COVER RATIONALE
2010 was a year of significant milestones for MBM Resources Berhad (MBMR). The numbers on the cover of this annual report symbolise each milestone achieved, beginning with the number ‘30’ signifying Daihatsu (Malaysia) Sdn Bhd’s 30th Anniversary, ‘50’ in celebration of Federal Auto Holdings Berhad’s 50th Anniversary, followed by ‘15’ to mark MBMR’s 15th year as a listed company on Bursa Malaysia Securities Berhad and finally ‘25’ in commemoration of Oriental Metal Industries (M) Sdn Bhd’s 25th Anniversary.
The lights in the background represent automotive headlights illuminating the many milestones achieved. These lights also show a lighted path, symbolising MBMR’s vision and growth forward.
ii | MBM RESOURCES BERHAD CONTENTS
2010 – A Year of Milestones: 02 MBM Resources Berhad – 15 Years of Growth 06 Federal Auto Holdings Berhad – 50 Years of Staying Ahead 08 Daihatsu (Malaysia) Sdn Bhd – 30 Years at the Forefront 10 Oriental Metal Industries (M) Sdn Bhd – 25 Years of Excellence 12 Corporate Information 14 Corporate Profile 15 Corporate Structure 16 5 Years Group Financial Performance 17 Financial Highlights 19 Chairman’s Statement 28 Managing Director’s Strategic Statement 36 The Year at a Glance 38 Profile of Directors 41 Management Team 43 Statement on Corporate Governance 49 Other Information Required by the Listing Requirements of Bursa Malaysia Securities Berhad 50 Statement on Internal Control 51 Report on Audit Committee 54 Statement of Directors’ Responsibilities in Relation to the Financial Statements 55 List of Properties 58 Analysis of Shareholdings 59 List of Top 30 Shareholders 61 Financial Statements 162 Notice of 17th Annual General Meeting 163 Form of Proxy M B M R eso u rces B erhad - 1 5 Y ears of G ro w th
MBM Resources Berhad (MBMR) was incorporated resulted in the MBM Group’s as an investment holding company in a restructuring automotive businesses scheme to consolidate its investments to include consolidated under the three main companies: listed entity, with the sale of the 20% stake in Perodua • Motor vehicle business in 2000 and 42% interest in Daihatsu (Malaysia) Sdn Bhd (DMSB), the exclusive Hino Motors (Malaysia) Sdn Bhd (HMMSB) in 2006 distributor of Daihatsu motor vehicles in Malaysia from the parent holding company to MBMR.
• Manufacturing activities The acquisition of Federal Auto Holdings Berhad Precision Press Industries Sdn Bhd (PPI), (FAHB), the established Volvo cars distributor and manufacturer of precision metal stamped subsequently a leading dealer, marked a significant parts and components and the design and milestone for the MBMR Group to pursue a multi- fabrication of tool and die for the metal stamping brand strategy, now as a top dealer for international industry, and reputable brands not only for Volvo but including Volkswagen and Mitsubishi. • Tekun Asas Sdn Bhd (Tekun Asas), manufacturer of loud speaker grilles and hard board panellings. MBMR also expanded into automotive parts manufacturing which today comprises of Oriental MBMR was successfully listed on the Kuala Lumpur Metal Industries (M) Sdn Bhd (OMI), the leading wheel Stock Exchange (now Bursa Malaysia Securities manufacturer and Summit Vehicles Body Works Berhad) on 9 February 1995, at an issue price of Sdn Bhd (SVBW), the body building business which RM2.00 per share. complements the commercial vehicle sales division.
Building on its strength as an automotive group, The Group crossed the RM1 billion revenue mark MBMR has expanded over the years into two core in 2006 and is now poised to reach new heights areas – automotive distribution and retailing and with its new growth strategy. The Group is in a new automotive parts manufacturing. expansion phase, investing heavily in expanding its distribution network and upgrading of its MBMR’s growth has been largely through facilities. MBMR aspires to be a complete acquisitions. A restructuring of its parent’s businesses automotive group.
