CB Industrial Product Holding Berhad Equipping Palm Oil Industries Around The World. CBIP Financial Highlights 1Q 2012

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Lucinda Atkinson
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1 CB Industrial Product Holding Berhad Equipping Palm Oil Industries Around The World CBIP Financial Highlights 1Q 2012

2 Operational Highlights Leading engineering company specializing in construction and engineering of palm oil mills Strong in engineering expertise and experience in construction of palm oil mill Leading manufacturer and supplier of Palm Oil Mill components Successfully invented and commercialized Modipalm mills with patented continuous sterilization process Patented in Malaysia and Indonesia till 2021 Modipalm granted pioneer status for 10 years till 2015 Sustaining longer term contribution from Plantation activities Steady earnings from plantation associates and JVs Building platform for future growth through plantation assets in Kalimantan, Indonesia 2

3 Financial Highlights & Corporate Developments Strong growth in continuing operations FY11 revenue and PBT of RM322.6m and RM70.9m translate to y-o-y growth of 19.1% and 35.21% respectively Growth sustained with revenue +82.4% and PBT +91.6% in 1QFY12 Balance sheet in net cash position Declared and paid total tax exempt dividend of 35sen per share in FY11 Comprising of interim dividend of 5sen* per share, and a second interim dividend of 30sen per share paid in May 2012 * adjusted for 1 for 1 bonus issue completed in March 2012 Latest corporate exercises Completed acquisition of 94% of PT Berkala Maju Bersama (BMB) and PT Jaya Jadi Utama (JJU) in April 2012 for a total purchase price equivalent to RM14.2m Completed sale of Sachiew Plantations Sdn Bhd and Empresa (M) Sdn Bhd in May 2012 for total cash consideration of RM268m 3

4 CB Industrial Product Holding Berhad Equipping Palm Oil Industries Around The World Review of 1QFY12 Results

5 Key Financial Highlights FYE Dec (RMm) 1QFY12 1QFY11 % Chg FY11 FY10 % Chg Revenue Profit from Operations Associates & Jointly-controlled (47.7) PBT Net Profit * Opt Margin (%) * net profit from continuing operations Revenue growth underpinned by Increase in project billings Improvement in project completion for retrofitting special purpose vehicles Improved profitability for mill equipment & construction operations Higher better margin mechanical portion vs turnkey/civil works Ability to command premium pricing for Modipalm mills Lower CPO prices and production led to reduced profits from plantation associates and JVs 5

6 Equipment and Contracting * % 20% % 13.0% 15.6% 14.9% 15.5% 16% 10.5% 12% % % - FY07 FY08 FY09 FY10 FY11 1QFY11 1QFY % Revenue (RMm) Opt Margin (%) * excluding contribution from disposed plantation subsidiaries 6

7 Dividend Gross dividend per share (sen) ^ Payout ratio (%) 90% % 32% 31% 29% % 11% FY05 FY06 FY07 FY08 FY09 FY10 * FY11 Interim 2nd Interim Final Dividend payout (LHS) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% * credited 3rd interim share dividend of 1 for 20 for FY10 ^ adjusted for 1 for 1 bonus 2 nd interim of 30 sen paid out on 30 May 2012 To maintain one-third of net profit as dividend payment 7

8 CB Industrial Product Holding Berhad Equipping Palm Oil Industries Around The World Operations & Prospects

9 Production Capacity & Projects Award Capacity to produce 14 mills per annum with > 66,000 sq m floor space Factory Output : Financial Year No of Projects Total Capacity (TPH) Projects Award : Financial Year No of New Contracts Secured Total Value (RMm) * excluding retrofitting of special purpose vehicles and boilers 9

10 Projects Orderbook Sizeable unbilled portion of about RM356m as at end 1QFY12 Equivalent to 1.7x FY11 turnover Expect to drive revenue and profit growth in FY12 Projects in Hand Value (RMm) % Recognition Unbilled Sales (RMm) Palm oil mill construction - Malaysia % Indonesia % Other countries % 39.1 Boilers % 27.0 Total % * excluding retrofitting of special purpose vehicles New contracts recently secured in 2QFY12 RM60m contract from Jaya Tiasa (RM40m for 120 tph) and PT Swakarsa Sawit Raya (RM20m for 45 tph) RM16m boilers contract from Wilmar and Sime Darby Targeting to secure projects worth RM500m to sustain orderbook growth Core demand from Indonesia PNG emerging as potential new growth market 10

