Annual Report 2013 Reaching out to you

Transcription

1 Annual Report 2013 Reaching out to you

2 Contents Company Profile Corporate Information Notice of Annual General Meeting & Statement Accompanying Notice of Annual General Meeting Directors Profile Group Financial Highlights Chairman s Statement Group Managing Director s Review Corporate Social Responsibility Corporate Governance, Risk Management and Internal Control Board Audit & Risk Management Committee Report Financial Statements Other Information Form of Proxy

3 Company Profile Southern Steel Berhad ( SSB ) is a public listed company and its shares are traded on the Main Market of Bursa Malaysia Securities Berhad. SSB is principally involved in the manufacturing, sale and trading in billets, steel bars and wire rods whilst the principal activities of the Group consist of the manufacturing, sale and trading in steel products, wire mesh, prestressed concrete wire products and steel pipes, and investment holding. 2 SOUTHERN STEEL BERHAD (5283-X)

4 Corporate Information DIRECTORS YBhg Datuk Kwek Leng San (Chairman) YBhg Dato Dr Tan Tat Wai (Group Managing Director) Mr Chow Chong Long (Deputy Group Managing Director) YM Raja Dato Seri Abdul Aziz bin Raja Salim Mr Tang Hong Cheong Mr Ang Kong Hua Mr Seow Yoo Lin Dr Kwa Lay Keng AUDITORS KPMG Chartered Accountants Level 18, Hunza Tower 163E Jalan Kelawei Penang Tel : Fax : REGISTRAR AGRITEUM Share Registration Services Sdn Bhd 2nd Floor, Wisma Penang Garden 42, Jalan Sultan Ahmad Shah Penang Tel : Fax : COMPANY SECRETARIES Ms Joanne Leong Wei Yin Ms Lee Wui Kien REGISTERED OFFICE Level 9, Wisma Hong Leong 18 Jalan Perak Kuala Lumpur Tel : Fax : COUNTRY OF INCORPORATION / DOMICILE A public limited liability company, incorporated and domiciled in Malaysia 3 ANNUAL REPORT 2013

5 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Fifty-first Annual General Meeting of Southern Steel Berhad (the Company ) will be held at the Training Room B, Level 1, Southern Steel Berhad, 2723 Lorong Perusahaan 12, Prai Industrial Estate, Prai, Penang on Tuesday, 22 October 2013 at a.m. in order: 1. To lay before the meeting the audited financial statements together with the reports of the Directors and Auditors thereon for the financial year ended 30 June To approve the payment of Director fees of RM238, for the financial year ended 30 June 2013 (2012: RM319,071.04) to be divided amongst the Directors in such manner as the Directors may determine. (Resolution 1) 3. To re-elect the following retiring Directors: (a) YBhg Datuk Kwek Leng San (Resolution 2) (b) Mr Chow Chong Long (Resolution 3) (c) Dr Kwa Lay Keng. (Resolution 4) 4. To pass the following motion as an Ordinary Resolution: THAT YM Raja Dato Seri Abdul Aziz bin Raja Salim, a Director who retires in compliance with Section 129 of the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting. (Resolution 5) 5. To re-appoint Messrs KPMG as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 6) SPECIAL BUSINESS As special business, to consider and, if thought fit, pass the following motions: 6. Ordinary Resolution - Authority To Directors To Issue Shares THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby empowered to issue shares in the Company, at any time and from time to time, and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being and that the Directors be and are also empowered to obtain approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company. (Resolution 7) 7. Ordinary Resolution - Proposed Shareholders Mandate On Recurrent Related Party Transactions Of A Revenue Or Trading Nature With Hong Leong Company (Malaysia) Berhad ( HLCM ) And Persons Connected With HLCM THAT approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature referred to in Section 2.3(A) of Part A of the Circular to Shareholders dated 30 September 2013 with HLCM and persons connected with HLCM ( Hong Leong Group ) provided that: (a) such transactions are undertaken in the ordinary course of business, on commercial terms which are not more favourable to the Hong Leong Group than those generally available to and/or from the public, where applicable, and are not, in the Company s opinion, detrimental to the minority shareholders; and (b) such approval, unless revoked or varied by the Company in a general meeting, shall continue in force until the conclusion of the next Annual General Meeting of the Company; AND THAT the Directors of the Company be and are hereby authorised to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution. (Resolution 8) 4 SOUTHERN STEEL BERHAD (5283-X)

