FRS. Effective for annual periods beginning on or after 1 February 2010 1 July 2010 1 January 2011 1 January 2011 1 January 2011
Description Amendment to FRS 32 Financial Instruments: Presentation Classification of Rights Issues INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments Revised FRS 24 Related Party Disclosures Amendments to INT FRS 114 Prepayments of a Minimum Funding Requirement INT FRS 115 Agreements for the Construction of Real Estate
Except for the revised FRS 24, the adoption of the other standards and interpretations above has no material impact on the financial statements of the Group. The revised FRS 24 clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised FRS 24 expands the definition of a related party and would treat two entities as related to each other whenever a person (or a close member of that personâs family) or a third party has control or joint control over the entity, or has significant influence over the entity. The revised standard also introduces a partial exemption of disclosure requirements for government-related entities. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group.
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6.
Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends.
Group 1Q 2011 1Q 2010 7.62 9.61 7.62 9.59
Earnings per ordinary share based on net profit attributable to shareholders (i) Based on the weighted average num ber of ordinary shares in issue (cts) (ii) On a fully diluted basis (cts)
7.
Net asset value (for the issuer and group) per ordinary share based on the total number of issued shares excluding treasury shares of the issuer at the end of the:(a) current financial period reported on; and (b) immediately preceding financial year.
Group 31/3/2011 31/12/2010 Company 31/3/2011 31/12/2010
Net Asset Value (for the issuer and group) per ordinary share based on the total number of issued shares excluding treasury shares, if any, of the issuer as at 31 March 2011 and as at 31 December 2010 (cts)
209.26
205.69
89.70
81.85
8. A review of the performance of the group, to the extent necessary for a reasonable understanding of the groupâs business. It must include a discussion of the following:(a) any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors; and (b) any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on. Growth of the Chinese economy had moderated to 9.7 percent in 1Q 2011 compared to 11.9 percent achieved in 1Q 2010. Inflation, which continues to be a worrying factor in China, has led to two rounds of interest rate hikes and three rounds of increase in banksâ reserve ratio so far this year, resulting in reduced liquidity available for lending in China. Nonetheless, Chinaâs wages have increased which contributed to an increase in disposable income and this has also led to higher consumer spending. Investment spending in trucks and buses has moderated considerably as a result of liquidity squeeze and measures by the Chinese government to curtail growth of automobiles. Subsidy programs targeted at the automobile sector in the rural areas are no longer in place. Sales revenue of the Group declined by 16.6 percent caused primarily by lower sales from the Groupâs diesel engines unit (âYuchaiâ). Foreign exchange effect from the stronger Singapore dollar against the Renminbi accounted for 5 percent of the total decline in sales revenue. These were partly compensated by marginally better unit sales from the Groupâs consumer products unit (âXinfeiâ) and higher sales of ready-mix concrete at higher selling prices, the latter reflecting the 2.6 percent yearon-year growth in the building activities in the Singapore residential segment. Prices of cement sold in Malaysia were also better than 1Q 2010. Sales of the Groupâs industrial packaging unit (âRexâ) fell on lower business volume but more green technology pallets (âGPacâ) were sold. Demand for white goods continues to grow in China and this was reflected in the 5 percent increase in unit sales achieved by Xinfei in 1Q 2011. However selling prices came under pressure as the products qualified under the fourth tender rural subsidy program for electrical appliances expired in March 2011. As a result, the higher unit sales of white goods did not translate to a proportionate increase in sales revenue for Xinfei. Sales of diesel engines did not reach the same level as 1Q 2010 due to lower demand for trucks and buses. The cessation of the various Chinese government subsidy schemes, measures to combat automobile growth and rising fuel costs also had a dampening effect on diesel engine sales. However, selling prices in 1Q 2011 were generally higher than 1Q 2010 and this helped to cushion the effect of volume decline.
