IOIp COr OratIOn Berhad 9027-W annual repOrt 2010 Our Vision …is to be a leading corporation in our core businesses by providing products and services of superior values and by sustaining consistent long-term growth in volume and profitability. We shall strive to achieve responsible commercial success by satisfying our customers’ needs, giving superior performance to our shareholders, providing rewarding careers to our people, cultivating mutually beneficial relationship with our business associates, caring for the society and the environment in which we operate and contributing towards the progress of our nation. IOI COrpOration Berhad 9027-W annual repOrt 2010 Our Core Values In our pursuit of Vision IOI, we expect our people to uphold, at all times, the IOI Core Values which are expressed as follows: Integrity which is essential and cannot be compromised Commitment as we do what we say we will do Loyalty is crucial because we are one team sharing one vision Excellence in Execution as our commitments can only be realized through actions and results Speed or Timeliness in response is important in our ever changing business environment Innovativeness to provide us additional competitive edge Cost Efficiency is crucial as we need to remain competitive CONTENTS Proven balance ~ work in harmonyha to achieve both our business goals and the wider goals of a caring society. 006 Chairman’s Statement 068 Senior Management Team annual general meeting 012 Group Financial Overview 069 Group Business Activities information 014 Group Performance 070 Global Presence 264 Notice of Annual General Highlights 072 Location of Operations Meeting 015 Group Quarterly Results in Malaysia 267 Statement Accompanying 015 Financial Calendar 074 Corporate Calendar Notice of Annual General 016 Five-Year Financial Meeting Highlights 076 Audit Committee Report 081 Statement on 268 Shareholders Information management’s discussion Corporate Governance and analysis 090 Statement on Proxy Form 018 Group Financial Review Internal Control 026 Group Business Review 092 Risk Management 094 Statement of 050 Corporate Social Directors’ Interests Responsibility 095 Other Information 062 Corporate Information 063 Board of Directors 098 Financial Reports 064 Profi le of Directors 250 Group Properties IOI CORPORATION BERHAD 002 | ANNUAL REPORT 2010 meeting business goals Delivering maximum returns to our stakeholders and ensuring high productivity and high profi tability. IOI CORPORATION BERHAD ANNUAL REPORT 2010 | 003 maintaining a sustainable environment Our CSR activities enable and support sustainable and responsible business practices in all sectors, thereby ensuring a balanced strategy for our planet. IOI CORPORATION BERHAD 004 | ANNUAL REPORT 2010 KEY INDICATORS % 30 20 10 0 -10 24.07.09 14.08.09 04.09.09 25.09.09 16.10.09 06.11.09 27.11.09 18.12.09 08.01.10 29.01.10 19.02.10 12.03.10 02.04.10 23.04.10 14.05.10 04.06.10 25.06.10 IOI CORPORATION BERHAD FTSE BURSA MALAYSIA KLCI KL PLANTATION INDEX 2010 2009 2008 2007 2006 FINANCIAL Profi t before taxation RM’000 2,550,633 1,550,117 3,095,197 1,991,073 1,152,873 Profi t attributable to equity RM’000 2,035,661 983,517 2,231,632 1,482,104 829,002 holders of the Company Equity attributable to equity RM’000 10,780,181 8,346,290 8,391,361 7,739,258 6,033,923 holders of the Company Return on average equity % 21.29 11.75 27.67 21.52 15.22 Basic earnings per share SEN 32.96 16.62 36.85 24.13 14.51 Gross dividend per share % 170.0 80.0 170.0 70.0 87.0 PLANTATION FFB production MT 3,405,090 3,626,776 3,957,281 3,694,535 3,674,483 Total oil palm area HA 154,709 150,931 149,445 148,871 144,055 PROPERTY Sales value RM’000 1,045,095 688,487 696,743 683,471 570,842 Sales UNIT 2,044 1,465 1,934 1,529 1,524 MANUFACTURING Oleochemical Plant utilisation % 91 78 92 95 99 Sales MT 684,389 597,351 668,808 509,965 364,393 Refi nery Plant utilisation % 75 78 91 85 87 Sales MT 2,533,527 2,817,987 2,996,439 2,287,190 1,283,647 Specialty oils and fats Plant utilisation % 96 100 100 95 91 Sales MT 486,828 504,317 521,719 502,695 482,876 IOI CORPORATION BERHAD ANNUAL REPORT 2010 | 005 Dividend Per Share 2010 170.0% Profi t 2009 Before 80.0% Taxation 2010 RM2.55 BILLION 2009 RM1.55 BILLION Return on Average Equity Share 2010 21.29 % Price 2009 2010 11.75 % RM5.01 2009 RM4.72 Basic Earnings Per Share Market 2010 Capitalisation 32.96 SEN 2010 2009 RM31.95 BILLION 16.62 SEN 2009 RM28.11 BILLION IOI CORPORATION BERHAD 006 | ANNUAL REPORT 2010 CHAIRMAN’S STATEMENT Dear Shareholders, On behalf of the Board of Directors of IOI Corporation Berhad, I am pleased to present