02 | MBM RESOURCES BERHAD 1995 695
2000 538
Year 2005 945
2010 1,528
Revenues (RM Mil)
MBMR Share Prices (1995-2010) 5.00
4.50
4.00
3.50
3.00
2.50 RM 2.00
1.50
1.00 High 0.50 Low Close 0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year
ANNUAL REPORT 2010 | 03 M B M R eso u rces B erhad - 1 5 Y ears of G ro w th
1995 1997 1998 • Listing on the Main Board of the • Acquired 24.88% in Colonial • MBMR reported a pre-tax loss of Kuala Lumpur Stock Exchange Motors Company Ltd RM25.8m as the financial crisis (now known as Bursa Malaysia (CMC), largest Ford hits auto sales Securities Berhad) dealer in New Zealand
2000 2001 2002 • MBMR acquired 20% stake in • Restructuring of Perodua • A Bonus issue of 2 for 3 was Perodua from Med-Bumikar completed with greater completed, increasing MBMR’s Mara for RM160m via issuance participation by Daihatsu paid-up share capital to of 64m new MBMR shares at Motor Company Ltd (DMC) RM231.7m RM2.50/share. Senior directors in Perodua’s manufacturing retire. New directors elected to operations. A special gross the Board dividend of 20 sen per share was paid
2003 2004 2005 • Acquired 90% of SVBW; • Acquired Galaxy Waves which • Increased stake in FAHB by disposed stake in CMC owns 20% of OMI and 32% of 37.6% to 69.6% FAHB; acquired additional 58% in OMI; Acquired 50.98% in WSA Capital Corporation Sdn Bhd (WCC)
04 | MBM RESOURCES BERHAD 2006 2007 2008 • Acquired 42% in HMMSB for • Increased stake in FAHB by • Disposed MBM Industries RM25.8m 16.4% to 86% at additional cost Sdn. Bhd. • Acquired remaining 10% in of RM9.3m • Additional acquisition of 21.52% SVBW making it a wholly- stake in WCC increasing total owned subsidiary of MBMR equity interest in WCC to • MBMR revenue crossed 73.32% RM1 billion, highest ever achieved
2009 2010 2011 and Beyond • Additional dealership locations • Obtained distributorship for • We aspire to be a complete obtained for the Group’s Heico Sportiv products and ABT automotive group. Volkswagen and Mitsubishi Sportsline products under FAHB dealerships • Obtained Hino dealership under DMSB • Disposed entire 73.32% equity interest in WCC
ANNUAL REPORT 2010 | 05 FEDERAL AUTO Holdings Berhad – 50 Years of STAYING AHEAD
Volvo with dealerships and 3S centres FAHB started as a distributor of located in Petaling Jaya, Shah Driven Volvo vehicles in Malaysia and Alam (Glenmarie) and Johor remains as a dealer for Volvo Bahru. As of Dec 2010, FAHB’s passenger vehicles through its market share of total VW sales in ederal Auto Holdings Berhad subsidiary, Federal Auto Cars Sdn. Malaysia was 27%. F(FAHB) was incorporated in Bhd. since the year 2000 when 1960 under the name of Federal Volvo Cars Malaysia Sdn. Bhd. Mitsubishi Auto Company Limited and was assumed the responsibility as the FAHB’s wholly-owned subsidiary, converted to a public company principal in Malaysia. F.A. Automobiles (Ipoh) Sdn. Bhd. in 1968 under the name of (FAAI) was appointed a Mitsubishi Federal Auto Company Berhad. It has now within its network a dealer in 2007 for the state of Perak. In 1970, it changed its name total of six branches – Kuala In 2009, FAAI extended its network to Volvo Malaysia Berhad and Lumpur, Shah Alam (Glenmarie), to include Petaling Jaya. FAHB subsequently assumed its present Penang, Ipoh, Melaka and Johor holds approximately 7% of the name in 1975. Bahru and all are 3S (sales, service total Mitsubishi sales in Malaysia. and spare parts) centres. FAHB is FAHB is an investment holding the main dealer for Volvo, holding FAST company with main investments about 80% market share of total Both distributorships for Heico in its subsidiaries holding car Volvo passenger vehicle sales in Sportiv and ABT Sportsline in dealerships, namely Volvo, Malaysia. Malaysia were obtained in 2010. Volkswagen (VW) and Mitsubishi. These additional sports tuning It also distributes the Heico Sportiv Volkswagen brands provides an opportunity and ABT Sportsline products FAHB’s wholly-owned subsidiary, for FAHB to serve customers who under its sports tuning division, F.A. Wagen Sdn. Bhd. was wish to customise their cars to FAST Sdn. Bhd. appointed a VW dealer in 2009 define their own individuality.
