33
1 Segmental results UMW HOLDINGS BHD 37 th Annual General Meeting 23 May 2019
1
Segmental resultsUMW HOLDINGS BHD
37th Annual General Meeting23 May 2019
2
We turned around in
2018…
3
2018 IN REVIEW
UMW HOLDINGS BERHAD
Group revenue from Continuing Operations increased by 2.1% to
RM11.3 billion in 2018; mainly contributed by higher sales in Equipment
and M&E segments.
Group PBT from Continuing Operations increased more than three-
fold, registering RM800.3 million in 2018 compared to a PBT of RM266.6
million in 2017.
All three core segments delivered better results in 2018.
Group PATAMI from Continuing Operations was RM515.4 million in
2018, a substantial improvement over the RM35.3 million registered in
2017.
Divestment of companies in the Unlisted Oil & Gas segment is
progressing well. Operating losses from the remaining companies
have reduced significantly.
Dividend payout was 7.5 sen for 2018.
4
SNAPSHOT OF UMW’S FINANCIAL PERFORMANCE IN 2018
UMW HOLDINGS BERHAD
(RM‘m) 2018 2017% change year-
on-year
Revenue from Continuing
Operations11,303.6 11,066.6
PBT from Continuing
Operations800.3 266.6
PAT from Continuing
Operations676.2 144.9
PAT/(LAT) from Discontinued
operations(176.3) (805.4)
Consolidated PAT 499.9 (660.5)
01
02
03
04
05
2.1%
>100%
>100%
>100%
>100%
5
CORE SEGMENTS CONTINUED TO DELIVER HEALTHY
RESULTS IN 2018
UMW HOLDINGS BERHAD
RM550 million
RM160 million
RM446 million
RM142 million
RM550 million
RM22 million
(RM18 million)
20172018
2018 2017
RM732
million
RM570
million
COMBINED PBT
AUTOMOTIVE
EQUIPMENT
M&E
28.4%
6
GROUP’S DEBT POSITION
Debt-to-equity ratio
UMW HOLDINGS BERHAD
50%
As at 31 Dec 2018
66%
As at 31 Dec 2017
Our gross debt-to-equity ratio eased further
in 2018
7
Segmental
Results
8
• PBT boosted by stronger performance from
an associated company as well as improved
margin from better cost optimisation.
• UMW Group’s automotive market share for
2018 increased to 49.1% from 47.8% in
2017.
AUTOMOTIVE
SEGMENTAL RESULTS
(RM ‘m) 2018 2017 % change
Revenue 8,946.7 8,972.2 (0.3%)
PBT 550.0 446.1 23.2%
• Improved results due to higher sales in the
mining and logging industries.
(RM ‘m) 2018 2017 % change
Revenue 1,539.6 1,458.9 5.5%
PBT 160.1 141.8 12.9%
EQUIPMENT
• Higher delivery of fan cases coupled with
better profit margins earned from cost
optimisation initiatives contributed to the
segment’s profitability.
(RM ‘m) 2018 2017 % change
Revenue 843.2 645.1 30.7%
PBT 21.5 (17.7) >100%
MANUFACTURING & ENGINEERING
UMW HOLDINGS BERHAD
9
Major
Developments
in 2018
10
MAJOR DEVELOPMENTS IN 2018Paving the way for improved performance
UMW HOLDINGS BERHAD
Strengthening partnership with
KOMATSU
Moving from principal to strategic
partnership – the joint venture officially
kicked off on 1 Oct 2018.
Monetising land assets
Unlocking the value of the assets in
Serendah and Shah Alam
Ramping up production in the
Aerospace business
Higher delivery of fan cases led to a
turnaround in M&E segment in 2018.
Realigning our focus on our
core businesses
Substantial assets under Unlisted Oil &
Gas segment have been addressed. Efforts
are on-going to divest/liquidate the
remaining companies.