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Gross profit fell by 14.4 percent year-on-year, 2.2 percentage points lower than the fall in sales revenue. Foreign exchange effect from the stronger Singapore dollar accounted for 5.1 percent of the total decrease in gross profit. Higher raw material and labour costs as well as lower average unit selling price significantly affected the performance of Xinfei and lower unit sales depressed gross profit of Yuchai. A combination of lower volume and selling prices affected the gross profit of Rex. The write-back of provision for onerous contracts and impairment charges on property, plant and equipment had a favourable impact on the gross profit of the Groupâs building materials unit (âBMUâ). Other income in 1Q 2010 included a $2.4 million gain from the sale of a factory building in Ang Mo Kio and a write-back of a $0.9 million claim by a supplier. In 1Q 2011, other income included $0.3 million of fees received from PT Rexplast. Other than these factors, other income in the two comparative periods comprised essentially interest income, largely from bank deposits. Total operating expenses were favourably affected by the stronger Singapore dollar against Renminbi to the tune of $11.7 million. Selling and distribution (âS&Dâ) expenses fell and this was primarily attributed to lower volume-related and performance-related expenses incurred by Yuchai as well as lower freight charges incurred by Rex. However, Xinfei had to incur higher costs to incentivize dealers and Yuchai had to provide for higher allowance for doubtful debts. Continued investments in skilled manpower as well as increased use of third party consultants by both Yuchai and Xinfei resulted in an increase in research and development expenses. Arising from lower profitability, both Xinfei and Yuchai accrued lower performance-related staff costs which would have lowered general and administrative expenses (âG&Aâ) but for the higher depreciation expense on fair value adjustments on assets relating to the hospitality industry which were acquired by the Group. This had resulted in marginally higher G&A expenses in 1Q 2011. Finance costs rose from higher bill discounting activity and issuance of corporate bonds by Yuchai as well as higher interest rates in China. About $14 million of share of profit from associates (âAssociates Profitâ) came from prior yearsâ earnings of two associates of Tasek Corporation Berhad (âTCBâ), $1.8 million coming from 1Q 2011 earnings of the two associates and the balance of $0.3 million from another associate of BMU in Singapore. The Groupâs interests in the two associates of TCB were previously considered for disposal and were accordingly treated as âAssets classified as held-for-saleâ. However the divestment plan had since been aborted and as such the investments are now considered as associates. At year end, the Group will review the materiality of the Associates Profit in relation to the Groupâs pre-tax profit for FY 2011 to determine if prior year adjustment is required. A Malaysian subsidiary had accrued $4.1 million tax refund in 1Q 2011. The effective tax rate in 1Q 2011 was higher than that of 1Q 2010 as the former had a higher proportion of income from nonChina source. Non-China sourced income had a higher effective tax rate compared to China-sourced income. Working Capital and Cash Flow The issuance of RMB1 billion in corporate bonds by Yuchai had a positive impact on the cashflow for the Group as at the end of March 2011. However, a sharp fall in profits, before accounting for the Groupâs share of profits from associates, and a steeper decline in trade and bills payables compared to the decline in trade and bills receivable resulted in a negative cashflow from operating activities. The high interest rates and curbs in bank lending in China collectively resulted in a reduction in suppliersâ credit which in turn reduced funding from this source. Sales revenue for 1Q 2010 grew much faster than the preceding quarter compared to the similar comparison for 1Q 2011 and this resulted in a slower rate of increase in trade and other receivables which had a positive impact on cashflow. Profit for the quarter was affected particularly by weak performances from Xinfei and Yuchai for reasons explained in the preceding section. Diesel sales were exceptionally strong in 1Q 2010 which did not recur in 1Q 2011. Although demand for white goods has grown year-on-year, pricing pressure, high commodity costs and expenses incurred in incentivizing dealers affected its performance. This has resulted in Xinfei incurring a loss in 1Q 2011. Cashflow from investing activities increased as ongoing payments were made by Yuchai for the research centre in Nanning and the second phase of the foundry project for capacity expansion as well as investments in other capacity expansion and quality enhancement assets. 12
9. Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results. None. 10. A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months. The Chinese economy is expected to continue to post growth although measures to control inflation are likely to have an adverse impact on domestic trading activities. The rural subsidy program for electrical appliances in three of the provinces in China is expected to cease this year and the rest in 2012. The electrical appliance market should continue to expand with the acceleration of purchases of electrical appliances in those three provinces which should see better sales by Xinfei in the second quarter of (â2Qâ) 2011. Growth may however, be moderated by inflationary fears which may cause consumers to defer non-essential purchases, notwithstanding that disposable income, as a whole, has risen in China. However, the downsides to this positive development, viz., (1) the trade is unlikely to carry as much inventories as they have done in the past due to higher interest cost, and (2) the inability of the trade to fully sell off electrical appliances which qualified under the fourth tender rural subsidy program (which subsidy expired on 15 March 2011) are expected to put pressure on Xinfei to offer discounts and other incentives to assist dealers to dispose those goods that no longer qualify for the subsidy. Sales of diesel engines are expected to improve in 2Q 2011 as inventories are being depleted but as in white goods, increased business costs may affect engine demand. Rising commodity costs will have an effect on the profitability of Xinfei and Yuchai as well as Rex. With signs of lower granite and aggregate prices, biddings by subcontractors are likely to become more competitive again. Project delays, which happened in 1Q 2011, will translate to a challenging year for the precast concrete business of BMU. Cement prices in Malaysia have increased. Sales of cement are unlikely to be affected in the near term despite a scheduled plant maintenance program in 2Q 2011. Barring unforeseen circumstances including any change in policies of the Chinese government and any adverse change in the business climate, the Group expects to operate profitably in the next quarter and in the current financial year. As part of the Groupâs efforts to grow its businesses and enhance shareholdersâ value, the Group continues to explore investment and divestment opportunities. As and when these opportunities materialize, appropriate announcements will be made. Negotiations with certain parties to dispose the Groupâs interest in the quarry on Karimun Island are ongoing. 11. Dividend (a) Current Financial Period Reported On Any dividend declared for the current financial period reported on? No
(b) Corresponding Period of the Immediately Preceding Financial Year Any dividend declared for the corresponding period of the immediately preceding financial year? No (c) Date payable Not applicable. (d) Books closure date Not applicable.