06 | MBM RESOURCES BERHAD Long Service Staff Speaks about FAHB
‘Federal Auto provides career opportunities for us to grow.’
Faridah binti Darus Admin Assistant, Joined in 1975
‘We have strong teamwork, supportive of each other in a caring working environment.’
Teoh Teong Ghee Aftersales Manager, Joined in 1974 OUR NETWORK ‘Federal Auto is driven by passionate Federal Auto Cars people I come to accept as my family.’ Volvo outlets Angie Ng Wai Mun Receptionist, Joined in 1972 F.A Wagen Volkswagen outlets
F.A. Automobiles (Ipoh) Mitsubishi ‘It is a company that cares for its outlets employees.’
Jeffrey Moey Kum Chiew FAHB Sales Consultant, Joined in 1962 Vehicle sales chart 2,026 2,423 2,301 1,950 1,869 1,552 970 Total vehicle sales unit Total 648 1,124 1,176
1966 1970 1975 1980 1985 1990 1995 2000 2005 2010 Year
ANNUAL REPORT 2010 | 07 Daihatsu (Malaysia) Sdn Bhd – 30 Years at the Forefront
aihatsu (Malaysia) Sdn. Bhd. D(DMSB) was incorporated in 1980 and holds the distributorship of Daihatsu vehicles in Malaysia. With the formation of the DMSB DMMS Second National Car company, DMSB’s Daihatsu commercial DMMS is the largest Perusahaan Otomobil Kedua vehicle range comprises the Gran independent Perodua dealer, Sdn. Bhd. (Perodua) in 1993, a Max series and the Delta series. holding approximately 10% of the joint venture between Malaysian The Daihatsu Delta series has total Perodua sales in Malaysia. partners and Daihatsu Motor dominated the light truck market DMMS has in total seventeen Company Ltd, Japan, DMSB was (trucks with Gross Vehicle Weight branches (Shah Alam, Sungai appointed an authorised dealer (GVW) up to 4,000kg for the V58 Besi, Sungai Buloh, Salak Tinggi, for Perodua vehicles a year later. and GVW up to 7,000kg for the Sri Permaisuri, Petaling Jaya, Kota DMSB is also a 5% shareholder V116) with a leading average of Kinabalu, Kuching, Butterworth, of Perodua. Since then, DMSB approximately 34%-39% market Ipoh, Melaka, Batu Pahat, Johor concentrates on the distribution share. In 2009, DMSB introduced Bahru, Mid Valley, Selayang, of commercial vehicles and DMM the Gran Max pick-ups and in 2010 Ampang and Sri Kembangan). Sales Sdn. Bhd. (DMMS), a wholly- launched the Gran Max panel van owned subsidiary, on the retailing models. With a Hino dealership in of Perodua vehicles. In the year hand, DMSB is now also marketing 2010, DMSB was appointed a the Hino range of commercial dealer by Hino Motors (Malaysia) products. DMSB has in total nine Sdn. Bhd. to market the full range branches (Shah Alam, Serdang, of Hino commercial vehicles in Kepong, Puchong, Butterworth, Malaysia. Ipoh, Batu Pahat, Johor and Kota Kinabalu) for Daihatsu products and six branches (Shah Alam, Puchong, Butterworth, Ipoh, Johor Bahru and Kota Kinabalu) for the Hino dealership.
08 | MBM RESOURCES BERHAD Long Service Staff OUR Speaks about DMSB NETWORK ‘I have gained a lot of experience and opportunities
DMSB at DMSB.’ DMSB sales branches DMSB service branches Hazimah binti Mohd Sidik Dealers Section Manager, Joined in 1980
DMMS DMMS sales branches DMMS service branches ‘The Company provides training to help improve my skills and I DMSB Group have had the Vehicle sales chart opportunity to visit Japan and Indonesia for technical product training.’ 20,813 Rosalie bin Ab. Karim 18,549
17,944 Section Manager, 17,361 Joined in 1980 14,484
Total vehicle sales unit Total ‘I like the conducive
8,015 working 7,182 7,135
6,489 environment.’
4,246 Norazien binti Ramli 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Section Manager, Year Joined in 1980
‘The management is supportive and encouraging to its staff.’
