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 e s o u r c e s B e r h a d - 1 5 Y e a r s o f G r o w t h MBM Resources Berhad (MBMR) was incorporated as an investment holding company in a restructuring scheme to consolidate its investments to include three main companies: Motor vehicle business Daihatsu (Malaysia) Sdn Bhd (DMSB), the exclusive distributor of Daihatsu motor vehicles in Malaysia resulted in the MBM Group s automotive businesses consolidated under the listed entity, with the sale of the 20% stake in Perodua in 2000 and 42% interest in Hino Motors (Malaysia) Sdn Bhd (HMMSB) in 2006 from the parent holding company to MBMR. Manufacturing activities Precision Press Industries Sdn Bhd (PPI), manufacturer of precision metal stamped parts and components and the design and fabrication of tool and die for the metal stamping industry, and Tekun Asas Sdn Bhd (Tekun Asas), manufacturer of loud speaker grilles and hard board panellings. MBMR was successfully listed on the Kuala Lumpur Stock Exchange (now Bursa Malaysia Securities Berhad) on 9 February 1995, at an issue price of RM2.00 per share. The acquisition of Federal Auto Holdings Berhad (FAHB), the established Volvo cars distributor and subsequently a leading dealer, marked a significant milestone for the MBMR Group to pursue a multibrand strategy, now as a top dealer for international reputable brands not only for Volvo but including Volkswagen and Mitsubishi. MBMR also expanded into automotive parts manufacturing which today comprises of Oriental Metal Industries (M) Sdn Bhd (OMI), the leading wheel manufacturer and Summit Vehicles Body Works Sdn Bhd (SVBW), the body building business which complements the commercial vehicle sales division. Building on its strength as an automotive group, MBMR has expanded over the years into two core areas automotive distribution and retailing and automotive parts manufacturing. MBMR s growth has been largely through acquisitions. A restructuring of its parent s businesses The Group crossed the RM1 billion revenue mark in 2006 and is now poised to reach new heights with its new growth strategy. The Group is in a new expansion phase, investing heavily in expanding its distribution network and upgrading of its facilities. MBMR aspires to be a complete automotive group. 02 MBM RESOURCES BERHAD
1995 695 Year 2000 2005 538 945 2010 1,528 Revenues (RM Mil) MBMR Share Prices (1995-2010) 5.00 4.50 4.00 3.50 3.00 RM 2.50 2.00 1.50 1.00 0.50 0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year High Low Close ANNUAL REPORT 2010 03
M B M R e s o u r c e s B e r h a d - 1 5 Y e a r s o f G r o w t h 1995 Listing on the Main Board of the Kuala Lumpur Stock Exchange (now known as Bursa Malaysia Securities Berhad) 2000 MBMR acquired 20% stake in Perodua from Med-Bumikar Mara for RM160m via issuance of 64m new MBMR shares at RM2.50/share. Senior directors retire. New directors elected to the Board 2003 Acquired 90% of SVBW; disposed stake in CMC 1997 Acquired 24.88% in Colonial Motors Company Ltd (CMC), largest Ford dealer in New Zealand 2001 Restructuring of Perodua completed with greater participation by Daihatsu Motor Company Ltd (DMC) in Perodua s manufacturing operations. A special gross dividend of 20 sen per share was paid 2004 Acquired Galaxy Waves which owns 20% of OMI and 32% of FAHB; acquired additional 58% in OMI; Acquired 50.98% in WSA Capital Corporation Sdn Bhd (WCC) 1998 MBMR reported a pre-tax loss of RM25.8m as the financial crisis hits auto sales 2002 A Bonus issue of 2 for 3 was completed, increasing MBMR s paid-up share capital to RM231.7m 2005 Increased stake in FAHB by 37.6% to 69.6% 04 MBM RESOURCES BERHAD
2006 Acquired 42% in HMMSB for RM25.8m Acquired remaining 10% in SVBW making it a whollyowned subsidiary of MBMR MBMR revenue crossed RM1 billion, highest ever achieved 2007 Increased stake in FAHB by 16.4% to 86% at additional cost of RM9.3m 2008 Disposed MBM Industries Sdn. Bhd. Additional acquisition of 21.52% stake in WCC increasing total equity interest in WCC to 73.32% 2009 Additional dealership locations obtained for the Group s Volkswagen and Mitsubishi dealerships 2010 Obtained distributorship for Heico Sportiv products and ABT Sportsline products under FAHB Obtained Hino dealership under DMSB Disposed entire 73.32% equity interest in WCC 2011 and Beyond We aspire to be a complete automotive group. ANNUAL REPORT 2010 05