Expanded capacity and higher
productivity
The state-of-the art automotive assembly
plant in Bukit Raja has commenced
operation in January 2019.
11
Update on
Unlisted Oil & Gas
segment
12
UPDATE ON UNLISTED OIL & GAS SEGMENTRemaining companies
UMW HOLDINGS BERHAD
Efforts are on-going to complete the Group’s
full exit from the segment
16 companies
Feb 2017The group announced its
strategic decision to exit
the Oil & Gas segment
6 companies
Apr 2019Successfully
divested/liquidated
majority of companies
13
2019 and
beyond …
14
AUTOMOTIVE STRATEGY – TOYOTA
UMW HOLDINGS BERHAD
2019 SALES TARGET
75,000 units 13% growth over 2018
sales
To regain No. 1 position in non-National segment
Increase localisation – to improve cost and pricing competitiveness
Expand CKD model line-up
Focus on EEV models
Commenced operations in January 2019
Boost capacity and capability
▪ High automation
▪ 50% more efficient compared to Shah Alam plant
▪ Annual capacity – 50,000 units (1-shift operations)
All-new Toyota Vios and Yaris are volume-driven models
BUKIT RAJA PLANT
15
TOYOTA CAMRY
Launched in November 2018
TOYOTA RUSH
Launched in October 2018
TOYOTA VIOS
Launched in January 2019TOYOTA YARIS
Launched in April 2019
New models to boost Toyota sales in 2019
UMW HOLDINGS BERHAD
TOYOTA C-HR
The improved model was
introduced in January 2019
16
AUTOMOTIVE STRATEGY – PERODUA
UMW HOLDINGS BERHAD
2019 SALES TARGET
231,000 units 2% growth over 2018 sales
Launched in Jan 2019
Target 30,000 unit sales in 2019
PERODUA’S NEW 7-SEATER PERODUA ARUZ
Continue to lead the Malaysian automotive market
Improve model offering for the entry-level segment
To offer models in popular segments at an affordable price
17
EQUIPMENT STRATEGY
▪ Reinforcing our partnership with
Komatsu
▪ Penetrate into new technology-driven
solutions such as Smart Construction
Heavy Equipment
▪ To be a total solutions provider
▪ Leveraging on Internet of Things (IoT)
▪ Expanding fleet management / rental
business
Industrial Equipment
Strengthening partnership and innovate new value-
added solutions and services
UMW HOLDINGS BERHAD
18
M&E STRATEGY
Further expansion into high-value / advanced manufacturing
▪ Plant expansion and
modernisation initiatives for
KYB-UMW
▪ Improve synergies to increase
localisation
▪ Expansion of products and
services
1To expand automotive
components business
▪ Optimising aerospace
manufacturing capabilities
▪ Diversify into non-aerospace
related projects
Explore opportunities in
the HVM space2
▪ Entry into new markets in
ASEANExpansion of lubricants
business3
UMW HOLDINGS BERHAD
19
PROPELLING UMW TO GREATER HEIGHTS…
2017 2018
Strategic decision
to exit O&G
business...
…paved the way
for improved
performance
STABILISATION AND
RECOVERYDRIVING GROWTH AND
SUSTAINABLE VALUE CREATION
2019 AND BEYOND…
Growing our core
businesses via
expansion of products
and markets by:-
Nurturing strategic
partnerships
Enhancing manufacturing
capabilities
Fostering innovation
Transforming our
internal processes
Leaner
More agile
Leveraging on digital
technologies
01 02
20
MINORITY
SHAREHOLDERS
WATCH GROUP
(MSWG)
Q & A
21
STRATEGIC AND FINANCIAL MATTERS
1. On Page 45 (President & Chief Executive Officer’s Review), it is stated that the
focus is for Perodua to defend its overall No.1 position in the Malaysian
automotive market; and for Toyota to regain its No. 1 position in the non-national
segment by increasing localisation and expanding our CKD model offering at a
more competitive price.
a) What is Perodua’s market share in the Malaysian automotive market and
Toyota’s market share in the non-national segment? Have these market
shares increased or decreased compared to comparative periods?