6 Notice of Annual General Meeting 8. Ordinary Resolution - Proposed Shareholders Mandate On Recurrent Related Party Transactions Of A Revenue Or Trading Nature With Su Hock Company Sdn Bhd ( Su Hock ) And Its Subsidiary THAT approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature referred to in Section 2.3(B) of Part A of the Circular to Shareholders dated 30 September 2013 with Su Hock and its subsidiary ( Su Hock Group ) provided that: (a) such transactions are undertaken in the ordinary course of business, on commercial terms which are not more favourable to the Su Hock Group than those generally available to and/or from the public, where applicable, and are not, in the Company s opinion, detrimental to the minority shareholders; and (b) such approval, unless revoked or varied by the Company in a general meeting, shall continue in force until the conclusion of the next Annual General Meeting of the Company; AND THAT the Directors of the Company be and are hereby authorised to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution. (Resolution 9) 9. Ordinary Resolution - Proposed Shareholders Mandate On Recurrent Related Party Transactions Of A Revenue Or Trading Nature With Hong Bee Hardware Company, Sdn Berhad ( Hong Bee Hardware ) And Hong Bee Engineering Sdn Bhd ( Hong Bee Engineering ) THAT approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature referred to in Section 2.3(B) of Part A of the Circular to Shareholders dated 30 September 2013 with Hong Bee Hardware and Hong Bee Engineering provided that: (a) such transactions are undertaken in the ordinary course of business, on commercial terms which are not more favourable to Hong Bee Hardware and Hong Bee Engineering than those generally available to and/or from the public, where applicable, and are not, in the Company s opinion, detrimental to the minority shareholders; and (b) such approval, unless revoked or varied by the Company in a general meeting, shall continue in force until the conclusion of the next Annual General Meeting of the Company; AND THAT the Directors of the Company be and are hereby authorised to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution. (Resolution 10) 10. Ordinary Resolution - Proposed Shareholders Mandate On Recurrent Related Party Transactions Of A Revenue Or Trading Nature With Cheah Hong Inn Sdn Bhd ( Cheah Hong Inn ) THAT approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature referred to in Section 2.3(B) of Part A of the Circular to Shareholders dated 30 September 2013 with Cheah Hong Inn provided that: (a) such transactions are undertaken in the ordinary course of business, on commercial terms which are not more favourable to Cheah Hong Inn than those generally available to and/or from the public, where applicable, and are not, in the Company s opinion, detrimental to the minority shareholders; and (b) such approval, unless revoked or varied by the Company in a general meeting, shall continue in force until the conclusion of the next Annual General Meeting of the Company; AND THAT the Directors of the Company be and are hereby authorised to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution. (Resolution 11) 5 ANNUAL REPORT 2013

7 Notice of Annual General Meeting 11. Ordinary Resolution - Proposed Shareholders Mandate On Recurrent Related Party Transactions Of A Revenue Or Trading Nature With Kim Company Sdn Bhd ( Kim Co ) THAT approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature referred to in Section 2.3(B) of Part A of the Circular to Shareholders dated 30 September 2013 with Kim Co provided that: (a) such transactions are undertaken in the ordinary course of business, on commercial terms which are not more favourable to Kim Co than those generally available to and/or from the public, where applicable, and are not, in the Company s opinion, detrimental to the minority shareholders; and (b) such approval, unless revoked or varied by the Company in a general meeting, shall continue in force until the conclusion of the next Annual General Meeting of the Company; AND THAT the Directors of the Company be and are hereby authorised to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution. (Resolution 12) 12. Ordinary Resolution - Proposed Shareholders Mandate On Recurrent Related Party Transactions Of A Revenue Or Trading Nature With Bekaert Southern Wire Pte Ltd ( BSWPL ) And Its Subsidiaries THAT approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature referred to in Section 2.3(B) of Part A of the Circular to Shareholders dated 30 September 2013 with BSWPL and its subsidiaries ( BSWPL Group ) provided that: (a) such transactions are undertaken in the ordinary course of business, on commercial terms which are not more favourable to BSWPL Group than those generally available to and/or from the public, where applicable, and are not, in the Company s opinion, detrimental to the minority shareholders; and (b) such approval, unless revoked or varied by the Company in a general meeting, shall continue in force until the conclusion of the next Annual General Meeting of the Company; AND THAT the Directors of the Company be and are hereby authorised to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution. (Resolution 13) 13. Ordinary Resolution - Proposed Shareholders Mandate On Recurrent Related Party Transactions Of A Revenue Or Trading Nature With Steel Industries (Sabah) Sdn Bhd ( SIS ) THAT approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature referred to in Section 2.3(B) of Part A of the Circular to Shareholders dated 30 September 2013 with SIS provided that: (a) such transactions are undertaken in the ordinary course of business, on commercial terms which are not more favourable to SIS than those generally available to and/or from the public, where applicable, and are not, in the Company s opinion, detrimental to the minority shareholders; and (b) such approval, unless revoked or varied by the Company in a general meeting, shall continue in force until the conclusion of the next Annual General Meeting of the Company; AND THAT the Directors of the Company be and are hereby authorised to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution. (Resolution 14) 6 SOUTHERN STEEL BERHAD (5283-X)

8 Notice of Annual General Meeting 14. Ordinary Resolution - Proposed Termination Of The Existing Executive Share Option Scheme THAT, subject to the passing of Resolution 16 below, approval be and is hereby given for the Company to terminate the existing executive share option scheme of the Company which was established on 8 October 2008 ( Proposed Termination ); AND THAT the Directors of the Company be and are hereby authorised to give effect to the Proposed Termination with full power to assent to any condition, modification, variation and/or amendment in any manner as may be required by the relevant authorities and to do all such acts and things as they may consider necessary or expedient in relation to the Proposed Termination. (Resolution 15) 15. Ordinary Resolution - Proposed Establishment Of An Executive Share Scheme Of Up To 10% Of The Issued And Paid-up Ordinary Share Capital (Excluding Treasury Shares) Of The Company THAT, subject to the passing of Resolution 15 above and the requisite approvals being obtained, the Directors of the Company be and are hereby authorised: (a) to establish and administer an executive share scheme ( Scheme ), which comprises an executive share option scheme and an executive share grant scheme, for the benefit of eligible executives and/or Directors of the Company and its subsidiaries ( Eligible Executives ) under which options to subscribe for/purchase ordinary shares of RM1.00 each (unless otherwise adjusted) in the Company ( Shares ) and/or grants of Shares without any consideration payable by the Eligible Executives will be offered to them in accordance with the provisions of the bye-laws referred to in Part B of the Circular to Shareholders dated 30 September 2013 ( Bye-Laws ); (b) from time to time to issue and allot such number of new Shares ( New Shares ) and/or to transfer existing Shares ( Transferred Shares ) to Eligible Executives upon exercise of the options and/or vesting of Shares pursuant to grants under the Scheme, provided that the aggregate number of Shares comprised in any options and/or grants (whether in exercised and/or unexercised options, outstanding and/or completed grants and unexpired offers pending acceptances) under all executive share schemes established by the Company which are still subsisting does not exceed 10% of the total issued and paid-up ordinary share capital (excluding treasury shares) of the Company at any point in time during the existence of the Scheme and that the New Shares shall, upon issuance and allotment, rank pari passu in all respects with the existing issued and paid-up ordinary share capital of the Company, except that the New Shares will not rank for any dividend, right, entitlement or distribution ( Rights ) in respect of which the record date precedes the allotment date of the New Shares; and for Transferred Shares, such shares shall be transferred together with all Rights in respect of which the record date is on or after the transfer date; and such New Shares and Transferred Shares will be subject to all the provisions of the Articles of Association of the Company relating to transfer, transmission and otherwise; (c) to make the necessary applications to Bursa Malaysia Securities Berhad and to take whatever necessary actions at the appropriate time or times for permission to deal in and for listing of and quotation for the New Shares which may from time to time be issued and allotted pursuant to the Scheme; and (d) to modify and/or amend the Scheme from time to time provided that such modification and/ or amendment is effected in accordance with the provisions of the Bye-Laws, to assent to any condition, modification, variation and/or amendment that may be required by the relevant authorities, and to do all such acts and enter into all such transactions, arrangements, agreements or undertakings, impose such terms and conditions or delegate such part of their powers as may be necessary or expedient in order to give full effect to the Scheme. (Resolution 16) 7 ANNUAL REPORT 2013