FEDERAL AUTO Holdings Berhad 50 Years of STAYING AHEAD Driven Federal Auto Holdings Berhad (FAHB) was incorporated in 1960 under the name of Federal Auto Company Limited and was converted to a public company in 1968 under the name of Federal Auto Company Berhad. In 1970, it changed its name to Volvo Malaysia Berhad and subsequently assumed its present name in 1975. FAHB is an investment holding company with main investments in its subsidiaries holding car dealerships, namely Volvo, Volkswagen (VW) and Mitsubishi. It also distributes the Heico Sportiv and ABT Sportsline products under its sports tuning division, FAST Sdn. Bhd. Volvo FAHB started as a distributor of Volvo vehicles in Malaysia and remains as a dealer for Volvo passenger vehicles through its subsidiary, Federal Auto Cars Sdn. Bhd. since the year 2000 when Volvo Cars Malaysia Sdn. Bhd. assumed the responsibility as the principal in Malaysia. It has now within its network a total of six branches Kuala Lumpur, Shah Alam (Glenmarie), Penang, Ipoh, Melaka and Johor Bahru and all are 3S (sales, service and spare parts) centres. FAHB is the main dealer for Volvo, holding about 80% market share of total Volvo passenger vehicle sales in Malaysia. Volkswagen FAHB s wholly-owned subsidiary, F.A. Wagen Sdn. Bhd. was appointed a VW dealer in 2009 with dealerships and 3S centres located in Petaling Jaya, Shah Alam (Glenmarie) and Johor Bahru. As of Dec 2010, FAHB s market share of total VW sales in Malaysia was 27%. Mitsubishi FAHB s wholly-owned subsidiary, F.A. Automobiles (Ipoh) Sdn. Bhd. (FAAI) was appointed a Mitsubishi dealer in 2007 for the state of Perak. In 2009, FAAI extended its network to include Petaling Jaya. FAHB holds approximately 7% of the total Mitsubishi sales in Malaysia. FAST Both distributorships for Heico Sportiv and ABT Sportsline in Malaysia were obtained in 2010. These additional sports tuning brands provides an opportunity for FAHB to serve customers who wish to customise their cars to 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. OUR NETWORK Federal Auto Cars Volvo outlets F.A Wagen Volkswagen outlets F.A. Automobiles (Ipoh) Mitsubishi outlets Teoh Teong Ghee Aftersales Manager, Joined in 1974 Federal Auto is driven by passionate people I come to accept as my family. Angie Ng Wai Mun Receptionist, Joined in 1972 It is a company that cares for its employees. Total vehicle sales unit FAHB Vehicle sales chart 1,124 970 1,176 2,423 1,869 2,301 1,950 1,552 Jeffrey Moey Kum Chiew Sales Consultant, Joined in 1962 648 2,026 1966 1970 1975 1980 1985 1990 1995 2000 2005 2010 Year ANNUAL REPORT 2010 07
Daihatsu (Malaysia) Sdn Bhd 30 Years at the Forefr ont Daihatsu (Malaysia) Sdn. Bhd. (DMSB) was incorporated in 1980 and holds the distributorship of Daihatsu vehicles in Malaysia. With the formation of the Second National Car company, Perusahaan Otomobil Kedua Sdn. Bhd. (Perodua) in 1993, a joint venture between Malaysian partners and Daihatsu Motor Company Ltd, Japan, DMSB was appointed an authorised dealer for Perodua vehicles a year later. DMSB is also a 5% shareholder of Perodua. Since then, DMSB concentrates on the distribution of commercial vehicles and DMM Sales Sdn. Bhd. (DMMS), a whollyowned subsidiary, on the retailing of Perodua vehicles. In the year 2010, DMSB was appointed a dealer by Hino Motors (Malaysia) Sdn. Bhd. to market the full range of Hino commercial vehicles in Malaysia. DMSB DMSB s Daihatsu commercial vehicle range comprises the Gran Max series and the Delta series. The Daihatsu Delta series has dominated the light truck market (trucks with Gross Vehicle Weight (GVW) up to 4,000kg for the V58 and GVW up to 7,000kg for the V116) with a leading average of approximately 34%-39% market share. In 2009, DMSB introduced the Gran Max pick-ups and in 2010 launched the Gran Max panel van models. With a Hino dealership in hand, DMSB is now also marketing the Hino range of commercial products. DMSB has in total nine branches (Shah Alam, Serdang, Kepong, Puchong, Butterworth, 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. DMMS DMMS is the largest independent Perodua dealer, holding approximately 10% of the total Perodua sales in Malaysia. DMMS has in total seventeen branches (Shah Alam, Sungai Besi, Sungai Buloh, Salak Tinggi, Sri Permaisuri, Petaling Jaya, Kota Kinabalu, Kuching, Butterworth, Ipoh, Melaka, Batu Pahat, Johor Bahru, Mid Valley, Selayang, Ampang and Sri Kembangan). 08 MBM RESOURCES BERHAD