13
12. If no dividend has been declared/recommended, a statement to that effect. No dividend is declared / recommended for the current financial period under review.
PART II - ADDITIONAL INFORMATION REQUIRED FOR FULL YEAR ANNOUNCEMENT (This part is not applicable to Q1, Q2, Q3 or Half Year Results) 13. Segmented revenue and results for business or geographical segments (of the group) in the form presented in the issuerâs most recently audited annual financial statements, with comparative information for the immediately preceding year. Not applicable. 14. In the review of performance, the factors leading to any material changes in contributions to turnover and earnings by the business or geographical segments. Not applicable. 15. A breakdown of sales. Not applicable. 16. Interested persons transactions No interested persons transactions (IPT) were concluded under the Companyâs IPT Mandate for the quarter ended 31 March 2011.
BY ORDER OF THE BOARD Yeo Swee Gim, Joanne Ng Siew Ping, Jaslin Company Secretaries 12 May 2011
Confirmation Pursuant to Rule 705(5) of the Listing Manual The Board has confirmed that to the best of its knowledge, nothing has come to its attention which may render the unaudited interim financial results of the Group for the first quarter ended 31 March 2011 to be false or misleading in any material respect.
On behalf of the Board
Kwek Leng Beng Chairman
Kwek Leng Peck Director & Acting CEO
12 May 2011
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FINANCIAL STATEMENT AND RELATED ANNOUNCEMENT
Page 1 of 1
Print this page First Quarter Results * Financial Statement And Related Announcement * Asterisks denote mandatory information Name of Announcer * Company Registration No. Announcement submitted on behalf of Announcement respect to * is submitted with HONG LEONG ASIA LTD. 196300306G HONG LEONG ASIA LTD. HONG LEONG ASIA LTD.
Announcement is submitted by * Designation * Date & Time of Broadcast Announcement No.
NG SIEW PING, JASLIN COMPANY SECRETARY 12-May-2011 18:33:40 00181
>> Announcement Details The details of the announcement start here ... For the Financial Period Ended * 31-03-2011
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12/5/2011
HONG LEONG ASIA LTD. (REGISTRATION NO. 196300306G)
Unaudited First Quarter Financial Statement For The Period Ended 31 March 2011
PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS The Board of Directors announces the results of the Group for the first quarter ended 31 March (â1Qâ) 2011. These figures have not been audited. Certain comparative figures for 1Q 2010 have been restated to be consistent with the classification for 1Q 2011. 1(a) An income statement (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year. 1(a)(i) Income statement
Group 1Q 2010 (restated) $'000 1,493,364 (1,152,414) 340,950 10,075 (148,184) (17,236) (50,963) (12,452) 122,190 680 122,870 (20,059) 102,811
1Q 2011 $'000 Continuing operations Revenue Cost of sales Gross profit Other income Selling and distribution expenses Research and development costs General and administrative expenses Finance costs Profit from continuing operations Share of profit of associates, net of tax Profit before income tax from continuing operations Income tax expense Profit from continuing operations, net of tax Discontinued operations Profit from discontinued operations, net of tax Profit for the period Attributable to : Owners of the parent Profit from continuing operations, net of tax Profit from discontinued operations, net of tax 28,469 28,469 75,595 1,245,769 (953,770) 291,999 5,925 (141,413) (18,556) (52,208) (14,347) 71,400 16,144 87,544 (11,949) 75,595
Change % -16.6% -17.2% -14.4% -41.2% -4.6% 7.7% 2.4% 15.2% -41.6% 2274.1% -28.8% -40.4% -26.5%
267 103,078
NM -26.7%
35,664 194 35,858
-20.2% NM -20.6%
Non-controlling interests Profit from continuing operations, net of tax Profit from discontinued operations, net of tax 47,126 47,126 67,147 73 67,220 -29.8% NM -29.9%
1
1(a)(ii) Notes to the income statement
Group 1Q 2010 $'000 2,087 (1,719) 573 1,539 (28,102) (701)
Profit from operations include the following: (Loss)/gain on disposal of property, plant and equipm ent (1) Impairment written back/( losses) on property, plant and equipm ent and developm ent properties (2) Allowance (m ade)/written back for trade and other receivables/(bad debts written off) (3) Allowance written back for stock obsolescence (4) Depreciation and am ortisation (5) Foreign exchange gain/(loss)
1Q 2011 $'000 (156) 2,311 (4,090) 3,458 (34,699) 1,950
Change % NM NM NM 124.7% 23.5% NM
NM: Not meaningful
(1) The gain from disposal of property, plant and equipment in 1Q 2010 arose largely from sale of a factory located in Singapore. (2) Impairment written back in 1Q 2011 arose from the re-evaluation of the performance of the cash generating units which held the property, plant and equipment. Impairment charge in 1Q 2010 relates entirely to the Groupâs hospitality business. (3) Allowances for doubtful debts were made by one of the Groupâs China subsidiaries to reflect the ageing of those debts. (4) Allowance for stock obsolescence was written back as those stocks were subsequently sold. (5) Further depreciation charge was made in 1Q 2011 to reflect fair value adjustments in respect of purchase of property, plant and equipment relating to the hospitality industry by a subsidiary of the Group. 1(a)(iii) Amount of any adjustment for under or overprovision of tax in respect of prior years The Groupâs tax charge for the period included an accrual for tax refund of $4,128,000 (1Q 2010: over provision of $397,000) in respect of prior years.
