HALF YEAR REPORT August 2017

Transcription

1 21 August 2017

2 CONTENTS UIE in brief 3 Key Figures Business Performance 4 UIE s Strategic Investments DIRECTORS REPORT Financial Review - Business Reporting 6-9 UP MSAB Risk Factors 17 Outlook 18 Consolidated Key Figures FINANCIAL SECTION Consolidated Financial Statements Notes to Consolidated Financial Statements Statement by the Board of Directors and the Management 30 Company Information 31 Abbreviations & Definitions 32 CONTENTS 2 2

3 UIE IN BRIEF United International Enterprises Limited ( UIE ) is a holding company which primarily invests in the agro-industrial sector. UIE exercises long-term and active ownership via involvement at board level and via close dialogue with the management about operational and strategic issues. UIE is committed to invest in companies that are operated and developed in a sustainable as well as socially responsible way. UIE was founded in 1982 and is listed on NASDAQ Copenhagen. The investment portfolio mainly consists of the following two companies: UNITED PLANTATIONS BERHAD 47.3 % UIE 1.7 % MELKER SCHÖRLING AB 3 UIE IN BRIEF

4 UIE KEY FIGURES BUSINESS PERFORMANCE 1 NET PROFIT IN H USD MILLION UIE s net profit in the first half of 2017 amounted to USD 30.9 million compared to USD 10.6 million in the first half of When comparing the two periods under review, it should be noted that the fair value change of the investment in MSAB increased by USD 9.4 million in the first half of 2017, whereas it decreased by USD 5.5 million in the first half of Share of net profit in UP Fair value change and dividend, MSAB Fair value change Greenbridge Admin. costs Other items Net Profit UIE s share of UP s net profit was USD 20.2 million, which is an in- crease of 32% compared to the first half of EARNINGS PER SHARE H USD 197% ON H CASH AS AT 30 JUNE USD MILLION 3% ON YEAR-END 2016 SHARE PRICE AS AT 30 JUNE ,360 DKK 10% ON YEAR-END 2016 NET PROFIT H USD MILLION SHAREHOLDERS EQUITY USD MILLION MARKET VALUE OF UIE S ASSETS AS AT 30 JUNE 2017 USD MILLION , Holding Discount 19% H Market value of UIE s Assets UIE s market value UP MSAB/Greenbridge Cash & Other 1) See page 6 for further explanation of Business Reporting and Accounting Policies. UIE IN BRIEF 4

5 UIE S STRATEGIC INVESTMENTS FINANCIAL PERFORMANCE UNITED PLANTATIONS BERHAD Profit before tax in the first half of 2017 was MYR million (USD 56.1 million); an increase of 44% compared to the first half of In the plantation division, profit before tax increased by 53% due to a higher production of CPO and PK as well as improved selling prices. Net profit in the first half of 2017 was MYR million (USD 43.0 million); an increase of 42% compared to the first half of UP PROFIT BEFORE TAX BY SEGMENT % MYR million H H Change Plantation % Refining % Other (1.5) (1.8) N/A Total profit before tax % MELKER SCHÖRLING AB Net profit in the first half of 2017 was SEK 9,787 million (USD 1,109 million), which relates to dividends received and a change in the fair value of the Company s portfolio of investments. Net asset value per share increased from SEK 492 at the end of 2016 to SEK 570 on 30 June 2017, representing an increase of 16%. MSAB NET ASSET VALUE 30 June 31 Dec. % SEK million Change Net Asset Value of Investments 65,520 56,909 15% Net Cash 2,424 1,677 45% Total Net Asset Value 67,944 58,586 16% 5 UIE IN BRIEF