OUR NETWORK DMSB DMSB sales branches DMSB service branches Dealers Long Service Staff Speaks about DMSB I have gained a lot of experience and opportunities at DMSB. Hazimah binti Mohd Sidik Section Manager, Joined in 1980 Total vehicle sales unit DMSB Group Vehicle sales chart 7,135 1983 4,246 1986 7,182 1989 8,015 1992 18,549 6,489 14,484 17,361 DMMS DMMS sales branches DMMS service branches 17,944 20,813 1995 1998 2001 2004 2007 2010 Year The Company provides training to help improve my skills and I have had the opportunity to visit Japan and Indonesia for technical product training. I like the conducive working environment. Norazien binti Ramli Section Manager, Joined in 1980 Rosalie bin Ab. Karim Section Manager, 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 Oriental Metal industries (M) Sdn Bhd (OMI) started as a SME vendor that commenced operations in 1985 with the assistance of Central Motor Wheel Company Ltd., a subsidiary of Toyota Motor Corporation. Today, OMI is fully run by competent locals as a Large Scale Industry (LSI) vendor that serves about 85% of the Malaysian Automotive Industry. In 1996, OMI implemented a full manufacturing facility for steel wheel and at the same time, an opportunity was given for it to venture into wheel assembly module business. In 2005, our sequential delivery strategy for module business did well despite keen market competition. Introduction of modern automated production facilities coupled with Good Management Practice (GMP) and Toyota Production Systems in both steel wheel and wheel assembly module operations was key for achieving good quality, cost and delivery performance. We have also equipped ourselves with TS-16949, ISO14001 and OHSAS18001 which are Quality Management Systems required by our customers covering manufacturing, environment and safety. Human resource development programmes include training, job enhancement and job rotation were helpful in meeting staff career development expectations and retention of skills and know-how within the company. In 2010, backed by recognition from valued Original Equipment (OE) customers, OMI won the following awards and nominations: Best Kaizen Projects award, 1st runner up for Quality Control Circles (QCC) activities, Top 5 Best Vendor award, Excellence Delivery Vendor Award, Excellence Quality Vendor nominee and Excellence Performance Vendor (LSI) nominee. As a responsible corporation, OMI contributes back to society yearly in the form of providing internship for university students, conducting safety talks and practical workshops for boyshomes, Gotong-royong activities and donations for the needy and disaster relief funds. Through our vision of being the preferred regional Tier-1 Comprehensive Wheel Module Supplier and driven by our core values: Integrity, Excellence, 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 No. 1-6, The Boulevard Mid Valley City Lingkaran Syed Putra 59200 Kuala Lumpur, Malaysia T (603) 2287 6803 F (603) 2287 6805 W www.mbmr.com.my Company Secretaries Puan Shahrizat bt Othman (MAICSA 0764744) Puan Zaharah bt Ibrahim (MAICSA 7012004) Principal Bankers HSBC Bank (Malaysia) Bhd Citibank Berhad Hong Leong Bank Berhad CIMB Bank Berhad STOCK EXCHANGE LISTING Main Market Bursa Malaysia Securities Berhad Stock Code : 5983 Registered Office Suite C-5-4, Wisma Goshen, Plaza Pantai, Jalan Pantai Baharu 59200 Kuala Lumpur, Malaysia T (603) 2283 4007 F (603) 2287 7006 SHARE REGISTRAR AAJ Registration Services Sdn Bhd Suite C-5-4, Wisma Goshen Plaza Pantai, Jalan Pantai Baharu 59200 Kuala Lumpur, Malaysia T (603) 2283 4007 F (603) 2287 7006 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 RM1.53 bil RM MILLION NET ASSETS PER SHARE RM4.2 RM NET CASH RM144.1 mil RM MILLION 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 PROFIT BEFORE TAX RM172.4 mil RM MILLION EARNINGS PER SHARE 58.6 sen SEN OPERATING CASH FLOW PER SHARE -5.4 sen 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 / Hino Trucks DMMS Perodua FAHB Volvo / 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 RM 3.00 2.50 2.00 1.50 1.00 0.50 0.00 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 Year 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 Percentage (%) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010 Year ANNUAL REPORT 2010 17