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1(a)(iv) Statement of Comprehensive Income
1Q 2011 $'000 Profit for the period 75,595 Group 1Q 2010 (restated) $'000 103,078 Change % -26.7%
Other comprehensive income: Exchange differences on translation of financial statements of foreign subsidiaries and associated corporations Net fair value changes Total other comprehensive income for the year, net of tax Total comprehensive income for the period (39,815) 1,380 (38,435) 37,160 5,184 (105) 5,079 108,157 NM NM NM -65.6%
Attributable to: Owners of the parent Non-controlling interests Total comprehensive income for the period 16,034 21,126 37,160 37,860 70,297 108,157 -57.6% -69.9% -65.6%
Attributable to: Owners of the parent Total comprehensive income from continuing operations, net of tax Total comprehensive income from discontinued operations, net of tax Total comprehensive income for the period attributable to owners of the parent 16,034 16,034 37,666 194 37,860 -57.4% NM -57.6%
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1(b)(i) A Statement of Financial Position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year.
Group $'000 Non-current assets Property, plant and equipment Land use rights Intangible assets Investment in subsidiaries Interests in associates Investment properties Other investments Deferred tax assets Non-current receivables Current assets Other investments Inventories Developm ent properties Trade and other receivables Cash and short-term deposits Assets classified as held-for-sale Current liabilities Trade and other payables Provisions Loans and borrowings Current tax payable Liabilities classified as held-for-sale 31/03/11 1,121,721 133,637 70,349 55,544 7,055 1,927 80,849 4,782 1,475,864 10,943 788,270 11,960 1,496,394 1,156,772 36,123 3,500,462 2,093,664 87,893 382,276 55,937 19,043 2,638,813 Net current assets Non-current liabilities Loans and borrowings Deferred tax liabilities Deferred grants Other non-current payables Retirement benefits 861,649 31/12/10 1,141,147 123,438 69,580 22,534 7,055 2,101 87,502 12,666 1,466,023 12,596 746,397 15,764 1,285,517 1,168,143 58,252 3,286,669 2,097,200 89,938 235,333 49,648 19,066 2,491,185 795,484 Company 31/03/11 316 511 210,824 13,726 225,377 31 201,779 1,725 36,483 240,018 22,111 107,910 130,021 109,997 31/12/10 351 583 213,824 13,816 3 228,577 37 183,608 1,125 36,499 221,269 27,442 116,597 144,039 77,230
250,092 38,637 59,089 650 239 348,707
220,680 37,999 46,192 241 305,112 1,956,395
42 42 335,332
45 45 305,762
Net assets Capital and reserves Share capital Reserves Non-controlling interests Total Equity
1,988,806
266,692 515,557 782,249 1,206,557 1,988,806
266,143 502,253 768,396 1,187,999 1,956,395
266,692 68,640 335,332 335,332
266,143 39,619 305,762 305,762
4
Explanatory Notes to Statement of Financial Position Group ďˇ Compared to 31 December 2010, the increase in total assets and liabilities was primarily due to an increase in inventories and trade and other receivables as a result of increased business volumes in 1Q 2011 compared to 4Q 2010. Trade and other payables however fell marginally as curbs on bank lending and higher interest rates in China resulted in a tightening of suppliersâ credit terms. Consequently, loans and borrowings increased and cash holdings reduced. Loans and borrowings also rose as Yuchai issued RMB1 billion in corporate bonds during the quarter under review to fund its expansion program and to take advantage of current interest rate level in China in anticipation of further interest rate increases. Net current assets increased for the two comparative periods due to higher working capital requirements. The reduction in âAssets classified as held-for-saleâ as at 31 March 2011 compared to 31 December 2010 relates to two associates of Tasek Corporation Berhad, which had been put up for sale since mid February 2009 but the sale exercise has since been aborted. These investments are now accounted for as âInterests in associatesâ. Non-current liabilities rose due largely to two reasons, viz., (1) higher grants being given by the Chinese Government to one of the Groupâs China subsidiaries for research and development activities and (2) higher bank borrowings to fund the construction of a plant for the manufacture of heavy duty engines and to redeem preference shares issued by a subsidiary of the Group.
ďˇ
ďˇ
Company ďˇ Trade and other receivables rose primarily due to dividend receivable from a subsidiary of the Company.
1(b)(ii) Aggregate amount of groupâs borrowings and debt securities. Amount repayable in one year or less, or on demand
As at 31/03/2011 Secured $12,538,808 Unsecured $369,737,632 As at 31/12/2010 Secured $32,268,494 Unsecured $203,064,463
Amount repayable after one year
As at 31/03/2011 Secured $184,636,040 Unsecured $65,455,691 As at 31/12/2010 Secured $176,820,695 Unsecured $43,858,998
Details of any collateral The secured banking facilities of the Group, comprising term loans, are secured on the assets of certain subsidiaries with a total carrying value as at 31 March 2011 of $246,135,000 (31 December 2010: $289,524,000).