11 Plantation Division Disposal of Sachiew and Empresa completed in May 2012 Raised RM268.1m cash Consolidating plantation assets in Kalimantan, Indonesia Acquired PT Berkala Maju Bersama and PT Jaya Jadi Utama in April 2012 Total plantation land in Kalimantan under subsidiaries raised to 37,273ha from previously 8,000ha with just PT Sawit Lamandau Raya o Total plantable area is now approximately 33,000ha Subsidiaries Effective Interest (%) Landbank (ha) Estimated Planted Areas (ha) PT Sawit Lamandau Raya (SLR) 85% 8,000 5,000 PT Jaya Jadi Utama (JJU) 94% 13,645 13,000 PT Berkala Maju Bersama (BMB) 94% 15,628 15,000 Total 37,273 33,000 Associate & Jointly-controlled Solar Green Sdn Bhd (50%) 50% 5,567 Kumpulan Kris Jati Sdn Bhd 30% Bahtera Bahagia Sdn Bhd 30% 20,855 11

12 Planting Schedule for Indonesian Estates Target to complete planting for 5,000ha in SLR by FY13 Currently preparing nurseries for JJU and BMB Expect to commence planting in FY13 Annual planting expected to be 5,000 8,000ha per annum SLR JJU BMB ,300 ha E 1,000 ha E 2,700 ha - 4,000 ha 2014E 45MT mill - 4,000 ha 2015E - 4,000 ha 2,000 ha & 45MT mill 2016E - 4,000 ha 3,000 ha 2017E - 3,000 ha 2,000 ha & 45MT mill 2018E - 2,000 ha & 45MT mill - Total 5,000 13,000 15,000 12

13 Outlook and Prospects Targeting consistent profit growth of 20% p.a. Unbilled orderbook of Modipalm mills of RM356m as at 31 March 2012 Steady contribution from plantation associates and JVs Equipment & Contracting Division Securing new projects to further grow orderbook in Modipalm mills o Proven benefits of Modipalm mills and its continuous sterilization process o Core demand in Indonesia, with PNG offering new prospects Growing recurring revenue from replacement and upgrading works o Accounts for 10% of Modipalm revenue currently o Pursuing new market segment in older and under-performing mills Plantation Division Positive impact in the longer term with new cultivation in Kalimantan, Indonesia o Plantation hecterage rose from 8,000ha to 37,273ha with recent land acquisitions 13

14 CB Industrial Product Holding Berhad Equipping Palm Oil Industries Around The World Modipalm & The Benefits Of Continuous Sterilization Process

15 Palm Oil Milling Process 15

16 Sterilization Process Sterilization Process First process crucial to final oil quality and strippability of fruits Inactivates lipases in fruits and prevents build-up of free fatty acids (FFA) Facilitates fruits being stripped from bunches Softens fruit mesocarp for digestion and release of oil and conditioning of nuts to minimize kernel breakage Previous methodology Bunches cooked using steam at pre-determined pressure in specifically designed autoclaves Length of sterilizer dependent on throughpt Inadequate sterilization adversely affects subsequent milling processing stages Batch processing system Innovative methodology Introduction of continuous sterilization o Improved fruit strippability even with usage of low pressure steam or atmospheric steam o Consists of conveyor taking crushed FFBs into continuous sterilizer o Reduces much of machinery associated with sterilizers o Cost savings in manpower and maintenance 16

17 Modipalm Continuous Sterilization Process Patented continuous sterilization process Differentiation and benefits Unquantified oil loss Oil loss from condensation Oil quality Safety issue Operational cost savings Environmental issue 17

18 Oil Loss During Processing Sources of oil loss Sterilizer condensate, empty bunches, fruit loss in unstrapped bunches, press cake fibre, nuts and sludge Over-ripe bunches will lose more oil during sterilization To minimize oil loss to reduce wastage Shorter sterilizer cycle Better control of bunch ripeness and quality Oils recovered from sterilizer condensate should be used as technical oils Higher iron content, reducing oil stability if mixed with crude production oil Significant benefits in profitability Basing on industry s OER ranges 20-21%, 1% rate differential in OER resulting in net profitability of 5% 18