Lai Kwai Ping Section Manager, Joined in 1980
ANNUAL REPORT 2010 | 09 ORIENTAL METAL INDUSTRIES (M) SDN BHD – 25 years of excellence
riental Metal industries (M) the following awards and OSdn Bhd (OMI) started as nominations: Best Kaizen Projects a SME vendor that commenced award, 1st runner up for Quality operations in 1985 with the steel wheel and wheel assembly Control Circles (QCC) activities, assistance of Central Motor Wheel module operations was key for Top 5 Best Vendor award, Company Ltd., a subsidiary of achieving good quality, cost and Excellence Delivery Vendor Award, Toyota Motor Corporation. Today, delivery performance. Excellence Quality Vendor nominee OMI is fully run by competent locals and Excellence Performance as a Large Scale Industry (LSI) We have also equipped ourselves Vendor (LSI) nominee. vendor that serves about 85% of with TS-16949, ISO14001 and the Malaysian Automotive Industry. OHSAS18001 which are Quality As a responsible corporation, Management Systems required OMI contributes back to society In 1996, OMI implemented a by our customers covering yearly in the form of providing full manufacturing facility for manufacturing, environment internship for university students, steel wheel and at the same and safety. Human resource conducting safety talks and time, an opportunity was given development programmes include practical workshops for boys- for it to venture into wheel training, job enhancement homes, Gotong-royong activities assembly module business. In and job rotation were helpful in and donations for the needy and 2005, our sequential delivery meeting staff career development disaster relief funds. strategy for module business expectations and retention of did well despite keen market skills and know-how within the Through our vision of being competition. Introduction of company. the preferred regional Tier-1 modern automated production Comprehensive Wheel Module facilities coupled with Good In 2010, backed by recognition Supplier and driven by our core Management Practice (GMP) and from valued Original Equipment values: Integrity, Excellence, Toyota Production Systems in both (OE) customers, OMI won Teamwork, Innovation & Customer Orientation, the management team continues to further enhance our total supply value chain for Original Equipment Manufacturers (OEM) with more value-added new products and export programmes.
10 | MBM RESOURCES BERHAD Long Serving Staff Speaks about OMI
‘OMI is a harmonious organization with plenty of opportunities to learn and progress.’ Raja Zainal Raja Soia Senior Supervisor, Joined in 1988
‘At OMI, we work as a team and as a family.’ Zulkifly bin Abd Ghani Tech Support Staff, Joined in 1985
‘The management is supportive of my personal growth and they trust in my abilities.’ Osman bin Mohamed Ramli Supervisor, Joined in 1986
‘OMI rewards its employees well and provide opportunities for promotion and personal advancement.’ Sawiah binti Rohaimi Warehouse Executive, Joined in 1985
ANNUAL REPORT 2010 | 11 Corporate Information
MBM Resources Berhad (284496-V)
CORPORATE OFFICE STOCK EXCHANGE LISTING No. 1-6, The Boulevard Main Market Mid Valley City Bursa Malaysia Securities Berhad Lingkaran Syed Putra Stock Code : 5983 59200 Kuala Lumpur, Malaysia T (603) 2287 6803 Registered Office F (603) 2287 6805 Suite C-5-4, Wisma Goshen, W www.mbmr.com.my Plaza Pantai, Jalan Pantai Baharu 59200 Kuala Lumpur, Malaysia Company Secretaries T (603) 2283 4007 Puan Shahrizat bt Othman F (603) 2287 7006 (MAICSA 0764744) Puan Zaharah bt Ibrahim SHARE REGISTRAR (MAICSA 7012004) AAJ Registration Services Sdn Bhd Suite C-5-4, Wisma Goshen Principal Bankers Plaza Pantai, Jalan Pantai Baharu HSBC Bank (Malaysia) Bhd 59200 Kuala Lumpur, Malaysia Citibank Berhad T (603) 2283 4007 Hong Leong Bank Berhad F (603) 2287 7006 CIMB Bank Berhad Auditors Deloitte KassimChan (AF: 0080) Chartered Accountants
Financial Calendar 17th Annual General Meeting 14 June 2011
2010 Results Announcement Quarter One : 24 May 2010 Quarter Two : 17 August 2010 Quarter Three : 11 November 2010 Quarter Four : 17 February 2011
Dividend Payments Second interim for 2009: 18 March 2010 First interim for 2010: 22 September 2010 Second interim for 2010: 23 March 2011
12 | MBM RESOURCES BERHAD ANNUAL REPORT 2010 | 13 Corporate Profile
MBM RESOURCES BERHAD (MBMR) is an automotive Group with diverse investments in distributorship and dealership of major international brands of vehicles in Malaysia. It is well represented in all segments of the market from light trucks to medium and heavy duty trucks and buses in the commercial vehicle market and, from compact entry level cars to luxury cars in the passenger vehicle market. Its auto parts manufacturing division supplies to all the major brands in Malaysia.