6 FINANCIAL REVIEW - BUSINESS REPORTING U IE s net profit amounted to USD 30.9 million in the first half of almost triple the net profit reported in the first half of due to strong performance in UP and an increase in the fair value of MSAB, primarily due to the strengthening of the SEK. BUSINESS PERFORMANCE REVIEW UIE s operating income amounted to USD 30.4 million in the first half of 2017, which is 156% higher than the operating income reported in the first half of The improvement is primarily due to the fair value change of the investment in MSAB increasing by USD 9.4 million in the first half of 2017 compared to a loss of USD 5.5 million in the corresponding period in Furthermore, UIE s share of the net profit of UP increased by USD 4.9 million in the first half of 2017 relative to the result in the corresponding period in UIE s net profit in the first half of 2017 amounted to USD 30.9 million, which is 191% above the USD 10.6 million reported in the first half of INCOME IN UIE USD million Share of UP s net profit Change in fair value of Greenbridge H H Change in fair value of MSAB Other BUSINESS REPORTING - MEASUREMENT OF PERFORMANCE According to IFRS, UIE is deemed to have de facto control of UP (even though it holds less than 50% of UP s voting rights). Hence, UP s result is now consolidated in UIE s consolidated financial statements. However, as UIE is a non-operating holding company, the Board of UIE is of the view that a more appropriate measurement of the performance of the investment in UP is to equity account (monitoring UIE s share of the profit). Accordingly, this measurement is used in the internal reporting as well as in the reporting to shareholders, referred to as Business Reporting in the Directors Report. The performance of other investments is measured by changes in their respective fair value. The difference between the Business Reporting in the Directors Report and the consolidated financial statements is described in note 1. Net profit in the Business Reporting is substantially the same as the amount attributable to the owners of the Company in the consolidated financial statements. DIRECTORS REPORT 6

7 BUSINESS PERFORMANCE USD 000 Q Q H Q Q H Share of UP s net profit 8,272 11,964 20,236 6,858 8,498 15,356 Change in fair value of MSAB 2,664 6,758 9,422 (2,775) (2,690) (5,465) Change in fair value of Greenbridge (760) (861) (1,621) 115 1,595 1,710 Dividend income MSAB Other ,570 (378) (66) (444) Total operating income 11,007 19,424 30,431 3,820 8,067 11,887 Administrative expenses (722) (662) (1,384) (405) (652) (1,057) Net interest income Net foreign exchange 1, ,642 1,737 (1,930) (193) Profit before tax 11,820 19,301 31,121 5,226 5,594 10,820 Income tax (28) (166) (194) (15) (161) (176) Profit after tax 11,792 19,135 30,927 5,211 5,433 10,644 UP UP s net profit, measured in MYR (UP s financial currency), increased by 42% in the first half of However, measured in USD (UIE s functional currency), net profit increased by 32% due to the depreciation of the MYR against the USD. UIE s share of UP s net profit amounted to USD 20.2 million, an increase of USD 4.9 million compared to the first half of MSAB UIE s investment in MSAB is accounted for at fair value with movements being recognised in the Income Statement. On 30 June 2017, MSAB was trading at a discount of 5% compared to its net asset value (as opposed to a premium of 9% on 31 December 2016). In the first half of 2017, the fair value of UIE s investment in MSAB increased by SEK 7.9 million, or 1%, but the fair value, in USD, increased by 8% (USD 9.4 million) due to a strengthening of the SEK against the USD during the first half of UIE received a dividend from MSAB in the second quarter of 2017, amounting to USD 0.8 million less withholding dividend tax of USD 0.1 million. The share price of MSAB increased by 1%, from SEK on 31 December 2016 to SEK on 30 June During the same period, the NASDAQ Stockholm All-Share PI index increased by 8%. MSAB SHARE PRICE DEVELOPMENT SEK MSAB share price Dates of aquisition Reporting date 30 June DIRECTORS REPORT