5
1(c) A cash flow statement (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year.
1Q 2011 $'000 Operating Activities Profit before income tax from continuing operations Profit before income tax from discontinued operations Adjustment for : Depreciation and amortisation Write back of stock obsolescence Impairment losses made for trade and other receivables Cost of share-based payment Fair value loss on investments Impairment losses (written back)/made for property, plant and equipment and assets held for sale Loss/(gain) on disposal of property, plant and equipment Gain on liquidation of a subsidiary Loss on liquidation of an associate Finance costs Dividends and interest income Provision for warranties and other costs, net Share of profit of associates Operating profit before working capital changes Changes in working capital: Inventories Trade and other receivables Trade and other payables Provisions utilised Income tax paid Cash flows (used in)/from operating activities Investing Activities Interests and dividends received Royalty payments received Proceeds from disposal of a subsidiary, net of cash disposed Proceeds from disposal of associates and joint ventures Proceeds from disposal of property, plant and equipment Proceeds from disposal of land use rights Acquisition of non-controlling interests in a subsidiary Purchase of property, plant and equipment Payment of land use rights Purchase of intangible assets Cash flows used in investing activities Financing Activities Proceeds from share issue Grant received from government Capital contribution by minority shareholders of a subsidiary Proceeds from bank borrowings Proceeds from issuance of bond Repayment of bank borrowings Repayment of obligations under finance leases Dividends paid to minority shareholders of subsidiaries Release of fixed deposits pledged with banks Interest paid Cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of the period Comprising: Fixed deposit, bank and cash balances Less: Bank overdraft Fixed deposits pledged 87,544 34,699 (3,458) 4,090 248 1,347 (2,311) 156 682 14,347 (3,708) 17,967 (16,144) 135,459 (53,069) (228,258) 45,385 (18,166) (118,649) (2,572) (121,221) 1Q 2010 (restated) $'000 122,870 348 28,102 (1,539) (573) 54 1,719 (2,087) (453) 12,452 (3,822) 27,273 (680) 183,664 (48,486) (520,682) 404,345 (15,230) 3,611 (3,469) 142
4,353 765 102 386 367 (40,659) (13,347) (1,052) (49,085)
4,524 (3) 7,959 (6,210) (31,107) (8,565) (182) (33,584)
549 14,034 39,846 193,733 (47,731) (5,065) 27 (15,586) 179,807 9,501 1,167,479 (21,493) 1,155,487
1,062 22,431 5,962 47,347 (48,159) (9,499) 59 (13,606) 5,597 (27,845) 1,054,674 1,739 1,028,568
1,156,772 (1,285) 1,155,487
1,049,863 (412) (20,883) 1,028,568
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The attributable net assets of a subsidiary disposed during the period are as follows: 1Q 2011 $'000 Disposals Realisation of translation difference Gain on liquidation of a subsidiary Disposal of a subsidiary, net of cash disposed 1Q 2010 $'000 (456) 453 (3)
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1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year.
Premium Reserve of Equity paid on disposal Compenacquisition group Capital Statutory Fair Value sation Translation of minority classified Revenue Reserve Reserve Reserve Reserve Reserve Interests held-for-sale Reserve $'000 $'000 $'000 $'000 $'000 $'000 S$'000 $'000 (28,672) 29,664 44,015 (105) 2,009 (18,757) 2,107 414,798 35,858
Statement of Changes in Equity
Share Capital $'000 264,996 -
Total $'000 708,053 37,860
Noncontrolling Interests $'000 1,006,596 70,297
Total Equity $'000 1,714,649 108,157
The Group At 1 January 2010 Total comprehensive income for the Transactions with owners, recorded directly in equity Contributions by and distributions to owners Share issued during the period Cost of share-based payments Acquisition of business combination and others Dividends paid/payable to noncontrolling interests of subsidiaries Shares issued to non-controlling interests of subsidiaries Changes in ownership interests in subsidiaries that do not result in a loss of control Acquisition of non-controlling interests Premium paid on acquisition of noncontrolling interests At 31 March 2010
1,062 -
-
-
-
54 -
-
-
-
(143) -
1,062 54 (143) -
217 (9,499) 5,962
1,062 54 74 (9,499) 5,962
266,058
-
-
43,910
2,063
(16,650)
(2,331) (2,331)
-
450,513
-
(3,879)
(3,879) (2,331) 1,814,249
(28,672) 29,664
(2,331) 744,555 1,069,694
At 1 January 2011 266,143 Total comprehensive income for the period Transactions with owners, recorded directly in equity Contributions by and distributions to owners Share issued during the period 549 Cost of share-based payment Realisation of reserves upon disposal of assets At 31 March 2011 266,692
(28,672) 32,568 -
48,395 1,380
1,477 -
(47,269) (13,815)
(1,451) -
2,353 -
494,852 28,469
768,396 16,034
1,187,999 21,126
1,956,395 37,160
-
-
(2,978) 46,797
248 1,725
(61,084)
(1,451)
2,353
523,321
549 248
-
549 248
(28,672) 32,568
(2,978) (2,568) (5,546) 782,249 1,206,557 1,988,806
Statement of Changes In Equity
Share Capital $'000
Capital Reserves $'000 9,199 9,199
Fair Value Reserves $'000 5 (2) 3
Compensation Reserves $'000 1,496 54 1,550
Revenue Reserves $'000 48,326 (3,429) 44,897
Total Equity $'000 324,022 (3,431) 1,062 54 321,707
