2qfy2017 results presentation (20170906) fir.irchartnexus.com/umw/doc/qu/2qfy2017 results... ·...

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Beyond Boundaries UMW Holdings Berhad 2QFY2017 Results Briefing 19th September 2017

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2Q17 IN REVIEW

o  Automotive and Equipment segments continue to be profitable.

o  Manufacturing & Engineering segment – auto components and lubricants business were profitable - but suffered losses due to pre-operating expenses incurred by the aerospace business.

o  Group’s results were dragged down by losses in both the listed and unlisted Oil & Gas segments, and loss on the demerger of the listed Oil & Gas subsidiary.

o  Oil & Gas exit will nonetheless improve financial position and underpin the refocus on core businesses.

o  Continued weakening of the ringgit, intense competition and poor consumer demand have impacted earnings.

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Leading in turbulent times

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COMPETITION REMAINS TOUGH BUT OUR AUTOMOTIVE DIVISION IS GAINING TRACTION

UMW TOYOTA MOTOR 1H17

(units) 1H16 (units)

Variance (%)

2017 Target (units)

% achieved for 2017

34,133 27,880 22.4 70,000 48.8

PERODUA 1H17 (units)

1H16 (units)

Variance (%)

2017 Target (units)

% achieved for 2017

99,675 97,370 2.4 202,000 49.3

Historically, the automotive industry performs much better in the second half of the year.

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….AND OTHER BUSINESS HIGHLIGHTS

Equipment - the industrial equipment sub-segment continues to perform well, particularly the leasing business. Operations in Malaysia and Vietnam contributed higher revenue and profit for 1H17, while Singapore operations continued to perform well.

M&E – Auto components and lubricants businesses were both profitable. Auto components business registered better than expected results for 1H17 due to strong contribution from KYB. Delivery of first fan case is on schedule for 4Q2017, as planned.

We remain committed towards our goal in enhancing and building sustainable businesses

Oil & Gas Listed Group - we completed the demerger of our listed Oil & Gas segment in July 2017. Moving forward, there will be no more losses from this segment that impacts the Group.

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FINANCIAL HIGHLIGHTS FOR FIRST HALF OF 2017

PBT (RM'000) 1Q17 2Q17 1H17 CORE SEGMENTS Automotive 87,071 98,969 186,039

Equipment 39,548 32,196 71,744

M&E 3,098 (9,600) (6,502)

Sub-total 129,717 121,565 251,281

NON-CORE SEGMENTS O&G Listed

- operating losses (104,908) (51,382) (156,290)

- loss on demerger (126,914) (126,914)

O&G Unlisted (15,031) (70,630) (85,661)

Others 4,610 (62,134) (57,523)

Sub-total (115,329) (311,060) (426,388)

Total 14,388 (189,495) (175,107)

7 UMW HOLDINGS BERHAD

GROUP’S CASH AND DEBT POSITION

RM’ mil 2Q2017 1Q2017

Deposits, Cash and Bank Balances 1,383.0 2,445.7

Short Term Borrowings 899.4 2,615.9

Long Term Borrowings 2,065.6 3,594.7

Total Borrowings 2,965.0 6,210.6

Total Equity 4,650.1 6,846.8

Debt/Equity ratio 64% 91%

Our debt/equity ratio eased significantly following the demerger of UMW Oil & Gas Corporation Berhad

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Segmental Results (Continuing Operations)

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SEGMENTAL RESULTS - AUTOMOTIVE

Automotive Results

The Automotive segment registered improved revenue of RM2,260.3 million for the second quarter of 2017, an increase of RM83.2 million or 3.8% compared to the corresponding quarter in 2016.

Profit before taxation (PBT) was lower at RM99.0 million primarily due to the strengthening of the US Dollar.

01

02

2Q2017

1H2016 vs 1H2017

2,177.1

133.3

2,260.3

99.0

Revenue PBT

2Q16

2Q17

RM’mil +3.8%

-25.7%

3,733.1

216.0

4,451.2

186.0

Revenue PBT

1H16

1H17

RM’mil

+19.2%

-13.9%

Higher revenue for the segment was attributable to the surge in demand for Toyota Innova (launched in December 2016) and Toyota Fortuner. UMW Toyota Motor sold 17,439 units in 2Q17 compared to 17,392 in 2Q16 (+0.3%)

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Perodua registered sales of 49,410 units for 2Q17 compared with 50,189 units in 2Q16 (-1.6%). Axia was the top selling model with 38% of total Perodua sales, while Bezza was second with 28%.

04

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SEGMENTAL RESULTS - EQUIPMENT

Equipment Results

Revenue of the Equipment segment in the second quarter of 2017 stabilised at RM351.4 million. PBT for the quarter was at RM32.2 million, a drop of RM11.2 million compared with the same quarter of 2016 of RM43.4 million.