8 GREENBRIDGE UIE s investment in Greenbridge is accounted for at fair value, with movements being recognised in the Income Statement. During the first half of 2017, the fair value of UIE s investment in Greenbridge decreased by USD 1.6 million compared to an increase of USD 1.7 million in the corresponding period in The fair value change in the first half of 2017 relates mainly to a share price decrease of Greenbridge s investment in NEXT Biometrics Group. OTHER INCOME AND ADMINISTRATION COSTS Approximately USD 18 million representing less than 20% of UIE s cash reserve is invested in a liquid and diversified portfolio of equities, fixed income products as well as in trading of soft commodities. The result of these activities, together with other income, produced a gain of USD 1.6 million in the first half of 2017 (loss of USD 0.4 million in the corresponding period in 2016). In the first half of 2017, general and administrative expenses totalled USD 1.4 million, compared to USD 1.1 million in the first half of FINANCIAL POSITION Shareholders equity increased from USD million on 31 December 2016 to USD million on 30 June The increase comprised net profit of USD 30.9 million and an increase of translation reserves of USD 12.9 million (primarily a positive equity adjustment arising from the conversion of UIE s interests in UP from MYR into USD), offset by dividends and share buy-backs of USD 17.4 million and USD 4.2 million, respectively. ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY AS AT 30 JUNE 2017 USD million Assets Liabilities and shareholders equity UP MSAB Greenbridge Cash Other assets Shareholders equity Other liabilities The development in the value of UIE s investment in UP, MSAB and Greenbridge is shown in the table below. The total value of the investments recognised in the financial position increased by USD 21.5 million during the period under review. The increase primarily derived from UIE s share of UP s result (offset by dividend received from UP), a strengthening of the MYR against the USD during the first half of 2017 and positive fair value adjustments relating to MSAB, offset by a negative fair value adjustment of the investment in Greenbridge. Total net cash reserves in UIE increased from USD 96.4 million on 31 December 2016 to USD 99.3 million on 30 June The increase was mainly due to the net effect of a tax refund of USD 9.5 million received from the Malaysian Tax Authorities in February 2017 and USD 19.2 million in dividend income from UP, less dividends to UIE shareholders and share buy-backs, which amounted to USD 21.6 million. VALUE OF UIE S INVESTMENTS UP MSAB Greenbridge Total USD 000 Equity method Fair value Fair value Balance at 1 January , ,774 9, ,287 Change in fair value - 9,422 (1,621) 7,801 Investments during the period UIE share of results 20, ,236 Dividend received (19,212) - - (19,212) Equity adjustments on foreign currency translation 12, ,419 Total on 30 June , ,196 7, ,750 DIRECTORS REPORT 8

9 CASH FLOW IN H USD million Cash 1 Jan Net cash used in operations Dividend from UP Dividend from MSAB, net of tax Dividends paid Purchase of treasury shares Invested in Greenbridge One-off tax settlement Other (net) Cash 30 June 2017 SHARE BUY-BACK PROGRAMME In June 2016, UIE initiated a new share buy-back programme with the intention of acquiring up to 5% of its share capital before the end of December 2017, so long as the shares continue to be traded at a significant holding discount. As reported in Company Announcement no , UIE initiated its share buy-back in two parallel programmes; one under the Safe Harbour regulation with a maximum outlay of DKK 100 million and one Block trade programme carried out outside the safe Harbour regulation. The total number of shares acquired under the two programmes may not exceed 5% of the share capital. Further information on the share buy-back programme is contained in Company Announcement no As at 30 June 2017, a total of 97,659 shares, corresponding to 2.75% of the share capital, had been acquired, of which 21,837 shares were acquired during the first half of 2017 for a total consideration of DKK 28.6 million (USD 4.2 million). OVERALL STRATEGY OF UIE UIE s Board is actively searching for operational investment opportunities to broaden the Company s investment portfolio. UIE is a long-term investor focusing on value creation and as follows, the Board will regularly assess potential acquisitions that align with the Company s investment criteria. The emphasis and focus will primarily be on investments within the agro-industrial sector. UIE S INVESTMENT PORTFOLIO There was only one minor change to UIE s investment portfolio in the first half of In March 2017, a third drawdown was made in relation to Greenbridge amounting to SEK 2 million (USD 0.2 million) and related to working capital requirements. UIE s remaining commitment to invest in Greenbridge amounts to SEK million (USD 16.3 million). On 30 June 2017, the investment portfolio accounted for 78% of UIE s total assets (based on Business Reporting) and the remaining assets primarily comprised cash reserves and the short-term investments in a portfolio of equities and fixed income products. On 30 June 2017, UIE owned 98,356,277 shares in UP and 1,968,705 shares in MSAB. 9 DIRECTORS REPORT

10 UP KEY FIGURES NET PROFIT H MYR MILLION CASH AS AT 30 JUNE MYR MILLION SHARE PRICE AS AT 30 JUNE MYR UIE OWNERSHIP 47.3% 42% ON H % ON YEAR-END % ON YEAR-END 2016 UNCHANGED ON YEAR-END 2016 NET PROFIT H MYR MILLION FINANCIAL PERFORMANCE CASH AND SHORT TERM DEPOSITS MYR MILLION SHAREHOLDERS EQUITY MYR MILLION 200 1, H H KEY FIGURES - PRODUCTION IN H CPO PRODUCTION THOUSAND TONNES 23% ON H PK PRODUCTION 21.5 THOUSAND TONNES 22% ON H COCONUT PRODUCTION 39.3 MILLION NUTS 14% ON H DIRECTORS REPORT 10