The Company At 1 January 2010 Total comprehensive income for the period Share is sues during the period Cost of share-based payment At 31 March 2010 264,996 1,062 266,058
At 1 January 2011 Total comprehensive income for the period Share is sues during the period Cost of share-based payment At 31 March 2011
266,143 549 266,692
9,199 9,199
8 (6) 2
1,424 248 1,672
28,988 28,779 57,767
305,762 28,773 549 248 335,332
8
1(d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles, as well as the number of shares held as treasury shares, if any, against the total number of issued shares excluding treasury shares of the issuer, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year. 1(d)(ii)(A) Movements in issued and paid-up capital
Number of Shares Ordinary Shares Balance as at 1 January 2011 Shares issued f or cash upon the exercise of options under the Hong Leong Asia Share Option Scheme 2000 (the " Scheme") Balance as at 31 March 2011 373,573,359 250,000 373,823,359 Issued and PaidUp Capital $'000 266,143 549 266,692
The Company did not hold any treasury shares as at 31 March 2011 and 31 March 2010. There had been no change in the number of ordinary shares in issue as at 31 December 2010 and 1 January 2011. 1(d)(ii)(B) Share Options During 1Q 2011, the following options were exercised pursuant to the terms of the Scheme:
Year of Grant 2001 2002 2003 2004 2005 2007 2008 2009 2011 Total Exercise Price Per Share $0.41 $1.00 $1.79 $1.51 $1.28 $1.88 $2.36 $1.42 $3.17 1Q 2011 85,000 165,000 250,000 Cum ulative To Date 6,107,000 1,153,800 809,000 247,700 1,031,400 361,800 33,000 9,743,700
As at 31 March 2011, there were a total of 1,745,200 (31 March 2010: 1,354,100) unissued shares under options granted pursuant to the Scheme. Details are as follows:
Year of Grant 2008 2009 2011 Total Exercise Price $2.36 $1.42 $3.17 Number of Outstanding Options 488,200 67,000 1,190,000 1,745,200
1(d)(iii) To show the total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of the immediately preceding year. Please refer to item 1(d)(ii)(A) above.
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1(d)(iv) A statement showing all sales, transfers, disposal, cancellation and/or use of treasury shares as at the end of the current financial period reported on. There was no sale, transfer, disposal, cancellation and/or use of treasury shares during the three months ended 31 March 2011. 2. Whether the figures have been audited or reviewed and in accordance with which auditing standard or practice. The figures have not been audited nor reviewed. 3. Where the figures have been audited or reviewed, the auditorsâ report (including any qualifications or emphasis of a matter). Not applicable 4. Whether the same accounting policies and methods of computation as in the issuerâs most recently audited annual financial statements have been applied. The Group has applied the same accounting policies and methods of computation as in the Group's audited financial statements for the year ended 31 December 2010. 5. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change. The Group adopted the following revised accounting standards that are effective for annual periods beginning on or after 1 February 2010. Insofar as the Group is concerned, these revised accounting standards are effective on 1 January 2011 as 2011 is the first annual period for the Group subsequent to 1 February 2010. Changes to the Groupâs accounting policies have been made as required, in accordance with the transitional provisions in the respective FRS and INT FRS. Effective for annual periods beginning on or after 1 February 2010 1 July 2010 1 January 2011 1 January 2011 1 January 2011
Description Amendment to FRS 32 Financial Instruments: Presentation Classification of Rights Issues INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments Revised FRS 24 Related Party Disclosures Amendments to INT FRS 114 Prepayments of a Minimum Funding Requirement INT FRS 115 Agreements for the Construction of Real Estate
Except for the revised FRS 24, the adoption of the other standards and interpretations above has no material impact on the financial statements of the Group. The revised FRS 24 clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised FRS 24 expands the definition of a related party and would treat two entities as related to each other whenever a person (or a close member of that personâs family) or a third party has control or joint control over the entity, or has significant influence over the entity. The revised standard also introduces a partial exemption of disclosure requirements for government-related entities. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group.
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6.
Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends.
Group 1Q 2011 1Q 2010 7.62 9.61 7.62 9.59
Earnings per ordinary share based on net profit attributable to shareholders (i) Based on the weighted average num ber of ordinary shares in issue (cts) (ii) On a fully diluted basis (cts)
7.
Net asset value (for the issuer and group) per ordinary share based on the total number of issued shares excluding treasury shares of the issuer at the end of the:(a) current financial period reported on; and (b) immediately preceding financial year.