The earnings declined amid shrinking margins and a highly competitive operating environment.

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02

2Q2017

1H2016 vs 1H2017

While there is a slowdown in the heavy equipment sub-segment, the industrial equipment sub-segment continues to perform well, particularly the leasing business.

03

Industrial equipment contributed 64% of total revenue of Equipment segment in 1H17.

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351.2

43.0

351.4

32.2

Revenue PBT

2Q16

2Q17

+0.1%

-25.1%

RM’mil

RM’mil -2.2%

-13.2%

709.1

82.6

693.8

71.7

Revenue PBT

1H16

1H17

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SEGMENTAL RESULTS – M&E

M&E Results

The Manufacturing & Engineering segment recorded a revenue of RM153.9 million in the second quarter of 2017, marginally lower than the RM157.0 million reported in the same quarter of 2016.

The lubricant business was affected by intense competition and registered lower revenue.

01

02

2Q2017

1H2016 vs 1H2017

The broader segment registered a loss before taxation of RM9.6 million, as opposed to a PBT of RM10.9 million in the same quarter of 2016.

03

The profitability was negatively affected by the pre-operating expenses incurred by the aerospace business.

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157.0

11.0

153.9

(10.0)

Revenue PBT

2Q16

2Q17

RM’mil -2.0%

>-100%

302.4

17.5

319.8

(6.5) Revenue PBT

1H16 1H17

>-100%

RM’mil 5.8%

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-25.1%

SEGMENTAL RESULTS – OIL & GAS (UNLISTED)

42.3

(45.3)

31.7

(70.6)

Revenue PBT

2Q16 2Q17

RM’mil

-55%

Oil & Gas (Unlisted) Results

The segment registered a revenue of RM31.7 million, a drop of RM10.6 million compared to the RM42.3 million in the same quarter of 2016 and a loss before taxation of RM70.6 million.

Performance of the exploration sub-segment was affected by the continued low industry demand. The losses was mainly contributed by the cessation of drilling operations in Oman. Moving forward, we expect to incur minimum administrative cost in managing the complete closure of the operations there.

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02

2Q2017

1H2016 vs 1H2017

95.8

(80.8)

67.90

(85.7)

Revenue PBT

1H16 1H17

RM’mil

-6.1%

-29.1%

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Segmental Results (Discontinued Operations)

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SEGMENTAL RESULTS – OIL & GAS (LISTED)

Oil & Gas (Listed) Results

Revenue of RM139.9 million for 2Q17 was higher than the RM130.0 million registered in the same quarter of 2016 by RM9.9 million or 7.6%.

The segment posted a lower loss before taxation of RM51.4 million in the second quarter of 2017 against the RM64.0 million recorded in the same quarter of 2016.

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02

2Q2017

1H2016 vs 1H2017

Higher rig utilisation rate coupled with lower losses from oilfield services accounted for the improvement in financial performance for the second quarter ended 30th June 2017.

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The UMW Group also recorded a one-time loss on demerger of UMW Oil & Gas Corporation Berhad (UMW-OG) of RM126.9 million arising from the difference between the fair value/market value of UMW-OG dated 13 June 2017 and share of net assets of UMW-OG.

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130.0

(64.0)

139.9

(51.4)

Revenue PBT

2Q16 2Q17

+7.6% RM’mil

+19.7%

217.7

(132.4)

214.2

(156.3)

Revenue

1H16 1H17

-18.1%

RM’mil

-10.98%

PBT

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Moving Forward

16 UMW HOLDINGS BERHAD UMW HOLDINGS BERHAD

KEY ACTION PLANS

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03 02

CONTINUED EXPANSION OF

OUR CORE BUSINESS

ADDRESSING EXIT OF

UNLISTED OIL & GAS

SEGMENT

MONETIZING LONG HELD, LAND ASSETS


Continued expansion of our business


CONTINUED EXPANSION OF OUR BUSINESS

AUTOMOTIVE Enhancing and

optimizing profitability

M&E Continued expansion of core business and

HVM

EQUIPMENT Strengthening of heavy equipment

segment with Komatsu

ü  GAME CHANGER


AUTOMOTIVE - Enhancing and optimizing profitability

Addressing FOREX volatility impacting earnings Action plans •  Improvising hedging methods •  Increase local content – Vios from 51% a

few years ago to 58% now. To focus increase on core models.

•  To increase the number of CKD models – currently 6 CKD models and 6 CBU models. Introduction of more new passenger car models from the new assembly plant in 2019.

•  To expand after-sales operations – to increase contribution from service, parts and body & paint operations.

Addressing intense competition – leading to higher A&P expenses Action plans •  Introduction of more new passenger car

models from the new assembly plant in 2019.

•  Strengthening brand image – Toyota Gazoo Racing, Toyota C-HR exclusive preview.