9 Notice of Annual General Meeting 16. Ordinary Resolution - Proposed Allocation Of Options And Grants To YBhg Dato Dr Tan Tat Wai THAT, subject to the passing of Resolutions 15 and 16 above, authority be and is hereby given to the Directors of the Company, from time to time, to offer to YBhg Dato Dr Tan Tat Wai, the Group Managing Director of the Company, options to subscribe for/purchase such number of ordinary shares of RM1.00 each (unless otherwise adjusted) in the Company ( Shares ) and/or grants comprising such number of Shares under the executive share scheme as they shall deem fit PROVIDED THAT not more than 10% of the Maximum Aggregate, the Maximum Aggregate being defined in the Bye-Laws as an amount equivalent to 10% of the issued and paid-up ordinary share capital (excluding treasury shares) of the Company at any one time, are allotted to him if he, either singly or collectively through persons connected with him, holds 20% or more of the issued and paid-up ordinary share capital (excluding treasury shares) of the Company subject always to such terms and conditions and/or any adjustment which may be made in accordance with the provisions of the Bye-Laws. (Resolution 17) 17. Ordinary Resolution - Proposed Allocation Of Options And Grants To Mr Chow Chong Long THAT, subject to the passing of Resolutions 15 and 16 above, authority be and is hereby given to the Directors of the Company, from time to time, to offer to Mr Chow Chong Long, the Deputy Group Managing Director of the Company, options to subscribe for/purchase such number of ordinary shares of RM1.00 each (unless otherwise adjusted) in the Company ( Shares ) and/or grants comprising such number of Shares under the executive share scheme as they shall deem fit PROVIDED THAT not more than 10% of the Maximum Aggregate, the Maximum Aggregate being defined in the Bye-Laws as an amount equivalent to 10% of the issued and paid-up ordinary share capital (excluding treasury shares) of the Company at any one time, are allotted to him if he, either singly or collectively through persons connected with him, holds 20% or more of the issued and paid-up ordinary share capital (excluding treasury shares) of the Company subject always to such terms and conditions and/or any adjustment which may be made in accordance with the provisions of the Bye-Laws. (Resolution 18) 18. Special Resolution - Proposed Amendments To The Articles Of Association Of The Company THAT the deletions, alterations, modifications, variations and additions to the Articles of Association of the Company as set out in Appendix VI of the Circular to Shareholders dated 30 September 2013 be and are hereby approved. (Resolution 19) 19. To consider any other business of which due notice shall have been given. By Order of the Board Joanne Leong Wei Yin Lee Wui Kien Company Secretaries Kuala Lumpur 30 September 2013 Notes 1. For the purpose of determining members eligibility to attend this meeting, only members whose names appear in the Record of Depositors as at 14 October 2013 shall be entitled to attend this meeting or appoint proxy(ies) to attend and vote on their behalf. 2. Save for a member who is an exempt authorised nominee, a member entitled to attend and vote at this meeting is entitled to appoint not more than two proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. A member who is an authorised nominee may appoint not more than two proxies in respect of each securities account it holds. A member who is an exempt authorised nominee for multiple beneficial owners in one securities account ( Omnibus Account ) may appoint any number of proxies in respect of the Omnibus Account. 3. Where two or more proxies are appointed, the proportions of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies, failing which the appointments shall be invalid. 4. The Form of Proxy must be deposited at the Registered Office of the Company at Level 9, Wisma Hong Leong, 18 Jalan Perak, Kuala Lumpur not less than 48 hours before the time of the meeting or adjourned meeting. 8 SOUTHERN STEEL BERHAD (5283-X)