11 UP SEGMENT UP s net profit increased by 42% in the first half of The significant increase is primarily due to higher CPO and PK production as well as higher sales prices as compared to the corresponding period in BUSINESS PERFORMANCE REVIEW Net profit amounted to MYR million (USD 43.0 million) in the first half of 2017, an increase of 42% compared to the net profit of MYR million (USD 32.5 million) achieved in the first half of However, measured in USD, the net profit did not increase to the same extent (increased by 32% or USD 10.5 million) due to the depreciation of the MYR against the USD compared to the first half of PLANTATION OPERATIONS UP s main activity, its plantation operations, recorded a profit before tax of MYR million, reflecting a significant increase of 53% compared to the MYR million reported in the first half of The increase is due to higher production, lower costs of production per tonne and higher selling prices. operation in H includes a non-recurring gain of MYR 15.2 million related to the disposal of UP s minority stake in AAK s refinery in Mexico. Adjusted for this non-recurring event, profit before tax in the plantation division in H and H were MYR million and MYR million, respectively an increase of 72%. In accordance with its replanting policy, UP will continue to replant large areas of its older and less productive oil palm stands in Malaysia during Cost efficiencies and improved productivity will therefore continue as a vital part of sustaining UP s positive development. BUSINESS REPORTING - UP SEGMENT In the following section, the description of developments within UP is based on figures reported by UP in MYR, UP s functional currency. However, the UP figures in the table below have been converted to USD and are used in the financial reporting for UIE. When comparing the two periods under review, it should be noted that the result from the plantation UP S BUSINESS PERFORMANCE IN H H H in MYR in USD in MYR in USD Revenue 734, , , ,964 Other income 12,088 2,757 48,188 11,835 Operating expenses (512,529) (116,908) (428,375) (105,209) Operating income 234,054 53, ,127 38,590 Net finance income 11,729 2,676 13,983 3,434 Profit before tax 245,783 56, ,110 42,024 Tax (57,318) (13,074) (38,693) (9,503) Net profit 188,465 42, ,417 32, DIRECTORS REPORT

12 CPO PRODUCTION 000 tonnes 22 PK PRODUCTION 000 tonnes 5.00 COCONUT PRODUCTION Million nuts Jan Mar May Jul Sep Nov 2.00 Jan Mar May Jul Sep Nov 4 Jan Mar May Jul Sep Nov PLANTATION OPERATIONS - PRODUCTION UP s profitability is highly dependent on production volumes as well as on the selling prices of CPO and PK. In the first half of 2017, UP s overall production of CPO and PK increased both by 22%. The coconut production decreased by 14% compared to the first half of OWN PRODUCTION H1 H1 Change Tonnes % CPO 101,079 82,526 22% PK 21,532 17,629 22% Coconut (million nuts) (14%) CPO AND PK PRICE DEVELOPMENTS Along with production volumes, UP s profitability is highly dependent on sales prices. In the first half of 2017, UP achieved an average selling price of MYR 2,536 per tonne of CPO, corresponding to an increase of 13%, whilst the average selling price of PK increased by 66% compared to the first half of THE AVERAGE SELLING PRICES OF CPO AND PK MYR H1 H1 Change per tonne % CPO Malaysia 2,486 2,282 9% Indonesia 2,701 2,132 27% Average 2,536 2,245 13% PK Malaysia 3,181 1,854 72% Indonesia 2,162 1,602 35% Average 2,989 1,800 66% AVERAGE SELLING PRICE CPO MYR 3,500 3,000 2,500 2,000 1,500 1,000 AVERAGE SELLING PRICE PK MYR 3,500 3,000 2,500 2,000 1,500 1, H H UP Malaysia UP Indonesia UP Group UP Malaysia UP Indonesia UP Group 500 DIRECTORS REPORT 12

