CAHYA MATA SARAWAK ANNUAL REPORT 2016

www.cmsb .com.my Section 03 P E R F O RMAN C E 2 0 1 6 Cahya Mata Sarawak Berhad 16 FINANCIAL PERFORMANCE As a result of the dedicated efforts of our people, CMS turned in a satisfactory performance for the financial year ended 31 December 2016. The Group registered a total revenue of RM1.55 billion in FY 2016, a 13% decline over revenue of RM1.79 billion in FY 2015. The main contributors to the Group’s revenue were the Construction Materials & Trading Division (contributing 34% of Group revenue), Cement Division (34% of Group revenue) and Construction & Road Maintenance Division (23% of Group revenue). Together, these three Divisions contributed 92% of the Group’s total revenue in FY 2016 with the remainder coming mostly from our Property Development Division which contributed 7% of the Group’s revenue. While the Group only turned in a profit before tax (PBT) of RM65.67 million in the first half of 2016 (1H2016), we recorded a strong recovery in profits during the second half of 2016 (2H2016) to turn in a PBT of RM236.47million. For the full financial year, the Group posted a PBT of RM302.14 million for FY2016, a 22% drop in comparison to FY 2015’s record PBT of RM388.60 million. The main contributors to the Group’s PBT were the Construction Materials & Trading Division and Cement Division (both contributing 35% of PBT each) followed by contributions from the Construction & Road Maintenance Division (contributing 31% of PBT). These three Divisions made a combined contribution of 101% to the Group’s PBT (FY 2015: 89%), while the remainder came primarily from the Property Development Division which contributed 8% of the Group’s PBT. On top of this, hedging currency losses, commissioning issues and restructured loans, all had an impact on our bottom line. I am pleased to say that despite the year’s challenges, our core Business Divisions showed their mettle and continued to deliver stable earnings. Your Company achieved several keymilestones in FY2016. The year saw our Cement Division launch East Malaysia’s first Integrated Cement Plant with the combining of our new grinding plant with our existing and adjoining clinker plant in Mambong to meet the growing demand for cement in the State. The Group’s success in securing contracts for both a works package and for the supply of construction materials for the Pan Borneo Highway too is set to be a game changer for the Group. Our associate, SACOFA Sdn Bhd, which is a growth driver for the Group, made significant inroads in the area of communications infrastructure with the signing of an exclusive rights agreement with U Mobile to construct, own and manage communications infrastructure in Sarawak. SACOFA’s involvement in the SEA Cable Exchange-1 (SeaX-1) project, a high-speed, large capacity undersea fibre optic cable that will connect Malaysia to Singapore and Indonesia, also augurs well for us. Our resilient performance to date underscores the fact that our robust business model, prudent and professional management approach, as well as our unrelenting focus on delivering long-term sustainable growth, all continue to work together for the Group’s good. I applaud the resilience of our management and employees who under the guidance of our Board of Directors (Board), proved their competence and rose to address the year’s challenges head on. All this aptly reflects the growing maturity of the Company and the depth of our management. DEAR SHAREHOLDERS, THE YEAR 2016 (FY 2016) WAS A YEAR IN WHICH THE GROUP’S FUNDAMENTAL STRENGTHS WERE SORELY TESTED EVEN AS A VOLLEY OF MACROECONOMIC FACTORS AFFECTED OUR PERFORMANCE. CMS HAD TO CONTEND WITH THE CHALLENGING MARKET AND OPERATIONAL CONDITIONS THAT INCLUDED LOW COMMODITY SELLING PRICES, HIGHER RAW MATERIALS’ COSTS IN THE CEMENT DIVISION RESULTING FROM A STRONGER US DOLLAR, PLUS LISTLESS PRIVATE AND PUBLIC SECTOR DEMAND DUE TO BANK LENDING RESTRAINTS AND THE LACK OF ANY NEW BIG PROJECTS. MANAGEMENT DISCUSSION AND ANALYSIS