Our brand partners are:
We are leaders in the segments we represent.
14 | MBM RESOURCES BERHAD Corporate Structure
AUTOMOTIVE
Daihatsu (Malaysia) Sdn Bhd 71.5% DMM Sales Sdn Bhd 100%
Federal Auto Holdings Berhad 86% Federal Auto Cars Sdn Bhd 100% F.A.Wagen Sdn Bhd 100% F.A. Automobiles (Ipoh) Sdn Bhd 100% FAST Sdn Bhd 100%
Hino Motors (Malaysia) Sdn Bhd 42% Perusahaan Otomobil Kedua Sdn Bhd 20% (and 5% held through Daihatsu (Malaysia) Sdn Bhd)
MANUFACTURING
Oriental Metal Industries (M) Sdn Bhd 78% Summit Vehicles Body Works Sdn Bhd 100%
PROPERTY
Inai Benua Sdn Bhd 70%
Note: Detailed list of the companies under the Group are shown in Notes 49 and 50 of the Audited Financial Statements
SUBSIDIARY ASSOCIATE
ANNUAL REPORT 2010 | 15 5 Years Group Financial Performance
Year ended December 31 2006 2007 2008 2009* 2010
Results (RM Million) Revenue 1,185.5 1,131.0 1,203.0 1,101.6 1,528.5 Operating profit before interest and tax 53.0 54.8 70.1 30.5 51.5 Associates’ results 72.9 86.8 79.4 54.1 119.0 Profit before tax 121.9 140.5 149.9 85.3 172.4 Profit attributable to equity holders 92.1 110.5 117.1 66.5 142.1 Basic earnings per share (sen) 38.9 45.9 48.4 27.5 58.6
Balance Sheets (RM Million) Share capital 238.5 242.0 242.1 242.1 242.7 Shareholders’ equity 661.1 765.9 849.1 894.3 1,018.2 Total assets 954.6 1,001.3 1,077.1 1,155.5 1,346.7 Net assets per share (RM) 2.8 3.2 3.5 3.7 4.2 Operating cashflow per share (sen) 26.6 29.9 15.2 22.6 (5.4)
Financial Ratios (%) Operating profit on revenue 4.5 4.8 5.8 2.8 3.4 Return on equity 13.9 14.4 13.8 7.4 13.9 Return on total assets 9.6 11.0 10.9 5.8 10.6
Sales (Units) DMSB Daihatsu/Hino trucks 5,279 4,935 5,327 4,020 3,167 DMMS Perodua 13,876 13,009 12,775 13,127 17,646 FAHB Volvo / Volkswagen / Mitsubishi 530 503 575 642 2,026
Equity Indices Closing year end share price (RM) 2.93 3.20 2.28 2.59 3.34 Price-earnings ratio (times) 7.5 7.0 4.7 9.4 5.7
*Certain figures have been restated to exclude discontinued operations’ financials
16 | MBM RESOURCES BERHAD Financial Highlights
REVENUE RM MILLION NET ASSETS PER SHARE RM NET CASH RM MILLION RM1.53 bil RM4.2 RM144.1 mil
‘06 1,185.5 ‘06 2.8 ‘06 30.9
‘07 1,131.0 ‘07 3.2 ‘07 65.6
‘08 1,203.0 ‘08 3.5 ‘08 91.9
‘09 1,101.6 ‘09 3.7 ‘09 120.3
‘10 1,528.5 ‘10 4.2 ‘10 144.1
OPERATING CASH FLOW PROFIT BEFORE TAX RM MILLION EARNINGS PER SHARE SEN PER SHARE SEN RM172.4 mil 58.6 sen -5.4 sen
‘06 121.9 ‘06 38.9 ‘06 26.6
‘07 140.5 ‘07 45.9 ‘07 29.9
‘08 149.9 ‘08 48.4 ‘08 15.2
‘09 85.3 ‘09 27.5 ‘09 22.6
‘10 172.4 ‘10 58.6 ‘10 -5.4
VEHICLE SALES UNITS VEHICLE SALES UNITS VEHICLE SALES UNITS DMSB Daihatsu / FAHB Volvo / Hino Trucks DMMS Perodua Volkswagen / Mitsubishi
‘06 5,279 ‘06 13,876 ‘06 530
‘07 4,935 ‘07 13,009 ‘07 503
‘08 5,327 ‘08 12,775 ‘08 575
‘09 4,020 ‘09 13,127 ‘09 642
‘10 3,167 ‘10 17,646 ‘10 2,026
MBMR SHARE PRICES FROM 2006 - 2010 GROUP VEHICLES SALES MARKET SHARE
4.00 4.5 3.50 4.0 3.00 3.5 2.50 3.0 2.00 2.5 RM 1.50 2.0 1.00 1.5 0.50
Percentage (%) 1.0 0.00 0.5 0.0
Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 2006 2007 2008 2009 2010 Year Year
ANNUAL REPORT 2010 | 17 18 | MBM RESOURCES BERHAD Chairman’s Statement
To the Shareholders of MBM Resources Berhad: I am pleased to report that MBM Resources Berhad’s performance exceeded our expectations, achieving record profitability for the financial year 2010.