Group 31/3/2011 31/12/2010 Company 31/3/2011 31/12/2010
Net Asset Value (for the issuer and group) per ordinary share based on the total number of issued shares excluding treasury shares, if any, of the issuer as at 31 March 2011 and as at 31 December 2010 (cts)
209.26
205.69
89.70
81.85
8. A review of the performance of the group, to the extent necessary for a reasonable understanding of the groupâs business. It must include a discussion of the following:(a) any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors; and (b) any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on. Growth of the Chinese economy had moderated to 9.7 percent in 1Q 2011 compared to 11.9 percent achieved in 1Q 2010. Inflation, which continues to be a worrying factor in China, has led to two rounds of interest rate hikes and three rounds of increase in banksâ reserve ratio so far this year, resulting in reduced liquidity available for lending in China. Nonetheless, Chinaâs wages have increased which contributed to an increase in disposable income and this has also led to higher consumer spending. Investment spending in trucks and buses has moderated considerably as a result of liquidity squeeze and measures by the Chinese government to curtail growth of automobiles. Subsidy programs targeted at the automobile sector in the rural areas are no longer in place. Sales revenue of the Group declined by 16.6 percent caused primarily by lower sales from the Groupâs diesel engines unit (âYuchaiâ). Foreign exchange effect from the stronger Singapore dollar against the Renminbi accounted for 5 percent of the total decline in sales revenue. These were partly compensated by marginally better unit sales from the Groupâs consumer products unit (âXinfeiâ) and higher sales of ready-mix concrete at higher selling prices, the latter reflecting the 2.6 percent yearon-year growth in the building activities in the Singapore residential segment. Prices of cement sold in Malaysia were also better than 1Q 2010. Sales of the Groupâs industrial packaging unit (âRexâ) fell on lower business volume but more green technology pallets (âGPacâ) were sold. Demand for white goods continues to grow in China and this was reflected in the 5 percent increase in unit sales achieved by Xinfei in 1Q 2011. However selling prices came under pressure as the products qualified under the fourth tender rural subsidy program for electrical appliances expired in March 2011. As a result, the higher unit sales of white goods did not translate to a proportionate increase in sales revenue for Xinfei. Sales of diesel engines did not reach the same level as 1Q 2010 due to lower demand for trucks and buses. The cessation of the various Chinese government subsidy schemes, measures to combat automobile growth and rising fuel costs also had a dampening effect on diesel engine sales. However, selling prices in 1Q 2011 were generally higher than 1Q 2010 and this helped to cushion the effect of volume decline.
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Gross profit fell by 14.4 percent year-on-year, 2.2 percentage points lower than the fall in sales revenue. Foreign exchange effect from the stronger Singapore dollar accounted for 5.1 percent of the total decrease in gross profit. Higher raw material and labour costs as well as lower average unit selling price significantly affected the performance of Xinfei and lower unit sales depressed gross profit of Yuchai. A combination of lower volume and selling prices affected the gross profit of Rex. The write-back of provision for onerous contracts and impairment charges on property, plant and equipment had a favourable impact on the gross profit of the Groupâs building materials unit (âBMUâ). Other income in 1Q 2010 included a $2.4 million gain from the sale of a factory building in Ang Mo Kio and a write-back of a $0.9 million claim by a supplier. In 1Q 2011, other income included $0.3 million of fees received from PT Rexplast. Other than these factors, other income in the two comparative periods comprised essentially interest income, largely from bank deposits. Total operating expenses were favourably affected by the stronger Singapore dollar against Renminbi to the tune of $11.7 million. Selling and distribution (âS&Dâ) expenses fell and this was primarily attributed to lower volume-related and performance-related expenses incurred by Yuchai as well as lower freight charges incurred by Rex. However, Xinfei had to incur higher costs to incentivize dealers and Yuchai had to provide for higher allowance for doubtful debts. Continued investments in skilled manpower as well as increased use of third party consultants by both Yuchai and Xinfei resulted in an increase in research and development expenses. Arising from lower profitability, both Xinfei and Yuchai accrued lower performance-related staff costs which would have lowered general and administrative expenses (âG&Aâ) but for the higher depreciation expense on fair value adjustments on assets relating to the hospitality industry which were acquired by the Group. This had resulted in marginally higher G&A expenses in 1Q 2011. Finance costs rose from higher bill discounting activity and issuance of corporate bonds by Yuchai as well as higher interest rates in China. About $14 million of share of profit from associates (âAssociates Profitâ) came from prior yearsâ earnings of two associates of Tasek Corporation Berhad (âTCBâ), $1.8 million coming from 1Q 2011 earnings of the two associates and the balance of $0.3 million from another associate of BMU in Singapore. The Groupâs interests in the two associates of TCB were previously considered for disposal and were accordingly treated as âAssets classified as held-for-saleâ. However the divestment plan had since been aborted and as such the investments are now considered as associates. At year end, the Group will review the materiality of the Associates Profit in relation to the Groupâs pre-tax profit for FY 2011 to determine if prior year adjustment is required. A Malaysian subsidiary had accrued $4.1 million tax refund in 1Q 2011. The effective tax rate in 1Q 2011 was higher than that of 1Q 2010 as the former had a higher proportion