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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) FY2010 FY2009 % RM mil RM mil change Revenue 67 60 +12 Profit Before Tax 17 14 +21 Wheel deliveries ( 000) 988 882 +12 Tyres assembled ( 000) 2,335 1,968 +19 OMI supplies steel wheels to all major automotive companies in Malaysia. The buoyant vehicle sales recorded in 2010 translated into strong wheel deliveries. The reorganisation of the tyre assembly lines in Shah Alam at the end of 2009 under the Toyota Production System project and the full year production of the tyre module plant in Serendah played a major role in contributing to the significant increase in volumes and efficiency gains for 2010. Summit Vehicles Body Works Sdn Bhd (SVBW) SVBW s losses narrowed substantially as further consolidation of its business were carried out. Volumes increased in 2010, but were insufficient to cover its costs as competition remains intense. A review of the types of bodies it offers to its customers were undertaken to focus on more specialised products. Production processes were also reviewed to improve on productivity and efficiency. 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) Perodua retained its market leadership for the fifth consecutive year, driven by sales of its three core models, Alza, Myvi and the Viva. Sales by registration rose by 13% to 188,600, a record achievement and total market share was stable at 31.2%. During the year Perodua added to its lineup the Myvi LE and Viva Elite Exclusive Edition variants. For the third consecutive year in 2010 the Perodua Viva won the Best Passenger Car Value for Money award from Frost & Sullivan. Perodua also participated in the Kuala Lumpur International Motorshow where it featured the Bezza, the next generation prototype model inspired entirely by Malaysian designers. Perodua contributes significantly to the Malaysian economy and the automotive industry. It employs directly over 10,000 employees, and this figure increases to 56,000 when combined with dealers and vendors. It also sources parts from local vendors of an approximately RM4 billion in value in 2010. A total of about RM3 billion has been invested in the plant and models development and the plant rated capacity is currently 250,000 units per annum. Significant milestones have been achieved together with the assistance from Perodua s Japanese partner, Daihatsu Motor Company, in lifting its engineering and manufacturing capabilities. Hino Motors (Malaysia) Sdn Bhd (HMMSB) HMMSB made major progress in 2010. Its total sales by registration reached an all time high of 4,590 units (+52% from 2009 sales of 3,014), securing it the No.1 position for the Commercial Vehicle (trucks and buses) category. It has gained market share in all segments with an overall market share of 27.8% compared with 19.9% in 2009. Hino has been able to fill the gaps in the market with its wide product range. It has embarked on extensive strengthening of the sales and service network support through major dealer development programmes. 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 prices have dampened the immediate market outlook. The earthquake in Japan has also impacted on the supply chain to the automotive industry, extent of which is still being assessed. So although we believe that MBMR is well positioned for its growth strategy, the external events are causing us to be more cautious. Nevertheless in 2011, the major investment in the Hino dealership undertaken by DMSB will be in full swing. The biggest of which will be the RM6 million 3S centre in Shah Alam. Under FAHB, the new Volkswagen Glenmarie 3S centre is expected to be fully completed. The main Volvo branch in Kuala Lumpur where FAHB s current headquarters is located (Lot 15) will be demolished in May to make way for the redevelopment of the property which will eventually house Volvo s showroom and a 26 storey office block, consisting of MBMR and FAHB s new headquarters. 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 26 MBM RESOURCES BERHAD
ANNUAL REPORT 2010 27