•  Streamlining operations and manpower optimisation at company level to reduce cost.

•  Rationalization of distribution network – focus on expanding dealerships

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EQUIPMENT - Strengthening of heavy equipment segment with Komatsu

ASIA Partnering directly with Komatsu Japan in equity JV to expand heavy equipment segment 01

Focus on construction industry given urbanization trends 02

JV will further strengthen and expand market penetration of Komatsu’s products in Malaysia, Singapore, Myanmar and Papua New Guinea

03

Generating growth for the Heavy Equipment segment 04


M&E - Continued expansion of core business and HVM

Lubricants

01

China operations o  Sole supplier of premium lubricants to

First Automobile Works (assembles Mazda, Red Flag, Besturn, Volkswagen and Audi models)

o  Recorded volume growth of more than 50% annually for the last few years

o  Market share less than 1%, huge potential for growth

Malaysia operations o  Continue to promote Pennzoil, Repsol

and Grantt lubricants o  Incorporated Toyota Production System

and LeanAero in its production process to improve efficiency and eliminate waste

o  UMW is the largest distributor of Repsol lubricants outside Spain.

o  Current combined capacity is 100 million litres/year. To increase capacity by 30% by 1Q18. Added capacity for venture into other ASEAN countries between 2018 and 2020.

Autocomponents

02

o  KYB-UMW has increased its market share to 54% in 2016 compared to 49% in 2015

o  Aggressively expanding into both

OEM and REM segments o  Exports to 38 countries o  Plans to increase manufacturing

capacity by 15% - 20% over the next 5 years.

HVM

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o  To deliver the first fan case to Rolls-Royce by Q42017


Addressing exit of Unlisted Oil & Gas segment


ADDRESSING EXIT OF UNLISTED OIL & GAS SEGMENT

Oil & Gas unlisted assets

o  16 assets to exit. o  Target to complete progressive exit

by 2018. o  Likely to incur operational losses

given limited income. o  Until exit, numerous mitigation

strategies deployed to minimise operational losses such as ceasing operations.

o  Various exit strategies considered

including outright sale.

o  In active negotiations with interested parties to dispose our equity in several companies.

Drilling & Exploration

OCTG & Line Pipe

Fabrication

Trading and Oilfield services

No. of Assets

3

5

2

6

Target 2017

2 – Offer received, final negotiations

1 – Phased out exit (Phase 1 completed, Phase 2 by year end) 1 - Offer received, finalisation 1 - Restructure and exit 1 – To cease operations

16 Total

Target 2018

2– active negotiatio

ns 1- Offer received, to exit 2- Active negotiations

-

2- exit

1- Ceased operations, to dispose assets 2- Active negotiations -


Monetizing long held land assets


MONETIZING LONG HELD LAND ASSETS

o  Serendah Land – 861 acres o  Opportunity exist for unlocking of value. o  Part of the land currently housed the Rolls-Royce fan casing project which acts

as a catalyst for further development of Serendah.

LOW-DENSITY RESIDENTIAL COMMUNITY

COMMERCIAL CORE WITH INTEGRATED CONNECTION TO

LANDSCAPE

MIXED-USE & RESIDENTIAL LOOP ROAD

HIGH-END, LOW-DENSITY RESIDENTIAL COMMUNITY

AEROSPACE INDUSTRY CLUSTER

AUTOMOTIVE INDUSTRY CLUSTER

MEDIUM-DENSITY AFFORDABLE HOUSING COMMUNITY

UMW Aerospace Sdn. Bhd’s site


Prospects for 2017


CURRENT PROSPECTS - 2017

Automotive Equipment

§  Heavy Equipment expected to be actively driven by construction sector

§  Steadfast demand anticipated for Industrial Equipment

Expected to be stable in the next quarters

M&E

§  Shock absorber business remains sustainable given high market share in the OEM and REM market – especially exports

§  Lubricants expected to contribute positively §  Rolls-Royce project is progressing as

scheduled

Positive outlook

Oil & Gas (Unlisted)

§  Oil prices are expected to remain low but volatility may have subsided with Brent crude oil price hovering above US$50 per barrel

§  UMW is actively implementing action plans towards exit from this segment

Oil price is on the upward trend

Challenging and to remain competitive

§  Softer consumer sentiment and intense competition

§  Stringent lending guidelines §  Expect lower margins for auto manufacturers

and distributors

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Conclusion

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o  2017 to be a turnaround and recovery year

o  Strong refocusing on the three core businesses (automotive, equipment, manufacturing & engineering) for better returns

o  Ongoing disposal of Unlisted Oil &Gas assets

UMW HOLDINGS BERHAD

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THANK YOU

UMW HOLDINGS BERHAD

2qfy2017 results presentation (20170906) fir.irchartnexus.com/umw/doc/qu/2qfy2017 results... ·...

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