10 Notice of Annual General Meeting Explanatory Notes 1. Resolution 7 - Authority To Directors To Issue Shares The proposed ordinary resolution, if passed, will give a renewed mandate to the Directors of the Company to issue ordinary shares of the Company from time to time provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being ( Renewed Mandate ). The Renewed Mandate, unless revoked or varied at a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company. As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the last Annual General Meeting held on 29 October 2012 and which will lapse at the conclusion of the Fifty-first Annual General Meeting. The Renewed Mandate will enable the Directors to take swift action in case of, inter alia, a need for corporate exercises or in the event business opportunities or other circumstances arise which involve the issue of new shares, and to avoid delay and cost in convening general meetings to approve such issue of shares. 2. Resolutions 8 to 14 - Proposed Shareholders Mandate On Recurrent Related Party Transactions Of A Revenue Or Trading Nature ( Proposed Shareholders Mandate ) The proposed ordinary resolutions, if passed, will empower the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature which are necessary for the day-to-day operations of the SSB Group, subject to the transactions being in the ordinary course of business and on terms which are not more favourable to the related parties than those generally available to and/or from the public and are not, in the Company s opinion, detrimental to the minority shareholders of the Company. 3. Executive Share Scheme a. Resolution 15 - Proposed Termination Of The Existing Executive Share Option Scheme ( Existing ESOS ) The proposed ordinary resolution, if passed, will empower the Company to terminate the Existing ESOS prior to its expiry ( Proposed Termination ). b. Resolution 16 - Proposed Establishment Of An Executive Share Scheme ( Proposed ESS ) The proposed ordinary resolution, if passed, will allow the Company to establish the Proposed ESS which comprises an executive share option scheme and an executive share grant scheme of up to 10% of the issued and paid-up ordinary share capital (excluding treasury shares) of the Company for the benefit of eligible executives and/or Directors of the Company and its subsidiaries ( Eligible Executives ) and to provide an opportunity for Eligible Executives to participate in the equity of the Company, and from time to time, to issue and allot such number of new ordinary shares of RM1.00 each (unless otherwise adjusted) in the Company ( Shares ) and/or to transfer existing Shares to Eligible Executives pursuant to their exercises of the options and/or vesting of the Shares under the Proposed ESS. c. Resolution 17 - Proposed Allocation Of Options And Grants To YBhg Dato Dr Tan Tat Wai ( Proposed Allocation To YBhg Dato Dr Tan ) The proposed ordinary resolution, if passed, will allow the Directors of the Company to offer and to grant to YBhg Dato Dr Tan Tat Wai, the Group Managing Director of the Company, options to subscribe for/purchase such number of Shares and/or grants comprising such number Shares under the Proposed ESS. d. Resolution 18 - Proposed Allocation Of Options And Grants To Mr Chow Chong Long ( Proposed Allocation To Mr CL Chow ) The proposed ordinary resolution, if passed, will allow the Directors of the Company to offer and to grant to Mr Chow Chong Long, the Deputy Group Managing Director of the Company, options to subscribe for/purchase such number of Shares and/or grants comprising such number Shares under the Proposed ESS. e. Resolution 19 - Proposed Amendments To The Articles of Association Of The Company ( Proposed Amendments ) The proposed special resolution, if passed, will enable the Company to align the Articles of Association of the Company with the amendments to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and to enhance administrative efficiency of the Company. 9 ANNUAL REPORT 2013

11 Notice of Annual General Meeting 4. Re-appointment Of YM Raja Dato Seri Abdul Aziz Bin Raja Salim ( YM Raja Aziz ) The Board has undertaken an annual assessment on the independence of all its Independent Directors including YM Raja Aziz who is seeking for re-appointment pursuant to Section 129 of the Companies Act, 1965 at the forthcoming Fifty-first Annual General Meeting. The annual assessment has been disclosed in the Statement on Corporate Governance, Risk Management and Internal Control of the Company's Annual Report. Detailed information on the Proposed Shareholders Mandate, Proposed Termination, Proposed ESS, Proposed Allocation To YBhg Dato Dr Tan, Proposed Allocation To Mr CL Chow and Proposed Amendments are set out in the Circular to Shareholders dated 30 September 2013 which is despatched together with the Company s Annual Report. Statement Accompanying Notice of Annual General Meeting (Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad) Details of individuals who are standing for election as Directors No individual is seeking election as a Director at the Fifty-first Annual General Meeting of the Company. 10 SOUTHERN STEEL BERHAD (5283-X)

12 Directors Profile YBhg Datuk Kwek Leng San Chairman; Non-Executive / Non-Independent Datuk Kwek Leng San, aged 58, a Singaporean, graduated from University of London with a Bachelor of Science (Engineering) degree. He also holds a Master of Science (Finance) degree from City University London. He has extensive business experience in various business sectors, including financial services and manufacturing. Datuk Kwek was appointed to the Board of Directors of Southern Steel Berhad ("SSB") on 27 October 1992 and assumed the position of Chairman on 18 June He is also the Chairman of the Remuneration Committee and a member of the Nominating Committee of SSB. He is the Chairman of Malaysian Pacific Industries Berhad, Narra Industries Berhad and Hong Leong Industries Berhad, and a Director of Hong Leong Bank Berhad, companies listed on the Main Market of Bursa Malaysia Securities Berhad. He is also a Director of Hong Leong Company (Malaysia) Berhad and Hong Leong Foundation. YBhg Dato Dr Tan Tat Wai Group Managing Director / Non-Independent YBhg Dato Dr Tan Tat Wai, aged 66, a Malaysian, holds a Bachelor of Science degree in Electrical Engineering and Economics from the Massachusetts Institute of Technology, a Master of Economics degree from University of Wisconsin (Madison) and a PhD in Economics from Harvard University. He started his career with Bank Negara Malaysia in 1978 undertaking research in economic policies and subsequently as consultant to Bank Negara, World Bank and the United Nations University for several years. He served as the Secretary and a member on the Council of Malaysian Invisible Trade set up to formulate policies to reduce Malaysia s deficit in service trade. He was a member of the Government appointed Malaysian Business Council, APEC Business Advisory Council, the Penang Industrial Council, the Industrial Co-ordination Council (ICC) and the National Committee on Business Competitiveness (NCBC) set up by the Ministry of International Trade and Industry. Currently, he is a Council Member for Wawasan Open University. YBhg Dato Dr Tan is the Group Managing Director of SSB, a post he has held since December On 18 May 1984, YBhg Dato Dr Tan was appointed as the Chief Executive Officer as well as a Director of SSB. He was appointed as the Managing Director of SSB in September YBhg Dato Dr Tan is also a member of the Remuneration Committee of SSB. He is a Director of Shangri-La Hotels (Malaysia) Berhad and Malayan Banking Berhad, companies listed on the Main Market of Bursa Malaysia Securities Berhad, and a Director of Maybank Trustees Berhad. He is also a Director of NSL Ltd, a public company listed on the Singapore Stock Exchange. Chow Chong Long Deputy Group Managing Director / Non-Independent Mr Chow Chong Long, aged 61, a Malaysian, graduated from University of Canterbury, New Zealand with a Bachelor of Engineering (Electrical) degree. He has over 27 years of working experience in management of engineering and project works, and general management. He joined the SSB Group in 1990 as Deputy General Manager. He was appointed as Chief Operating Officer in 2001, a position he held until On 1 January 2010, he assumed the position of Group Chief Operating Officer until 2012 when he became the Deputy Group Managing Director of the Company. Mr Chow joined the Board of SSB as Deputy Group Managing Director on 19 November He does not sit on any committee of SSB. 11 ANNUAL REPORT 2013

