CCM GROUP INVESTOR RELATIONS 1 June 2016
CHEMICAL COMPANY OF MALAYSIA BERHAD Presented by: Leonard Ariff Abd Shatar Group Managing Director Date: 1 June 2016 Frost & Sullivan s 2016 Pharmaceutical Company of the year Generics Drug Category
CONTENT 1 Overview a Pharmaceuticals Division b Chemicals Division c Fertilizers Division 2 Financial Performance
CCM GROUP Vision, Mission and Values Vision Enhancing Quality of Life Mission To be a responsible company committed to enhancing quality of life by providing sustainable solutions based on innovative sciences. Core Values Passion Excellence Teamwork Integrity Responsible Respect
CCM GROUP Brief Background Since 1966, Chemical Company of Malaysia Berhad (CCM) has had a significant corporate presence in Malaysia. CCM Group offers a wide range of products and services to the chemicals, healthcare and agricultural industries. Year Key Milestones 1963 CCM Berhad was incorporated 1966 CCM Berhad was listed on the main board of Bursa Malaysia Start up of the compound fertiliser and chlor-alkali plants (1st in Malaysia) 1991 Relocate chlor-alkali plant to Pasir Gudang 1994 Management Buy Out (MBO) of ICI s equity in CCM 1995 Acquired Upha Corporation (M) Sdn Bhd and CCM Pharma, thus establish its pharmaceuticals division 1996 Joint venture with Orica Investments Pte Ltd to form Orica-CCM Energy Systems Sdn Bhd 2005 2007 2008 Ground Breaking Ceremony of CCM Pharmaceutical s second plant in Bangi Acquire 33.4% of Duopharma Biotech Berhad Ground Breaking Ceremony of CCM Fertilizers Division plant in Bintulu Acquire Malayan Pharmaceutical's established brands and assets for RM22 million Acquire Enersave Water Sdn Bhd to expand its Watercare Business Acquire polymer coating specialist, Innovative Group of Companies 2009 Official Opening of CCM R&D Centre, Innovax Sdn Bhd 2012 Official Opening of the Lahad Datu fertilizers plant 2013 CCM awarded the Anugerah Majikan 1Malaysia (Kategori Syarikat GLC) 2015 CCM awarded the Halal Excellence Award 2015 Consolidation of Pharmaceutical businesses under CCM Duopharma Biotech Berhad 2016 CCM awarded the 2016 Pharmaceutical Company of the Year (Generics Drug) by Frost & Sullivan
Board of Directors CCM GROUP Board Structure and Board Members Audit and Compliance Committee Chairman: Khalid bin Sufat - Integrity Committee Chairman: Datin Paduka Kartini binti Hj. Abdul Manaf Nomination and Remuneration Committee Chairman: Khalid bin Sufat Risk Management Committee Chairman: Dato Azmi bin Mohd Ali Finance and Investment Committee Chairman: Dr. Leong Chik Weng Board Members Non-Independent Non-Executive Chairman YB Hajah Normala binti Abdul Samad Group Managing Director Leonard Ariff bin Abdul Shatar Senior Independent Non-Executive Director Khalid bin Sufat Non-Independent Non-Executive Director Datin Paduka Kartini binti Hj. Abdul Manaf Non-Independent Non-Executive Director Dato Azmi bin Mohd Ali Non-Independent Non-Executive Director Dato Seri Ir. Dr. Zaini bin Ujang Independent Non-Executive Director Dr. Leong Chik Weng Independent Non-Executive Director Tan Sri Datin Paduka Siti Sa diah binti Sh Bakir
CCM GROUP Senior Management Team Group Managing Director Leonard Ariff bin Abdul Shatar Director Government Relations & Program Office and Sustainability & Halal Abd. Rahman bin Abdullah Thani Group Chief Operating Officer Nik Fazila binti Nik Mohamed Shihabuddin Director Group Corporate Development Norzaimah binti Maarof Group Company Secretary Noor Azwah binti Samsudin General Manager, Legal/Company Secretary Ibrahim Hussin Salleh General Manager, Group Integrity Assurance Wan Aishah Idris binti Muhamad Idris
Permodalan Nasional Berhad CCM Berhad CCM GROUP Corporate & Equity Structure Chemicals Division: CCM Usaha Kimia (M) Sdn Bhd Fertilizers Division: CCM Agrimax Sdn Bhd Pharmaceuticals Division: CCM Marketing Sdn Bhd CCM Investments Ltd Yayasan CCM Pan Gen Biotech Inc Permodalan Nasional Berhad (PNB), Malaysia s largest private equity fund managed by the Government of Malaysia, holds the majority shares thus making CCM a Government- Linked Company (GLC). (as at 1st May 2016)