to you the annual report of the Company and the OPERATING ENVIRONMENT Group for the fi nancial year ended Whilst markets have rebounded from their lows, the global economy 30 June 2010 (“FY2010”). is currently in a period of uncertainty and is likely to experience greater volatility until a clearer picture emerges on the strength of the global economic recovery. Global economic growth is likely to slowdown in the second half of 2010 as worldwide fi scal spending dissipates and austerity measures in developed countries begin to take eff ect. These will be compounded by policy tightening in some Asian countries and other emerging economies. There is therefore a risk of a sharper than expected slowdown in global economic growth. The Malaysian economy is also likely to slow down in the second half of 2010 after recording strong growth in the fi rst half on the back of a surge in exports. Although most sectors of the domestic economy are likely to moderate in line with external demand, domestic demand is expected to remain resilient due to the high level of savings and rising consumerism. REVIEW OF RESULTS The Group’s operating profi t of RM2,636.3 million for FY2010 was higher by 34% compared to the previous year with increases reported in all main business segments except for plantation. IOI CORPORATION BERHAD ANNUAL REPORT 2010 | 007 Segmental Contribution to Operating Profi t Plantation division’s earnings were 31% lower at RM1,126.2 million on the back of lower CPO prices realised and a reduction in FFB production. The average selling price of CPO reduced from RM2,831 PROPERTY RESOURCE-BASED per MT in FY2009 to RM2,372 per MT as CPO prices retreated from MANUFACTURING 26% their highs towards more sustainable levels. Production of FFB 24% reduced from 3.63 million MT to 3.41 million MT in FY2010 largely due to lower yields achieved as a result of poor weather conditions. The resource-based manufacturing division’s earnings improved by 59% to RM568.6 million in FY2010 mainly coming from better results in the specialty oils and fats and oleochemicals businesses. The refi nery business was adversely aff ected by excess capacity in the industry and 2010 recorded a reduction in capacity utilisation in its plants. The property division’s results for FY2010 of RM602.9 million was 29% higher than the previous year despite a lower fair value gain on investment properties of RM21.0 million (FY2009 – RM110.8 million). The property division achieved a total revenue exceeding RM1 billion contributed by an overall increase in units sold and higher average sales value per unit. PLANTATION OTHERS 48% 2% The Group’s pre-tax profi t of RM2,550.6 million was 65% better than the profi t achieved in FY2009 whilst net earnings for FY2010 improved 107% to RM2,035.7 million partly due to unrealised translation gains PROPERTY RESOURCE-BASED 18% MANUFACTURING on its long term USD denominated borrowings as opposed to foreign 14% currency losses recorded in FY2009. The Group continues to generate healthy cash fl ow from its operations, which amounted to RM2,008.6 million for FY2010. A more detailed review of the Group’s performance is covered under the section on “Management Discussion and Analysis” in this Annual Report. 2009 RETURNS TO SHAREHOLDERS Two interim dividends totalling 17.0 sen per ordinary share amounting to a total payout of approximately RM1,084.6 million were declared for FY2010. The dividends represent an approximately 50% distribution of the Group’s net profi t attributable to shareholders which is in line with the dividend payout ratio in FY2009. PLANTATION OTHERS 65% 3% IOI CORPORATION BERHAD 008 | ANNUAL REPORT 2010 If a shareholder had subscribed for 1,000 ordinary shares of RM1.00 each in 1980 when the Company was listed and assuming the shareholder had taken up all the rights issues to date, the 1,000 shares that the shareholder subscribed for would have increased to 76,000 ordinary shares of RM0.10 each worth RM433,960 based on a share price of RM5.71 as at 15 September 2010. If we take into consideration all the dividends received less capital outlay for the past 30 years together with the capital appreciation as stated above, the shareholder would have achieved a remarkable compounded annual return of 22.8% per annum over the same period. The company continues to manage its capital in a proactive manner to provide value to shareholders, optimise gearing levels and provide for funding requirements. During the year, the Company completed a renounceable rights issue of 398,821,324 new ordinary shares at an issue price of RM2.90 per Rights Share.