13 Directors Profile YM Raja Dato Seri Abdul Aziz bin Raja Salim Non-Executive Director / Independent YM Raja Dato Seri Abdul Aziz bin Raja Salim, aged 74, a Malaysian, is an Honorary Fellow of the Malaysian Institute of Taxation, Fellow of the Chartered Association of Certified Accountants, United Kingdom, Fellow of the Chartered Institute Of Management Accountants ( CIMA ), United Kingdom and a Chartered Accountant (Malaysia). He served as Director- General of Inland Revenue Malaysia from 1980 to 1990 and Accountant-General Malaysia from 1990 to YM Raja Dato Seri Abdul Aziz was the President of CIMA, Malaysia from 1976 to 1993 and a Council Member of CIMA, United Kingdom from 1990 to He was awarded the CIMA Gold Medal in recognition of his outstanding service to the accounting profession. YM Raja Dato Seri Abdul Aziz was appointed to the Board of Directors of SSB on 18 June He is the Chairman of the Board Audit & Risk Management Committee of SSB. He is a Director of Hong Leong Industries Berhad, Gamuda Berhad, K & N Kenanga Holdings Berhad and Panasonic Manufacturing Malaysia Berhad, companies listed on the Main Market of Bursa Malaysia Securities Berhad. He is also a Director of Kenanga Investment Bank Berhad, Kenanga Islamic Investors Berhad and Kenanga Investors Berhad. Tang Hong Cheong Non-Executive Director / Non-Independent Mr Tang Hong Cheong, aged 58, a Malaysian, is a member of the Malaysian Institute of Accountants. He has over 30 years of working experience in finance, treasury and risk management, operation and strategic planning in which he has held various positions including senior management positions in various companies within the Hong Leong Group. He is currently holding the position of President/Finance Director of HL Management Co Sdn Bhd. Mr Tang was appointed to the Board of SSB on 15 January He is a member of the Board Audit & Risk Management Committee of SSB. Ang Kong Hua Non-Executive Director / Independent Mr Ang Kong Hua, aged 69, a Singaporean, graduated from University of Hull, United Kingdom with a Bachelor of Science (Economics) Upper II Honours degree in Following stints at the Economic Development Board from 1966 to 1967 and DBS Bank from 1968 to 1974, Mr Ang spent 28 years as the Chief Executive Officer ( CEO ) of NSL Ltd ( NSL ). He retired as CEO from NSL in 2003 and as Executive Director in Mr Ang currently serves as the Chairman of Sembcorp Industries Ltd, an industrial conglomerate listed on the Singapore Stock Exchange. He is also the Chairman of Global Logistic Properties Limited which is also listed on the Singapore Stock Exchange. Mr Ang is a Director of GIC Private Limited. Mr Ang was appointed to the Board of SSB on 3 May He is the Chairman of the Nominating Committee and a member of the Board Audit & Risk Management Committee and Remuneration Committee of SSB. 12 SOUTHERN STEEL BERHAD (5283-X)