Economy AND the Automotive Industry
Last year, I had expressed my optimism that the momentum for an economic recovery was gathering pace and was likely to be sustained into 2010. Not only did the economy continue to expand, the growth was above even our most optimistic forecasts. The Gross Domestic Product (GDP) grew by 7.2% in 2010 after contracting 1.7% in the previous year.
The economic growth coupled with the low interest rates environment provided the impetus for motor vehicle sales. Notably, Malaysian Total Industry Volume (TIV) climbed to a record high of 605,200 units, a growth of 13% over the previous year.
ANNUAL REPORT 2010 | 19 2010 Performance Highlights
• Revenues + 39% to RM1,528 million
• Total group vehicle sales + 28% to 22,839 units
• Total group vehicle sales including associates +15% to 215,474 units
• Profit Before Tax +102% to 172 million
• Net Profit to Shareholders +114% to RM142 million
• Dividend per share +117% to 13 sen per share
Revenues grew 39% to RM1,528 million and profit before tax more than doubled to RM172 million. All operating entities showed considerable improvement in contributions.
20 | MBM RESOURCES BERHAD Chairman’s Statement
Daihatsu (Malaysia) Sdn Bhd (DMSB)
FY2010 FY2009 % change RM mil RM mil
Revenue 1,066 867 +23 Profit Before Tax 35 20 +75
Truck sales (units) 3,167 4,020 -21 Perodua (units) 17,646 13,127 +34
DMSB is undergoing significant change in its business. The highly successful Delta light commercial vehicle (LCV) will be phased out with the remaining units expected to be marketed until the middle of this year. DMSB will then concentrate on the Gran Max pick-up trucks and vans, which have shown promising acceptance in the market since their launch in 2010 and this year respectively. In 2010 DMSB secured the dealership for Hino products. The Hino commercial vehicle product range is extensive which includes LCVs, medium and heavy duty trucks and buses. This provides the opportunity for DMSB to utilise its extensive experience to market the commercial vehicles that Hino offers. DMSB commenced its Hino dealership in the second half of 2010. Major investments are planned for the construction of 3S (sales, service and spare parts) centres for the business which will be completed progressively over the next 12 months.
The Perodua dealership under 100%-owned DMM Sales Sdn Bhd (DMMS) recorded significant jump in sales of 34%. This resulted in its market share of nationwide Perodua sales to improve to 9.4% from 7.9% in the preceding year. We have also embarked on upgrading our outlets in phases, with particular focus on increasing the capacity for the aftersales business, tapping on the opportunities that come with the rising units on the road.
ANNUAL REPORT 2010 | 21 Federal Auto Holdings Berhad (FAHB)
FY2010 FY2009 % change RM mil RM mil
Revenue 385 165 +134 Profit Before Tax 11 7 +55
Total Vehicle Sales 2,026 642 +216 (Volvo, Volkswagen and Mitsubishi)
The multi-brand strategy we adopted for FAHB has given it the springboard for its renewed growth.
Volvo car sales grew for the second consecutive year. The Volvo dealership had its first full year’s contribution from our new Glenmarie branch. We invested in upgrading the Penang branch during the year. Next in line are investments for the Kuala Lumpur and Johor Bahru branches.