1 Overview a Pharmaceuticals Division b Chemicals Division c Fertilizers Division 2 Financial Performance
PHARMACEUTICALS DIVISION Brief Background CCM Pharmaceuticals Division comprises of CCM Duopharma Biotech Berhad and its subsidiaries. It develops, manufactures and market generic drugs and branded pharmaceuticals products for consumers. CCM is the No.1 generic pharmaceutical manufacturing company in Malaysia and this division has a vision to be in the TOP 5 generic pharmaceutical company in ASEAN by 2022. Several of its main medications include Omesec and Vascor. It also produces many established brands such as Champs, Proviton, Flavettes, Donna and Diamelon. CCM Pharmaceuticals Division is committed to expanding both its ethical and over-the-counter (OTC) products to fulfil the emerging customer needs and strengthen our presence particularly in ASEAN region. Year Key Milestones 1995 Acquired Upha Corporation (M) Sdn Bhd and CCM Pharma, thus establish its pharmaceuticals division 2005 2007 Ground Breaking Ceremony of CCM Pharmaceutical s second plant in Bangi Acquired 33.4% of Duopharma Biotech Berhad CCM signed S&P Agreement to acquire Malayan Pharmaceutical's established brands and assets for RM22 million 2009 Official Opening of CCM R&D Centre, Innovax Sdn Bhd 2012 CCM s pharmaceuticals division inks strategic collaboration with Korea s PANGEN Biotech Inc. to pioneer development of biosimilars for kidney failure treatment in Malaysia 2015 Consolidation of all Pharmaceuticals assets under CCM Duopharma Biotech Berhad 2016 Awarded the Pharmaceutical Company of the Year (Generics Drug Category) by Frost & Sullivan
PHARMACEUTICALS DIVISION Corporate Structure Chemical Company of Malaysia Berhad CCM Marketing Sdn Bhd CCM Duopharma Biotech Berhad (as at 1st May 2016) CCM Pharmaceuticals Sdn Bhd Innovax Sdn Bhd Duopharma (M) Sdn Bhd CCM International (Philippines) Inc CCM Pharmaceuticals (S) Pte Ltd Upha Pharmaceuticals Manufacturing (M) Sdn Bhd CCM Pharma Sdn Bhd
Board of Directors PHARMACEUTICALS DIVISION CCM Duopharma Board Structure & Members STRUCTURE MEMBERS Nomination and Remuneration Committee Chairman: Dato Haji Ghazali bin Awang Non-Independent Non-Executive Chairman YB Hajah Normala binti Abdul Samad Senior Independent Non-Executive Director Dato Haji Ghazali bin Awang Non-Independent Non-Executive Director Datuk Aliasbin Ali Independent Non-Executive Director Dato Mohamad Kamarudin bin Hassan Audit and Risk Management Committee Chairman: Dato Haji Ghazali bin Awang Independent Non-Executive Director Dr. Byung-Geon Rhee Independent Non-Executive Director Tan Sri Datin Paduka Siti Sa diah binti Sh. Bakir Non-Independent Non-Executive Director Dato Azmi bin Mohd Ali
PHARMACEUTICALS DIVISION Facilities Snapshot Facilities Bangi Plant Established Workforce Types of Products 1976 534 people Ethical and OTC Products mainly in OSD, soft gels, liquids and cream forms Glenmarie Plant Klang Plant Established Workforce Types of Products Established Workforce Types of Products 2008 72 people Cephalosporin facility producing granules, capsules and tablets Innovax Sdn Bhd, the division s R&D center is located in this plant 1979 468 people Oral solids, Haemodialysis & SVI Products, LVI Irrigation Solution Products, Dental Cartridge Production and Sterile Cephalosporin
2011 Identified Erythropoietin (EPO) & Insulin as point of entry into Biotherapeutics Identified oncology as a potential high growth area PHARMACEUTICALS DIVISION Strategy 2012 Partnership with PanGen Biotech Inc Joint Clinical Trial & Licensing and Distribution 1 st local company to be involved in developing a Biosimilar 1 st local company to conduct a full-scale Phase III clinical trial EPO Biosimilar Phase III clinical trial Multi-national (MY & KR) 316 subjects 2013 Partnership with Biocon Limited Exclusive marketing & distribution agent in Malaysia for Insulin products from Biocon Currently conducting Post Market Surveillance (PMS) study on Biocon s Insulin 2014 Strategic Investment Acquisition of 11.6% equity stake in PanGen Exclusive marketing and commercialization rights in MY, SG & BN for all their pipeline products. 