14 Directors Profile Seow Yoo Lin Non-Executive Director / Independent Mr Seow Yoo Lin, aged 57, a Malaysian, qualified as a Certified Public Accountant in He holds a Master in Business Administration from the International Management Centre, Buckingham, United Kingdom. Mr Seow joined KPMG Malaysia in In 1983, he was seconded to the United States to gain overseas experience. He retumed in 1985 and was admitted as Partner in He was the Managing Partner of KPMG Malaysia from 2007 to 2010 and retired from the firm in During his tenure with KPMG, he has been the Audit Partner on a wide range of companies including public listed companies and multinationals in banking and finance, manufacturing, trading and services industries. Mr Seow was a member of the Executive Committee of the Malaysian Institute of Certified Public Accountants from 2009 to 2011 and was a Council member of the Malaysian Institute of Accountants from 2007 to Mr Seow is a Director of Narra Industries Berhad, a company listed on the Main Market of Bursa Malaysia Securities Berhad. Mr Seow was appointed to the Board of Directors of SSB on 31 January He is a member of the Board Audit & Risk Management Committee and Nominating Committee of SSB. Dr Kwa Lay Keng Non-Executive Director / Independent Dr Kwa Lay Keng, aged 54, a Malaysian, graduated from University of Leeds, Leeds, United Kingdom with a Bachelor of Science in Mechanical Engineering (Honours) degree and a PhD. Dr Kwa currently serves as the Chairman of Raffles Marina Holdings Ltd. She is a Director of the Management Board of Energy Studies Institute in Singapore and a member of the SIM University Education Fund Committee. She is a member of the Corporate R & D Advisory Panel of NSL Ltd ( NSL ) and the Technology Advisory Panel of Sembcorp Industries Ltd. Dr Kwa started her career as a Senior Officer with the Singapore Economic Development Board in She joined NSL in 1988 and was appointed the Group Chief Operating Officer of NSL in July She was appointed the Chief Executive Officer of NSL in January 2011 and retired in the same year. Dr Kwa was appointed to the Board of SSB on 4 February She does not sit on any committee of SSB. Notes: 1 Family Relationship with Director and/or Major Shareholder YBhg Datuk Kwek Leng San is a brother of YBhg Tan Sri Quek Leng Chan and Mr Quek Leng Chye, both major shareholders of SSB. Save as disclosed herein, none of the Directors has any family relationship with any other Director and/or major shareholder of SSB. 2 Conflict of Interest None of the Directors has any conflict of interest with SSB. 3 Conviction of Offences None of the Directors has been convicted of any offences within the past 10 years. 4 Attendance of Directors Details of Board meeting attendance of each Director are disclosed in the Statement on Corporate Governance, Risk Management and Internal Control in the Annual Report. 13 ANNUAL REPORT 2013

15 Group Financial Highlights (RM million) Financial year ended Financial year ended Financial period from to Financial year ended Financial year ended Revenue 3,222 2,022 4,430 3,295 2,823 Profit Before Tax Profit Attributable to Owners of the Company Net earnings per share (sen) Net dividend per share (sen) Total Equity Total assets 1,926 1,752 2,297 1,941 2,200 Capital expenditure REVENUE (RM million) PROFIT BEFORE TAX (RM million) 4, , ,500 2,800 2,100 1, , TOTAL EQUITY (RM million) 120 1,000 2, , , , ,430 Financial Year ,000 3, , , TOTAL ASSETS (RM million) 1,752 2, Financial Year 1, , Financial Year Financial Year 14 SOUTHERN STEEL BERHAD (5283-X)

16 Chairman s Statement On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30 June 2013 ( FY 2013 ). BUSINESS ENVIRONMENT FY 2013 continued to be a challenging and difficult year for the steel industry. Severe dumping of steel products, especially by Chinese steel mills into the region reduced demand and margins for local steel products. Although various trade actions were initiated, the investigations and rulings took time to conclude and execute. Thus, despite good demand generated by the implementation of major projects, local steel mills performances were under pressure throughout the year. The second half environment improved when some of the trade measures started to be implemented. During FY 2013, revenue and volume decreased slightly as the portion attributable to former subsidiaries, Bekaert Southern Wire Sdn Bhd ( BSW, formerly known as Southern Wire Industries (Malaysia) Sdn Bhd) and Bekaert Southern Speciality Wire Sdn Bhd ( BSSW, formerly known as Southern Speciality Wire Sdn Bhd), were excluded as they became associates following a merger into the enlarged JV group of Bekaert Southern Wire Pte Ltd. Despite this, various strategic moves taken by the Group in this difficult period enabled the Group to make a higher profit than in the previous year. FINANCIAL REVIEW For the FY 2013, the Group s revenue dropped by 5.1% to RM2.8 billion but profit attributable to shareholders increased to RM42.2 million from RM6.2 million in the previous financial year. Stronger cash flow enabled the Group to pay a total dividend of 7 sen per share. PROSPECTS While there is uncertainty hovering over possible impact of US Federal Reserve Board easing of QE III, the ASEAN region is still expected to remain a growth area for the next few years. As such, with implementation of various infrastructure projects gaining momentum, domestic demand for steel products is expected to pick up. 15 ANNUAL REPORT 2013

17 Chairman s Statement The Group s new RM850 million hot rolled coil project is expected to be commissioned in the 2 nd half of the current financial year. This project is using an innovative new concept and is the first of its kind in the world. Once fully commercialised, the Group s current initiatives to develop more industrial grade wire rod and higher added value and service for the bar and mesh segments will further set the Group on a firmer long-term profit path in the ensuing years. I am also pleased that the Group s loss making pipe and pre-stressed concrete wire and strand operations under Southern Pipe Industry (Malaysia) Sdn Bhd and Southern PC Steel Sdn Bhd have both turnaround. Barring any unforeseen circumstances, the Board expects the Group to perform better in the new financial year ending 30 June DIVIDENDS The Company has declared and paid a first and second interim tax exempt dividends totaling 7 sen per share during the FY The Board does not recommend any final dividend for the FY APPRECIATION I would like to express my sincere appreciation to each and every employee of the Group for their contributions, commitments and dedication to the Group. Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group. Last but not least, on behalf of the Board, I wish to welcome on board our newly appointed independent director, Dr Kwa Lay Keng. Dr Kwa brings with her a great depth and breadth of experience, and I look forward to her contribution. DATUK KWEK LENG SAN Chairman 16 SOUTHERN STEEL BERHAD (5283-X)