2018 (units) Market share 2017 Market share
Perodua 227,243 38.0% 204,887 35.5%
UMWT 66,562 *21.7% 70,445 *23.4%
* in the Non-national segment
1Q2019 Market share 1Q2018 Market share
Perodua 60,659 42.4% 55,568 41.1%
UMWT 13,865 *21.6% 12,826 *19.2%
UMW HOLDINGS BERHAD
22
STRATEGIC AND FINANCIAL MATTERS
b) What is the capacity utilisation for Toyota’s first and second assembly
plant and what is the current capacity utilization?
Combined capacity of both plants is 88,000 units per annum.
Both plants are operating at above break-even level.
UMW HOLDINGS BERHAD
23
STRATEGIC AND FINANCIAL MATTERS
c) What are the all-new Vios model’s competitor-cars and how competitive
will the all-new Vios model’s pricing be?
Toyota Vios’ main competitor is Honda City (RM74,000 to RM87,000).
The all-new Toyota Vios was launched in January 2019 with three
variants, priced from RM77,000 to RM87,000.
The all-new Toyota Vios is highly competitive with improved
specifications and has outsold the Honda City since February 2019.
UMW HOLDINGS BERHAD
24
STRATEGIC AND FINANCIAL MATTERS
2. The Automotive segment’s full-year revenue was largely unchanged at RM8.95
billion as compared to RM8.97 billion in 2017. However, Perodua’s strong
performance as well as improved profit margins from cost optimization activities
led to a 23.3% jump in PBT to RM549.9 million (page 45 of the Annual Report).
a) What are the reasons for the marginal dip in revenue and what is the
outlook for 2019?
The marginal dip in revenue was due to lower unit sales registered by UMW
Toyota Motor in 2018.
For 2019, UMW Toyota Motor has targeted unit sales increase of 13% to
75,000 units.
UMW HOLDINGS BERHAD
25
STRATEGIC AND FINANCIAL MATTERS
b) What were the major items that caused the improved profit margins
leading to a 23.3% jump in PBT and is the improvement sustainable?
The improved PBT margins were mainly due to higher contribution from
Perodua and enhanced profit margin from cost optimisation activities.
For 2019, Perodua is targeting to sell 231,000 units, a 2% increase over
2018.
We will continue to focus on intensifying our cost optimisation activities
and hope that these initiatives will help us to improve our profit margins.
UMW HOLDINGS BERHAD
26
STRATEGIC AND FINANCIAL MATTERS
3. On Page 3 (Chairman’s Statement), it is stated that in the Equipment division, the
Company formed a joint venture company with one of its largest standing
principals, Komatsu Ltd of Japan, with whom it is investing in new value-adding
technologies, such as Smart Construction, that will elevate it into a total
solutions provider for its valued customers.
Please explain how and to what extent this new arrangement boosts the
Division’s contribution particularly in the light of the revival of some mega
infrastructure projects in Malaysia.
We have rolled-out a pilot Smart Construction program in Singapore and actual
jobsite testing has commenced. We expect to roll out a similar business strategy
in Malaysia in the coming years.
Smart Construction can be used in infrastructure development for precision
work finishing, less dependent on operator skill, optimal construction plan &
scheduling, reduce fuel consumption & improve productivity. We believe this will
provide us with a competitive advantage in the industry as the competitors have
no such offering.
The revival of some mega infrastructure projects in Malaysia augurs well for our
heavy equipment business and we hope to increase our sales through a wider
product offering from Komatsu.
UMW HOLDINGS BERHAD
27
STRATEGIC AND FINANCIAL MATTERS
4. As stated on Page 46 (President and Chief Executive Officer’s Review), the M&E
segment achieved a turnaround from a loss of RM17.7 million in 2017 to a PBT of
RM21.5 million; underpinned by higher revenue from the Aerospace business.
a) What is the outlook and prospect for M&E segment in 2019 and going forward?