2015 Implementation of Manufacturing Optimization Strategy. Rationalization and upgrading of manufacturing assets into state of the art facilities with enhanced cgmp, purpose-designed centralized warehouse & distribution hub Acquisition of 6 companies to strengthen Group s market position. Immediate increase in the Group s production capacity, product offerings & enhanced access to export markets. 2016 & Onwards Technological Partnership with NATCO Pharma Limited to establish the first HAPI Plant in Malaysia and the region. Commercialisation of high value products in niche therapeutics such as Oncology and Renal Care
1 Overview a Pharmaceuticals Division b Chemicals Division c Fertilizers Division 2 Financial Performance
CHEMICALS DIVISION Brief Background CCM Chemicals Division has been the leading industrial and specialty chemicals in Malaysia for over 70 years. CCM Chemicals aims to become the principal in water treatment and polymers for rubber glove, apart from manufacturing and trading of extensive range of general and specialty chemicals. CCM Chemicals is the leading chlor-alkali producer in Malaysia and represents many world renowned principals in the supply of industrial and performance chemical products with regional offices in Singapore, Indonesia and Philippines. CCM Chemicals is a recognized leader and steward in corporate safety and environmental management. The division maintain a high standard for Safety, Health & Environment (SHE) and has numerous CICM Responsible Care awards under its belt. Year Key Milestones 1992 Commissioned 1 st Chlor Alkali Plant in Pasir Gudang (PGW1) 1996 Commissioned 2 nd Chlor Alkali Plant in Pasir Gudang (PGW2) 1997 Commissioned 1 st Coagulant Plant in Pasir Gudang (PGW3) 1999 Commissioned Calcium Nitrate Plant in Shah Alam 2000 MS ISO 9001 2003 OHSAS 18001 2008 Acquired Innovative Group of Companies, a polymer coating solution specialist 2011 ISO 14000 EMS Certificate 2015 Awarded the Prime Minister s Hibiscus Award for notable achievement in Environmental Performance 2016 Internal restructuring of Chemicals Division into Chemicals and Polymers business. Implementation of OE Project at PGW 1
CHEMICALS DIVISION Corporate Structure Chemical Company of Malaysia Berhad CCM Usaha Kimia (M) Sdn Bhd Chemicals Polymers CCM Chemicals Sdn Bhd CCM Water Systems Sdn Bhd CCM Innovative Solutions Sdn Bhd CCM Singapore Pte Ltd PT CCM Indonesia Orica-CCM Energy Systems Sdn Bhd CCM Watercare Sdn Bhd Innovative Polymer Systems Sdn Bhd Delta Polymer Systems Sdn Bhd
CHEMICALS DIVISION Facilities Snapshot Facilities Pasir Gudang Plant Shah Alam Plant Bangi Plant Established Workforce Capacity Types of Products Established Capacity Workforce Types of Products Established Workforce Capacity Types of Products 1992 [PGW1 Chlor-alkali Plant] 1996 [PGW2 Chlor-alkali Plant] 1997 [PGW3 Coagulant Plant] 129 people 40,000 ECU [Chlor-alkali Plant] 25,200 MT [Coagulant Plant] Liquid Chlorine, Caustic Soda, Hydrochloric Acid, Sodium Hypochlorite [Chlor-alkali Plant] Polyaluminium Chloride [Coagulant Plant] 1999 6,000 MT 6 people Calcium Nitrate 2009 49 people 12,000 MT Polymer Coatings Chemicals Polymers
1 Overview a Pharmaceuticals Division b Chemicals Division c Fertilizers Division 2 Financial Performance
FERTILIZERS DIVISION Brief Background Fertilizers division of CCM engaged in the manufacturing, marketing and supply of fertilizers products. It started off as a subsidiary of ICI United Kingdom in 1930. The company was formally incorporated in 1963 and listed in the Main Board of Malaysia in 1966, where it commissioned a NPK fertilizer compound plant and a chlor-alkali manufacturing plant, the first of such facilities in Malaysia. A Management Buy-Out in 1994, effectively ended ICI s involvement in the company and CCM s diversification into the pharmaceuticals business. Year Key Milestones 1966 Commissioning of the first compound fertiliser manufacturing facility in Malaysia 1997 1998 Awarded Malaysia