The Volkswagen dealership achieved a quantum leap in sales. This is due to a combination of factors. We had the first full year’s contribution after the re-launch of our dealership, with a new location in Petaling Jaya at the end of 2009 and additional outlets in Danga Bay, Johor Bahru and Glenmarie, Shah Alam during the year. The product launches from Volkswagen have generally been well received, particularly the Polo 1.2 and Golf and Scirocco 1.4 in the latter part of 2010.
The Mitsubishi dealership had the first full year’s contribution from its new Petaling Jaya branch, in addition to our existing branch in Ipoh. The volume sales for this brand also recorded a sharp increase. During the year, the model lineup for Mitsubishi vehicles extended to include the all new compact crossover, ASX, the premium SUV, Pajero and the Lancer Sportback.
During the year we commenced the marketing of ABT Sportsline and Heico tuning/accessories products. The distributorships of these brands for the Volkswagen and Volvo vehicles respectively, will enhance our marketing strength in providing additional product enhancements to our customers.
22 | MBM RESOURCES BERHAD Chairman’s Statement
Oriental Metal Industries (M) Sdn Bhd (OMI) Summit Vehicles Body Works FY2010 FY2009 % Sdn Bhd (SVBW) RM mil RM mil change SVBW’s losses narrowed Revenue 67 60 +12 substantially as further Profit Before Tax 17 14 +21 consolidation of its business were carried out. Volumes Wheel deliveries (‘000) 988 882 +12 increased in 2010, but were insufficient to cover Tyres assembled (‘000) 2,335 1,968 +19 its costs as competition remains intense. A review of the types of bodies it OMI supplies steel wheels to all major automotive companies in offers to its customers were Malaysia. The buoyant vehicle sales recorded in 2010 translated into undertaken to focus on strong wheel deliveries. The reorganisation of the tyre assembly lines more specialised products. in Shah Alam at the end of 2009 under the Toyota Production System Production processes were project and the full year production of the tyre module plant in also reviewed to improve on Serendah played a major role in contributing to the significant increase productivity and efficiency. in volumes and efficiency gains for 2010.
OMI has continued to invest in its plant and training of its employees to ensure that production and delivery to our customers meet the highest standards. During the year OMI was recognised by its major customers as a quality vendor. In 2010 Proton acknowledged OMI as the “Best Kaizen Vendor” and Perodua presented us with the “Best Delivery Vendor” award.
ANNUAL REPORT 2010 | 23 Associates Perusahaan Otomobil Kedua Sdn Bhd (Perodua) Outlook We entered 2011 with optimism. Economic conditions remain encouraging and our order taking remains healthy. However, the recent political uncertainties in the Middle East and the resulting increase in oil Perodua retained its market leadership for the fifth consecutive year, prices have dampened the driven by sales of its three core models, Alza, Myvi and the Viva. immediate market outlook. Sales by registration rose by 13% to 188,600, a record achievement and total market share was stable at 31.2%. The earthquake in Japan has also impacted on the supply During the year Perodua added to its lineup the Myvi LE and Viva chain to the automotive Elite Exclusive Edition variants. For the third consecutive year in 2010 industry, extent of which is still the Perodua Viva won the “Best Passenger Car Value for Money” being assessed. So although award from Frost & Sullivan. Perodua also participated in the Kuala we believe that MBMR is Lumpur International Motorshow where it featured the Bezza, the next well positioned for its growth generation prototype model inspired entirely by Malaysian designers. strategy, the external events are causing us to be more Perodua contributes significantly to the Malaysian economy and cautious. the automotive industry. It employs directly over 10,000 employees, and this figure increases to 56,000 when combined with dealers and Nevertheless in 2011, the vendors. It also sources parts from local vendors of an approximately major investment in the Hino RM4 billion in value in 2010. A total of about RM3 billion has been dealership undertaken by invested in the plant and models development and the plant DMSB will be in full swing. The rated capacity is currently 250,000 units per annum. Significant milestones have been achieved together with the assistance from biggest of which will be the Perodua’s Japanese partner, Daihatsu Motor Company, in lifting its RM6 million 3S centre in Shah engineering and manufacturing capabilities. Alam. Under FAHB, the new Volkswagen Glenmarie 3S centre is expected to be fully completed. The main Volvo Hino Motors (Malaysia) Sdn Bhd (HMMSB) branch in Kuala Lumpur where HMMSB made major progress in 2010. Its total sales by registration FAHB’s current headquarters reached an all time high of 4,590 units (+52% from 2009 sales of is located (Lot 15) will be 3,014), securing it the No.1 position for the Commercial Vehicle demolished in May to make (trucks and buses) category. It has gained market share in all segments way for the redevelopment with an overall market share of 27.8% compared with 19.9% in 2009. of the property which will eventually house Volvo’s Hino has been able to fill the gaps in the market with its wide product showroom and a 26 storey range. It has embarked on extensive strengthening of the sales office block, consisting of MBMR and service network support through major dealer development and FAHB’s new headquarters. programmes. Whilst this redevelopment
24 | MBM RESOURCES BERHAD Chairman’s Statement
takes place, FAHB will temporarily relocate its headquarters to its six storey office block in Glenmarie and the Volvo 3S centre will be housed in a temporary centre adjacent to Lot 15.