18 Group Managing Director s Review The financial year ( FY ) ended 30 June 2013 ( FY 2013 ) was in fact more challenging with the increased influx of Chinese imports, a fair bit of which came in through misrepresentation. As a result, despite better local steel demand with the implementation of major Economic Transformation Programme projects, local supplies of steel products shrunk, reducing capacity utilisation significantly. This coupled with the compressed margins from subsidised exports from China put tremendous pressure on local steel companies. Nevertheless, overall sales volume for Southern Steel Group dropped only marginally as compared to the previous year. The compressed margins resulted in a small loss for the Group in the first half year. However, as some of the trade measures filed by local steel companies began to come into force, improved margins were possible in parts of the second half year. The Group was able to make a modest profit to end the year with a profit before taxation ( profit ) of RM44.4 million as compared to profit of RM15.3 million in the previous financial year. OPERATION REVIEW In order to ensure better focus and service to customers, the Company s operations were re-organised into three major divisions, each headed by a Chief Operating Officer: Wire Rod, Reinforcing Steel Business ( RSB ) and Hot Rolled Coil (under a new subsidiary Southern HRC Sdn Bhd SHRC ). SHRC s construction of a state-of-theart HRC mill is progressing well and we expect to initiate testing in early SOUTHERN STEEL BERHAD ( SSB ) As in the previous year, selling prices of steel products were volatile for most part of the FY. Although margins were generally better due to softening of raw material prices, volume was slightly lower mainly due to lower export volume. In the local market, SSB was still able to uphold its market position in the bar market and made a profit. Unfortunately, in the wire rod market, the Company lost ground in the midst of stiff competition from imports and local mills. The decrease in volume and margin compression led to losses in the rod business. At the Company level, while the combined bar and rod businesses was profitable, recognising a non cash loss of RM57.3 million from the deemed disposal of subsidiaries in the steel wire business, namely Bekaert Southern Wire Sdn Bhd (formerly known as Southern Wire Industries (Malaysia) Sdn Bhd) and Bekaert Southern Speciality Wire Sdn Bhd (formerly known as Southern Speciality Wire Sdn Bhd) to NV Bekaert SA as part of a Joint Venture deal, swung the Company into a RM13.0 million loss before taxation. 17 ANNUAL REPORT 2013

19 Group Managing Director s Review SOUTHERN STEEL MESH SDN BHD ( SOUTHERN MESH ) & SOUTHERN PC STEEL SDN BHD ("SPC") Under the new organisation structure, standard length and cut & bent steel bar business, together with Southern Mesh and SPC are all grouped under the umbrella of RSB. With this strategy of complete reinforcing steel supply, added-value service through cut and bent of bars and mesh, and closer supply bases to the customers, the performance of RSB was satisfactory in all its three components. Southern Mesh recorded a strong profit of RM16.8 million as compared to a small loss of RM0.8 million in the previous year. Southern Mesh s network of satellite operations in various parts of the country has enabled us to serve the customer better with more responsive service and faster delivery that were critical to the construction business. We have now production bases in various major towns in the Klang Valley, Penang, Johor and Pahang, and sale offices in Ipoh, Kota Bahru, Malacca and Bintulu. Our pre-stressed concrete business has also turned around and made a modest profit of RM1.5 million this year. SPC also turned in a small profit with better margin as a result of cost down initiatives. SOUTHERN PIPE INDUSTRY (MALAYSIA) SDN BHD ( SOUTHERN PIPE ) The strategy to downsize and focus on niche products has proven right in the highly competitive market of steel welded pipes, even though the market was threatened by cheaper imported pipes from neighbouring countries. Our expansion into export market also brought in positive contribution. As such, Southern Pipe turned around to make a profit of RM7.2 million, as compared to a loss of RM9.2 million in the previous year. Nevertheless, all the pipe industry players in the country still see the uneven duty structure of imported pipes versus hot rolled coil as detrimental to the local pipe industry. OUTLOOK The construction industry should continue to pick up momentum. We expect to further improve our performance in the FY ending June th ANNIVERSARY 2013 marks the 50 th anniversary of Southern Steel. I would like to take this special occasion to convey our utmost gratitude to the encouragement and strong support that all stakeholders have rendered us over the years: shareholders, employees, customers, suppliers, bankers and Government officers. Some of these relationships have spanned the full 50 years of our history without interruption. Some have come at critical periods of our development, while others sustained us through three very major crises at operation start-up in 1965, and But thanks to all of you, we have emerged stronger after each major crisis. We hope this partnership can continue for many more years to come for us to prosper together. Thank you very much! DATO DR TAN TAT WAI Group Managing Director 18 SOUTHERN STEEL BERHAD (5283-X)

20 Corporate Social Responsibility The Group believes that serving our communities is not only integral to running a business successfully----it is also part of our individual responsibilities as citizens of the world. We continue to support communities in ways that enhance the company s reputation with employees, customers, business partners and other stakeholders. Guided by our company value on Social Responsibility, we are committed to meeting the highest standards of corporate citizenship. The Group aims to ensure the health and safety of our employees and all who are affected by our business operations. We are also committed to protecting the environment. We are committed as a company and as individuals to comply with the laws, respect the cultures, and to have a positive impact on the lives of the people in the communities where we conduct our businesses. The Group sees Corporate Social Responsibility ("CSR") beyond its core mission. The Group contributes significantly to the socioeconomic development of the nation by promoting education, providing aid to marginalised communities, supporting and developing local talent, preserving the environment and practicing sustainable supply-chain in its operations. Below is our commitment to each of the focus areas under the Group s CSR: Workplace The Group is committed to upholding the human rights of our employees and treating them with dignity and respect. To maintain our market leadership in delivering innovative solutions, the Group consistently strives to create an inspiring and effective working environment. The Group also aims to ensure that the health, safety, and welfare of our employees are well taken care of all the time. To honour this, we will always fully accept our responsibility towards employees who may be affected by our activities. Various safety programmes and campaigns have been organised throughout the years. For the workers, we have Save Our Life Programme where employees submit their request to the management to rectify certain health/safety hazard identified by them, and the yearly Safety Week activities. For those outside contractors coming to our factory to work, we have the compulsory Contractors Safety Briefing. The Group identifies and hires local talent through the Hong Leong Group Graduate Development Programme, a programme of hiring local fresh graduates to undergo a training programme for 2 years. This programme aims to identify and develop young graduates into engineering talents to support the growth of the Group. It entails classroom training, on-the-job familiarisation, learning assignments as well as mentoring. In the area of training, we have our own in-house Young Engineer and Rising Star (for management training) programmes, and those sponsored by the government such as the Industrial Skills Enhancement Programmes (to help unemployed graduates with technical background), which have successfully trained them to be more gainfully employed in our organisation or elsewhere. We also participate regularly in career fairs and conduct recruitment exercises at campuses, besides giving scholarships to deserving students. 19 ANNUAL REPORT 2013