Palm Oil award by Palm Oil Registration and Licensing Authority for achieving the highest recorded yield of 46 tonnes per hectare. Establishment of Golden Growers Club, a non-profit organisation with the objective of educating and providing technical update for stakeholders in the agricultural industry 2005 Highest production recorded at Shah Alam plant at 283,107 MT per year 2008 Successful commissioning of Bintulu plant 2009 Decommissioned ammonia sphere and nitric acid facility at the Shah Alam plant to convert to a more flexible and environmentally friendly process 2011 Successful commissioning of Lahad Datu plant 2012 Initiated Lean Six Sigma programme 2015 Announcement of closure of the Shah Alam plant 2016 Fertilizers discontinued business
Fertilizers Division Exit Strategy Jun-13 Aug-13 Dec-13 Mar-15 May-15 Monetize PT200 Land Value Decision to Re-zone PT200 Decision to Divest Fertilizers Division as a package Project Reassessment Closure of Shah Alam Plant Trading with Contract Manufacturing Packaged Bintulu & Lahad Datu for sale Project A Project B To proceed with the business exit implementation plan through 2 separate projects Business Downward Trend Long-term Strategy In Formulation Plant Relocation CAGR (2012-2014) CAGR (2010 2014) T/O = -25.3% PBT = >-100% T/O = -14.9% PBT = >-100% Challenges Volatile CPO price contributed to lower demand of compound fertilizers Capacity under-utilization Inefficient operations resulting in higher prod. cost Over supply of compound fertilizer :- Capacity of ~2.4 million MT vs Demand of ~1.5 million MT)
Fertilizers Division Key Issues & Risk in Sustaining the Business OPERATIONAL RISK RISK PROFILE EXTERNAL RISK INVESTMENT CAPITAL 1. ASSETS Under utilized Lahad Datu plant Max utilization of Bintulu plant Ageing Shah Alam plant 2. MANAGEMENT Weak Management Team Unclear succession plan Ageing workforce STRATEGIC RISK 1. LAND TENANCY Shah Alam plant residing in a land with high potential value 2. NEW MARKET Unable to penetrate new markets 1. MARKET Market driven materials prices Low CPO prices Manufacturing capability differ from market requirements Demand sensitive to extreme weather conditions 2. FOREX Appreciation of USD against MYR 1. CASHFLOW Tight cash flow FINANCIAL RISK 2. WORKING CAPITAL Interest charges for TWC financing Working capital for trading of Straights, Mixtures and dealers Compounds CAPEX for new Shah Alam plant HUMAN RESOURCE Management team resources and time Ageing workforce Working culture
FERTILIZERS DIVISION Facilities Snapshot Facilities Bintulu Plant Lahad Datu Plant Start-up Year Capacity 2011 2012 2013 Workforce Start-up Year Capacity 2011 2012 2013 Workforce 2008 130,000 tonnes per annum 68% capacity 62% capacity 69% capacity 131 people (51 permanent; 80 contract) 2011 130,000 tonnes per annum 28% capacity 48% capacity 27% capacity 116 people (42 permanent; 72 contract)
CONTENT 1 Overview a Pharmaceuticals Division b Chemicals Division c Fertilizers Division 2 Financial Performance
FINANCIAL PERFORMANCE Group Financial Snapshot FP 2015* (RM mil) FPA 2014 (RM mil) Variance Revenue 630.3 600.4 5% Gross Profit 237.8 203.3 17% PBT 52.9 41.5 27.4% PAT (Continuing) 28.6 27.9 2.5% PAT (Discontinued) (101.8) (63.3) (61%) G.Margin % 37.7% 33.8% ROE % (Continuing) 4.6% 3.0% As at 31.12.15 (RM mil) As at 31.12.14 (RM mil) Assets 1,736.9 1,639.1 Cash 312.7 208.2 Equity 849.9 880.6 Borrowings 633.1 594.0 Gearing 0.74x 0.67x Net asset per share 1.48 1.65 Profit before tax RM' mil Financial Period YoY Division 2015* 2014 % Pharmaceuticals 38.4 35.7 7.5% Chemicals 31.3 18.9 65.6% Fertilizers (96.1) (63.7) (50.9%) Others and interco elimination (16.7) (13.0) (28.5%) Group (43.1) (22.1) (95%) Key Salient Points Group revenue increased by 5% y-o-y, shows an improvement from previous year. Group PBT grew by 27.4%. Debt/Equity ratio stood at 0.74x compared to 0.67x last year. Additional borrowing were due to drawn down pursuant to the completion of relocation and expansion of Chemicals Division. ROE for continuing operations stand at 4.6% compared to 3.0% y-o-y.