19 Oil Loss Minimization = Extra Profits For Plantation Companies 19

20 Conventional Sterilizer Spilled loose fruits Unquantified Oil Loss is defined as oil loss not accounted for by the mill in its compilation of the mill s total oil loss. This includes oil and loose fruit spillages, and condensate oil spillage. This is estimated to be % of OER depending on the mill s efficiency 20

21 Other Sterilizers Oil Loss from condensation 21

22 Continuous Sterilization Concept FROM FFB FEEDING CONVEYOR Capacity for single decker : 42m 22.5t/hr BUNCH CONDITIONER INLET FLAP VALVE LIVE STEAM INJECTION TWO DECK CONVEYOR OUTLET FLAP VALVE STERILIZED BUNCHES TO THRESHER 22

23 Continuous Sterilization Concept FROM FFB FEEDING CONVEYOR BUNCH CONDITIONER INLET FLAP VALVE Capacity for double decker : 24m 25t/hr 30m 30t/hr LIVE STEAM INJECTION TWO DECK CONVEYOR OUTLET FLAP VALVE STERILIZED BUNCHES TO THRESHER 23

24 Continuous Sterilization Concept 24

25 Continuous Sterilization System Video of Continuous Sterilizer... 25

26 How Oil Losses are Addressed Unquantified Oil Loss Previously, unquantified oil loss was not monitored or recovered in conventional sterilizers Other Sterilizers Oil Losses addressed by recovering from condensate (which was previously unquantified oil loss) Such recovery is positive to OER, but quality of oil is technical oil which has higher iron content and is of inferior quality. Typically such oil is used for industrial purposes and not for consumption Modipalm Continuous Sterilizer The Continuous Sterilizer system has significantly lower and much noticeable difference in Oil Losses from condensation as well as Unquantified Oil Loss 26

27 Oil Loss Comparison Conventional & Others Continuous Sterilizer Empty Fruit Bunch (% OER) 1-2% 0.5% Condensate (%OER) Up to 1% Less than 0.3% Most Mills using other systems will recover oil from EFB by using Empty Fruit Bunch Press About % OER is recoverable but oil extracted is of very poor quality with high wax content Very high power consumption operating EFB presses For a 60 MT/HR mill, up to 250 kw is required Hence, less environmentally friendly. Most mills now re-stream 100% of condensate back to process line Condensate oil is of very poor quality due to high iron content picked up from mild steel body of conventional sterilizers But, continuous sterilizer uses stainless steel body, hence less iron contamination 27

28 Operational Savings in Manpower Number of process operators per shift Mill Capacity Batch Sterilization Continuous Sterilizer

29 Actual Manpower Savings & Safety Mill Rated Throughput(t/h) No of operators per shift Bukit Puteri Kota Bahagia Melur Gemilang Balingian PT SAI Lower manpower requirements Much of the Continuous Sterilizer System being automated Safety record is also much improved 29

30 Operational Savings per tonne FFB Cost Savings on Labour and Maintenance Cost Center Cost Savings (RM/mt FFB) Reduction in process labour 3.75 Reduction in overall maintenance 2.17 Total cost savings 5.92 A 40 TPH mill processing 200,000 MT FFB/YR can save as much a RM1.0 million a year in costs 30

31 Modipalm Goes Green Batch processing is less environmentally friendly Environmentally friendly 31

32 Modipalm Clients List Tradewinds Plantations PT Astra Agro Lestari Pt Minamas Group Matahari Kahuripan Indonesia (Makin Group) PT Hutan Sawit Lestari Wilmar Group Pt Agro Indomas Group PT TH Indo Plantations (LUTH) PT Astra Agro Lestari Wilmar Group PT TH Indo Plantations (LUTH) PT Agro Indomas Group Felda Palm Industries PT Rea Kaltim Plantatons PT Minamas Group Tradewinds Plantation 32

33 Advance Boilers Expansion Opportunities To cater for expanding internal requirements from higher unit sales of Modipalm Continuous Sterilization System To cater for increased presence in the replacement market To cater for increased demand for backup boiler system as Palm Oil Mills seek to minimize the risks of down time 33

CB Industrial Product Holding Berhad Equipping Palm Oil Industries Around The World. CBIP Financial Highlights 2Q 2012

CB Industrial Product Holding Berhad Equipping Palm Oil Industries Around The World CBIP Financial Highlights 2Q 2012 Operational Highlights Leading engineering company specializing in construction and