21 Corporate Social Responsibility Workplace (cont'd) Since its founding, the Group has demonstrated an on-going commitment to people and to fair employment practices. As the Group has grown and expanded, its work force has become more diverse. The Group believes that this diverse work force helps the organisation realise its full potential. We benefit from the creativity and innovation that result from our people who have different experiences, perspectives and cultures working together. This is what drives innovation and high performance at the Group as proven by its track record as well as numerous awards and accolades that the Group receives over the years. We believe that a well-managed, diverse work force expands the Group s base of knowledge, skills and cross-cultural understanding, which in turn, enables us to understand, relate and respond to our diverse and changing customers, and connecting them to the power of technology. Our overall commitment is reflected in our diversity and inclusion philosophy. Consistent with our Best Work Environment practices, we maintain a work environment free from discrimination, one where employees are treated with dignity, honour and respect. We also comply with all applicable international and local laws pertaining to non-discrimination and equal opportunity. This is evidenced by the diverse ethnic and social backgrounds of members, staff and clients. All job applicants, employees, members, and clients receive equal treatment regardless of race, gender, religion, ethnic or national origins. Environment Our objective is to achieve high standards in environmental management and preservation, by examining our business and operations, and taking active steps to reduce environmental impact wherever possible. These include: minimising any adverse impact our activities may have on the environment; minimising the consumption of resources wherever possible; considering the environment when procuring goods and services; promoting waste reduction, re-use and recovery; and complying with legislation and wherever possible exceed legislative requirements. We are passionate about the environment and committed to reducing the carbon footprint of our growing business. We promote a culture of environmental awareness and engagement amongst our staff and our supply base. Our environmental initiatives include smart and careful consumption of resources, use of water, emissions to air, waste generation, energy use, and procurement processes. We are passionately committed to minimising our environmental impact and encouraging greater sustainability throughout our business. For example, the Group itself is a huge scrap recycling plant, by virtue of its steel making plants are using steel scrap as its main raw material. We assess the impact of its activities through well-established systems including Environmental Management System (ISO14001) and Occupational Health & Safety Management System (OHSAS-18001). We aspire to improve further in reduction of specific energy consumption and water pollutant discharged. As we are energy intensive, we have responded to the government s initiatives under the umbrella of Suruhanjaya Tenaga Malaysia. Under this initiative, we have assigned to the Energy Manager the full responsibility to look at various areas of energy conservation through the use of alternative energy source or new technology. Our commitment to the environment has guided us to continually strive to reduce our already minimised waste in all our manufacturing plants and offer more environmentally friendly and sustainable operations. Guided by our environmental principles, we consider the environment throughout all aspects of our business, from our supply chain, to delivery. 20 SOUTHERN STEEL BERHAD (5283-X)

22 Corporate Social Responsibility Marketplace For many years now, the Group has had in place internally generated best practices to ensure the economic sustainability of all its companies. Some of these best practices are: An established Financial Management Discipline intended to drive excellence in financial management with the objective of preserving and enhancing the quality of the business as an on-going concern. An established Enterprise Risk Management structure to ensure that a systematic process and delegation of responsibility are clearly set out to guide management. A strict code of business conduct and ethics which the Group abides by in all types of transactions and interactions. Financial reports which contain disclosures that are timely, true and fair. In choosing its directors, the Group seeks individuals of high integrity, have shareholder orientation and a genuine interest in their respective company s businesses. They are tasked with the responsibility of exercising their business judgment to act in what they reasonably believe to be in the best interest of the company and the shareholders they represent. The strict practice of responsible selling and marketing of products and services, in a global market that is increasingly becoming more aggressive and competitive. The Group has a firm commitment to the highest standards of business ethics and integrity throughout our company. These standards are reflected in our associated policies, and wherever these polices require a higher standard than local practice or applicable laws, we adhere to the higher standards set in Group policies. As individual, we stand guided by our values, which is more commonly known as 4 I s within the Group, i.e. Introspection, Integrity, Innovation and Industry. Community The Group conducts most of its philanthropic activities through Hong Leong Foundation, the charitable arm of the Hong Leong Group. Incorporated in 1992, Hong Leong Foundation is a corporate foundation driven by the interest and passion of the Hong Leong Group Malaysia. It is funded by contributions from the Hong Leong Group Malaysia companies and is thus effectively its charitable arm where most of the Group s philanthropic activities are conducted. It has an annual budget of RM5 million and has the following programmes in place to address its primary concern----poverty in Malaysia: Addressing Basic Needs - donations to provide adequate food and clean water, shelter, and clothing Towards Self Sufficiency: o Tertiary Scholarship Programme o After School Care Programme Building Infrastructure: o School Building Fund o Community Building Fund 21 ANNUAL REPORT 2013