13 Palm oil prices can fluctuate significantly and it is the policy of UP to hedge a proportion of future production revenues to mitigate the impact of spot price volatility. In the first half of 2017, the selling prices achieved for Malaysia were marginally lower than the market prices due to certain CPO quantities having been sold earlier, based on UP s forward sales policy. PRODUCTION COSTS In the first half of 2017, production costs per tonne of CPO and PK decreased by 22% and 4%, respectively, primarily due to higher production volumes. REFINERY OPERATIONS In the first half of 2017, profit before tax at the refinery increased marginally to MYR 35.1 million from MYR 34.5 million reported in the corresponding period of OTHER Current intercompany loans to the Indonesian subsidiary are denominated in Indonesian Rupiah. During the first half of 2017, the MYR strengthened against the Indonesian currency, leading to an unrealised foreign exchange loss of MYR 5.3 million, compared to an unrealised foreign exchange loss of MYR 4.1 million in the first half of FINANCIAL POSITION AND CASH FLOW On 30 June 2017, UP s current assets amounted to MYR 1,138.7 million (31 December 2016: MYR 1,186.3 million), of which cash, cash equivalents and short-term funds amounted to MYR million (31 December 2016: MYR million). Total non-current assets amounted to MYR 1,490.8 million (31 December 2016: MYR 1,455.6 million), of which biological assets and property, plant and equipment amounted to MYR 1,454.6 million (31 December 2016: MYR 1,419.4 million). Total equity increased from MYR 2,367.6 million on 31 December 2016 to MYR 2,375.5 million at the end of June The increase relates mainly to the net profit of MYR million for the period under review offset by dividend payments of MYR million. Positive cash flow from operating activities amounted to MYR million, compared to MYR million in the first half of Negative cash flow from investments, excluding net change in short-term funds, amounted to MYR 89.0 million (first half of 2016: MYR 40.7 million negative). Net change in cash, cash equivalents and short- term funds amounted to MYR 58.5 million positive in the first half of 2017 (first half of 2016: MYR 47.8 million negative). UP S SEGMENTAL INFORMATION FOR THE FIRST HALF OF 2017 Other Elimi- MYR 000 Plantations Refining segments nation Total Segment Revenue External Sales 202, , ,495 Intersegment Sales 192, (192,696) - 395, , (192,696) 734,495 Segment Results Operating profit (EBIT) 204,581 34,820 (5,347) - 234,054 Profit before tax 212,166 35,076 (1,459) - 245, DIRECTORS REPORT

14 MSAB KEY FIGURES NET PROFIT H ,787 SEK MILLION NET ASSET VALUE AS AT 30 JUNE SEK BILLION SHARE PRICE AS AT 30 JUNE SEK NET ASSET VALUE DISCOUNT AS AT 30 JUNE % 16% ON YEAR-END % ON YEAR-END 2016 PREMIUM OF 9% AT YEAR-END 2016 The performance of the UIE s investment in MSAB is measured by changes in fair value. MSAB KEY INVESTMENTS HEXAGON OWNERSHIP 26% ASSA ABLOY OWNERSHIP 4% AAK OWNERSHIP 33% HEXAGON is a leading global supplier of design, measurement and visualisation technologies. The Company s customers can design, measure and position objects as well as process and present data to stay one step ahead of a changing world. ASSA ABLOY is the world s leading lock group and offers a more complete product range for lock and door solutions than any other company on the market, incl. access control, identification technology, entrance automation, hotel security. AAK is one of the world s leading producers of high value-added speciality vegetable oils and fats solutions. These oils and fats solutions are characterised by a high level of technological content and innovation. HEXPOL OWNERSHIP 26% SECURITAS OWNERSHIP 5% LOOMIS OWNERSHIP 1% HEXPOL is a world-leading polymer group with strong global positions in advanced polymer compounds, gaskets for plate heat exchangers and wheels made of plastic and rubber materials for truck and castor wheel applications. SECURITAS is a global knowledge leader in security. They provide a broad range of services of specialised guarding, technology solutions and consulting and investigations that are suited to the individual customer s needs. LOOMIS offers safe and effective comprehensive solutions for the distribution, handling and recycling of cash for banks, retailers and other commercial companies via an international network consisting of almost 400 branch offices in 16 countries. DIRECTORS REPORT 14