Sales of automotive component and lubricants are anticipated to gradually
rise over the next three years.
Automotive component business will focus on plant expansion and
modernisation to improve productivity and efficiency.
Lubricants business to concentrate on expansion into additional markets in
ASEAN.
The aerospace business is ramping-up production to deliver fan cases to
Rolls-Royce and aims to achieve better efficiency and capacity optimisation.
UMW HOLDINGS BERHAD
28
STRATEGIC AND FINANCIAL MATTERS
b) What is the total outstanding contract orders for Aerospace business?
Our current order for Trent 1000 and Trent 7000 fan cases with Rolls-Royce
is for another 23 years, followed by an option for a further 5 years.
We are in discussion with Rolls-Royce and other aerospace industry
players to supply similar products to optimise capacity and for future
business expansions.
As we are bound by a confidentiality agreement with Rolls-Royce, we are
unable to share the orders, production and delivery numbers.
We are successfully delivering the fan cases to Rolls-Royce as per their
purchase orders.
UMW HOLDINGS BERHAD
29
STRATEGIC AND FINANCIAL MATTERS
5. The amounts charged (and utilized) for provision for warranties increased
significantly to RM114.5 million (RM57.2 million) in 2018 compared to RM26.3
million (RM17.3 million) in 2017 (page 188 of the Annual Report).
What were the main reasons for the substantial increase, the basis of calculation
of the amount charged and the co-relation between amount charged and
utilized?
The substantial increase in 2018 due to:
• Lower amount charged to P&L in 2017 as a result of reversal of over provision
for warranty.
• Higher utilization in 2018 was derived from the export parts
The provision for warranty is calculated based on actual utilization data plus
projected utilization taking into consideration factors specific to vehicle models.
There is no co-relation between amount charged and utilized.
UMW HOLDINGS BERHAD
(RM’000) 2018 2017 Variance
Charge to profit or loss 114,503 26,287 88,216
Utilised during the year (57,235) (17,274) (39,961)
30
CORPORATE GOVERNANCE MATTERS
1. Based on the Corporate Governance (“CG”) report of the Company on the
application of the Practices under the Malaysian Code on Corporate Governance
(“MCCG”) 2017, please provide clarification on the following:
a) Practice 4.3- Step up – The Board has a policy which limits the tenure of its
independent directors to nine years.
UMW’s response: Adopted
Explanation on adoption of the practice:
The explanation, among others, states that the Board Charter of the Company
specifies that the tenure of an INED shall not exceed a cumulative term of nine
(9) years. However, upon completion of the nine (9) years, the INED may
continue to serve the Board subject to the director’s re-designation as a NED.
In the event the Director is to remain designated as an INED, the Board shall
first justify and obtain shareholders’ approval.
UMW HOLDINGS BERHAD
31
CORPORATE GOVERNANCE MATTERS
MSWG’s comment:
The 2nd paragraph of your explanation allows for the possibility of the INED
continuing as an INED beyond the 9-year tenure. The Step-Up Practices does
not envisage a continuation as an INED beyond the 9-year tenure.
Please take note.
We take note of your comments above.
UMW HOLDINGS BERHAD
32
CORPORATE GOVERNANCE MATTERS
b) Practice 12.3 – Listed companies with a large number of shareholders or
which have meetings in remote locations should leverage technology to
facilitate:-
- Voting in absentia; and
- Remote shareholders’ participation at General Meetings.
UMW’s response: Departure
MSWG’s comment:
There is no timeframe set for adoption of the said Practice.
UMW is supportive of any technology that can facilitate voting in absentia or
remote participation at general meetings and will endeavour to explore a
suitable and reliable system to facilitate this. We hope to put in place this
technology within the next 5-years.
UMW HOLDINGS BERHAD
33
THANK YOU