During the year, the development of DMMS’ new Perodua 3S centre in Kuala Lumpur and FAHB’s redevelopment of its Johor Bahru property to accommodate the Volvo and Volkswagen dealerships are also expected to be undertaken.
Corporate Developments MBMR successfully completed the sale of its entire equity interest in WSA Capital Corporation Sdn Bhd on 30th June 2010.
On 14th October 2010 MBMR announced its proposed acquisition of 100% in Lion Motor Sdn Bhd (LMSB) and 70.01% in Kinabalu Motor Assembly Sdn Bhd (KMASB) for a combined purchase consideration and debt settlement consideration of Ringgit Malaysia Sixteen Million (RM16,000,000).
KMASB holds a manufacturing licence for the assembly of motor vehicles issued by the Ministry of International Trade and Industry. KMASB has distributor agreement with Anhui Jianghuai Automobile Co. Ltd. and LMSB has licence agreement with Dong Feng Automobile Co. Ltd., both for the distribution of commercial vehicles in Malaysia.
The Proposed Acquisitions will provide the opportunity for the MBMR Group to expand its automotive business.
The acquisition of LMSB was completed on 28th February 2011.
FAHB, an 86%-owned subsidiary, is undertaking a selective capital reduction scheme (SCR) which will result in it being a 100%-owned subsidiary of MBMR. The SCR which encompasses the reduction of all shares held by minority shareholders together with a portion of shares held by MBMR’s wholly owned subsidiary, Galaxy Waves Sdn Bhd, will result in a cash capital repayment of RM4.20 per share to minority shareholders of FAHB. The SCR received unanimous approval from shareholders of FAHB at the Extraordinary General Meeting held on 7th January 2011. The SCR is expected to be completed by May 2011.
ANNUAL REPORT 2010 | 25 Dividends For the financial year ended 31st December 2010, MBMR declared and paid two interim dividends and one special dividend for a combined dividend payment of 13 sen per share. The first interim dividend of 5 sen per share was paid on 22nd of September 2010. The second interim of 5 sen per share plus a special dividend of 3 sen per share were paid on the 23rd of March 2011.
Social Responsibilities Our Social Responsibilities Programme encompasses our responsibilities to our employees and to the communities we operate in.
The MBMR Group contributes to various charities in Malaysia. In 2010, we participated in the Relay for Life organised by the National Cancer Association. It is an annual fund raising event for cancer research and to also create greater awareness of cancer and to celebrate the lives of survivors.
Our internship programmes which have been running for many years now provide students with working experience at our operations. These students will find these practical experiences useful for their employability when they join the job market in the future.
We continue to emphasise on investing in our employees in raising their level of skills. Training programmes were conducted during the year for the employees at various levels. Safety campaigns were also carried out to reiterate the importance of safety awareness at the workplace.
Appreciation On behalf of the Board I wish to congratulate the management and staff for achieving a commendable performance for the year. I thank them for their dedication and commitment. I wish to also extend my appreciation to our customers, principals, suppliers, bankers, business partners and shareholders for their support.
The Annual General Meeting (AGM) We will be breaking from our past of holding our AGMs in leading hotels in Kuala Lumpur. This year’s AGM will be held on Tuesday, 14th of June 2011 at 10 A.M. at the Learning Academy at FAHB’s new headquarters in Glenmarie. We felt as shareholders, you should experience some of the investments that we have made and also see some of the most exciting products that we offer at our Volvo and Volkswagen dealerships. The Board and I look forward to your attendance.
DATO’ ABDUL RAHIM ABDUL HALIM Chairman
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