of income from nonChina source. Non-China sourced income had a higher effective tax rate compared to China-sourced income. Working Capital and Cash Flow The issuance of RMB1 billion in corporate bonds by Yuchai had a positive impact on the cashflow for the Group as at the end of March 2011. However, a sharp fall in profits, before accounting for the Groupâs share of profits from associates, and a steeper decline in trade and bills payables compared to the decline in trade and bills receivable resulted in a negative cashflow from operating activities. The high interest rates and curbs in bank lending in China collectively resulted in a reduction in suppliersâ credit which in turn reduced funding from this source. Sales revenue for 1Q 2010 grew much faster than the preceding quarter compared to the similar comparison for 1Q 2011 and this resulted in a slower rate of increase in trade and other receivables which had a positive impact on cashflow. Profit for the quarter was affected particularly by weak performances from Xinfei and Yuchai for reasons explained in the preceding section. Diesel sales were exceptionally strong in 1Q 2010 which did not recur in 1Q 2011. Although demand for white goods has grown year-on-year, pricing pressure, high commodity costs and expenses incurred in incentivizing dealers affected its performance. This has resulted in Xinfei incurring a loss in 1Q 2011. Cashflow from investing activities increased as ongoing payments were made by Yuchai for the research centre in Nanning and the second phase of the foundry project for capacity expansion as well as investments in other capacity expansion and quality enhancement assets. 12
9. Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results. None. 10. A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months. The Chinese economy is expected to continue to post growth although measures to control inflation are likely to have an adverse impact on domestic trading activities. The rural subsidy program for electrical appliances in three of the provinces in China is expected to cease this year and the rest in 2012. The electrical appliance market should continue to expand with the acceleration of purchases of electrical appliances in those three provinces which should see better sales by Xinfei in the second quarter of (â2Qâ) 2011. Growth may however, be moderated by inflationary fears which may cause consumers to defer non-essential purchases, notwithstanding that disposable income, as a whole, has risen in China. However, the downsides to this positive development, viz., (1) the trade is unlikely to carry as much inventories as they have done in the past due to higher interest cost, and (2) the inability of the trade to fully sell off electrical appliances which qualified under the fourth tender rural subsidy program (which subsidy expired on 15 March 2011) are expected to put pressure on Xinfei to offer discounts and other incentives to assist dealers to dispose those goods that no longer qualify for the subsidy. Sales of diesel engines are expected to improve in 2Q 2011 as inventories are being depleted but as in white goods, increased business costs may affect engine demand. Rising commodity costs will have an effect on the profitability of Xinfei and Yuchai as well as Rex. With signs of lower granite and aggregate prices, biddings by subcontractors are likely to become more competitive again. Project delays, which happened in 1Q 2011, will translate to a challenging year for the precast concrete business of BMU. Cement prices in Malaysia have increased. Sales of cement are unlikely to be affected in the near term despite a scheduled plant maintenance program in 2Q 2011. Barring unforeseen circumstances including any change in policies of the Chinese government and any adverse change in the business climate, the Group expects to operate profitably in the next quarter and in the current financial year. As part of the Groupâs efforts to grow its businesses and enhance shareholdersâ value, the Group continues to explore investment and divestment opportunities. As and when these opportunities materialize, appropriate announcements will be made. Negotiations with certain parties to dispose the Groupâs interest in the quarry on Karimun Island are ongoing. 11. Dividend (a) Current Financial Period Reported On Any dividend declared for the current financial period reported on? No
(b) Corresponding Period of the Immediately Preceding Financial Year Any dividend declared for the corresponding period of the immediately preceding financial year? No (c) Date payable Not applicable. (d) Books closure date Not applicable.
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12. If no dividend has been declared/recommended, a statement to that effect. No dividend is declared / recommended for the current financial period under review.
PART II - ADDITIONAL INFORMATION REQUIRED FOR FULL YEAR ANNOUNCEMENT (This part is not applicable to Q1, Q2, Q3 or Half Year Results) 13. Segmented revenue and results for business or geographical segments (of the group) in the form presented in the issuerâs most recently audited annual financial statements, with comparative information for the immediately preceding year. Not applicable. 14. In the review of performance, the factors leading to any material changes in contributions to turnover and earnings by the business or geographical segments. Not applicable. 15. A breakdown of sales. Not applicable. 16. Interested persons transactions No interested persons transactions (IPT) were concluded under the Companyâs IPT Mandate for the quarter ended 31 March 2011.
BY ORDER OF THE BOARD Yeo Swee Gim, Joanne Ng Siew Ping, Jaslin Company Secretaries 12 May 2011
Confirmation Pursuant to Rule 705(5) of the Listing Manual The Board has confirmed that to the best of its knowledge, nothing has come to its attention which may render the unaudited interim financial results of the Group for the first quarter ended 31 March 2011 to be false or misleading in any material respect.
On behalf of the Board
Kwek Leng Beng Chairman
Kwek Leng Peck Director & Acting CEO
12 May 2011
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