Turnover (RM mil) PBT / PAT (RM mil) SEGMENTAL FINANCIAL PERFORMANCE Pharmaceuticals Division 340.0 330.0 320.0 310.0 300.0 290.0 280.0 270.0 Turnover, PBT & PAT 2013 2014 2015 Turnover 295.9 320.4 334.8 PBT 30.8 35.7 38.4 PAT 24.0 27.5 28.7 (in RM'million) 2013 2014 2015* 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Non-current assets 431.4 445.5 279.1 Current assets 245.7 279.9 354.3 Equities 484.9 517.0 449.7 Liabilities 192.2 208.3 183.7 Gearing 0.01x 0.04x 0.27x Return on Equity 4.9% 5.3% 6.4% KEY HIGHLIGHTS Strong performance shown both in private and government markets. Maintained its position as #1 local pharmaceutical company and top 5 position (by sales value) among all pharmaceutical companies in Malaysia (source : IMS Flash Report Mar 2016). CCM was accorded the winner of the Frost and Sullivan 2016 Pharmaceuticals Company of the Year Award under the Generics Drug Category. Continue with brand visibility of OTC products focusing on 4 major brands i.e. Champs, Proviton, Flavettes & Naturalle. Continue to champion halal pharmaceuticals products. CCM was accorded the winner of the 2015 Islamic Economic Awards under Food and Health Category the Global Islamic Economy Summit 2015. Continuous collaboration and partnering with key pharmaceutical players like Biocon Ltd., Pangen Biotech Inc.
Turnover (RM mil) PBT / PAT (RM mil) SEGMENTAL FINANCIAL PERFORMANCE Chemicals Division Turnover, PBT & PAT KEY HIGHLIGHTS 305.0 300.0 295.0 290.0 285.0 280.0 275.0 270.0 265.0 2013 2014 2015 Turnover 299.5 279.0 294.8 PBT 16.6 18.9 31.3 PAT 9.9 14.3 18.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Stable local businesses, both in chlor alkali and polymer coating businesses. On the chlor alkali segment - Market price rebound, Caustic Soda and Chlorine prices has risen by >10% this year. As of 2015, CCM Innovative Solutions has world market share of 42% for polymer coatings and 36% for cleaners. (in RM'million) 2013 2014 2015* Non-current assets 225.9 251.7 217.5 Current assets 181.3 198.9 241.8 Equities 254.1 275.9 264.8 Liabilities 153.1 174.7 194.6 Gearing 0.15x 0.15x 0.13x Return on Equity 3.9% 5.2% 4.8% Continuous cost improvement initiatives via various operational efficiency projects.
Turnover (RM mil) PBT / PAT (RM mil) SEGMENTAL FINANCIAL PERFORMANCE Fertilizers Division 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 0.0 Turnover, PBT & PAT 2013 2014 2015 Turnover 693.0 488.7 367.5 PBT (12.9) (63.7) (96.1) PAT (13.5) (63.7) (101.9) (20.0) (40.0) (60.0) (80.0) (100.0) (120.0) (in RM'million) 2013 2014 2015* Non-current assets 126.0 117.3 47.5 Current assets 395.9 280.5 299.2 Equities 46.5 16.9 (92.8) Liabilities 475.4 380.9 439.5 Gearing 3.86x 6.50x 106.8x Return on Equity (28.9%) (376.9%) (109.8%) 0.0 KEY HIGHLIGHTS Sales trending downward ; low CPO prices influencing decision on fertilizers purchasers delays in procurement, switching to cheaper straight or mix fertilizers. Closure of Medan plant, impairment made of RM36.8m in 2014. Closure of Shah Alam Plant in 2015, impairment of RM30.7m (including retrenchment costs and assets write down). Write down of east Malaysia plant RM26.4m
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FERTILIZERS DIVISION Corporate Structure Chemical Company of Malaysia Bhd (CCMB) Lembaga Tabung Haji (LTH) CCM Agri-Max Sdn Bhd (CCMAG) 50.1% 49.9% CCM Fertilizers Sdn Bhd (CCMF) CCM Agriculture Sdn Bhd (CCMA) CCM Agriculture (Sabah) Sdn Bhd (CCMAS) Shah Alam Plant 240 kmt Capacity Bintulu Plant 130 kmt Capacity Lahad Datu Plant 130 kmt Capacity