15 FINANCIAL HIGHLIGHTS MSAB s net result amounted to a gain of SEK 9,787 million (USD 1,109 million) in the first half of 2017, which relates to the change in the fair value of the company s portfolio of investments and dividends received. The weighted average organic growth in MSAB s portfolio companies was 4% (first half of 2016: 3%). The weighted average growth in operating profit (EBIT) in the portfolio companies was 11% (first half of 2016: 6%). The net asset value is MSAB s most important key indicator since it reflects the value of MSAB s assets, which comprise the underlying share portfolio at fair value and the company s net cash reserves. On 30 June 2017, the market value of MSAB s portfolio amounted to SEK 65,520 million (USD 7,756 million); net cash amounted to SEK 2,424 million (USD 287 million) and therefore the net asset value amounted to SEK 67,944 million (USD 8,042 million) compared to SEK 58,586 million (USD 6,465 million) at the end of Net asset value per share increased from SEK 492 at the end of 2016 to SEK 570 per share on 30 June 2017, representing an increase of 16% (during the same period, the NASDAQ Stockholm All-Share PI index increased by 8%). SHARE OF TOTAL ASSETS ON 30 JUNE % 12% 13% 4% 0% 0% Hexagon AAK HEXPOL ASSA ABLOY Securitas Loomis Other 59% MSAB HOLDINGS AND NET ASSET VALUE 30 June Dec No. of Share Price SEK No. of Share Price SEK shares (SEK) million shares (SEK) million Hexagon 93,679, ,631 93,679, ,549 HEXPOL 89,298, ,189 89,298, ,546 AAK 13,899, ,548 13,899, ,333 ASSA ABLOY 42,812, ,933 42,812, ,257 Securitas 19,734, ,805 19,734, ,832 Loomis 900, , Other Total 65,520 56,909 Net cash 2,424 1,677 Net asset value 67,944 58,586 No. of shares 119,097, ,097,595 Net asset value per share (SEK) DIRECTORS REPORT

16 CHANGE IN NET ASSET VALUE PER MSAB SHARE PER INVESTMENT - H SEK Net asset value 31 Dec Hexagon 6 HEXPOL 6 ASSA ABLOY 0 2 Loomis AAK 0 Securitas Net cash and other holdings Net asset value 30 June 2017 DEVELOPMENT IN NET ASSET VALUE PER SHARE SEK Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q DIRECTORS REPORT 16

17 RISK FACTORS As a holding company, UIE is exposed to various general and specific commercial as well as financial risks. Risk management is an inherent part of the decisionmaking process in UIE, and the Board of Directors is responsible for identifying and controlling risks as well as establishing risk policies. As virtually all UIE s investments are in listed companies (UP and MSAB), the management of these companies is consequently accountable for identifying and controlling their risks. COMMERCIAL RISKS Due to the nature of UIE s business, the Company is indirectly exposed to various commercial risks through its investments in UP and MSAB. The primary commercial risk of UIE is its high level of exposure to the palm oil industry, which, through UP, accounts for approximately 67% of UIE s total consolidated assets of USD 908 million. The following is a brief description of the most significant commercial risks of UIE. UP UP s income is highly dependent on both production volume and commodity prices. Production is influenced by local and global weather patterns, such as El Niño, and is highly dependent on the seasonal and cyclical conditions of the plantation operations as well as the age profile of the oil and coconut palms. UP s production of CPO and PK is generally higher from March to September (peaking around July), then declining from October to February. Commodity prices are determined by the global supply and demand for edible oils and are to some extent correlated to the price of mineral oil. The prices obtainable and the production volumes therefore fluctuate and affect the profits of UP accordingly. Other risk factors include the availability and cost of labour, changes in tax/duty structures and impact of the biodiesel demand on commodity prices. MSAB MSAB is a holding company which primarily invests in the industrial sector. MSAB s current portfolio primarily consists of investments in six publicly listed companies, and MSAB s risks are significantly linked to the risk factors in the respective companies. See MSAB s Annual Report 2016 for further information on MSAB s risk factors. FINANCIAL RISKS In the ordinary course of business, the Group is exposed to a variety of financial risks, which include market risks, credit risks as well as interest rate risks. The Group is primarily exposed to the following market risks: Share price risk which is the risk that the value of the investments will fluctuate due to changes in the share prices Commodity price risk arises from fluctuations in the price of palm and palm kernel oil Foreign currency risks arising from investments and commodity sales in foreign currencies as the value of investments and cash flows fluctuates due to changes in foreign currency rates In relation to credit risk, the primary risk is related to the Group s cash at bank. The Group manages its credit risk by ensuring that deposits are placed with a limited spread of highly rated banks. As the Group has no interest-bearing debt, the interest rate risk arises on the interest earned on cash deposits. See Note 4.6 in UIE s Annual Report 2016 for further information on UIE s financial risk management and exposure. See UP s Annual Report 2016 for further information regarding UP s risk factors. 17 DIRECTORS REPORT

18 OUTLOOK The outlook for UIE remains significantly dependent on the performance of UP, which does not release a formal profit estimate. The contribution from MSAB is a function of movements in its fair value, which mainly reflects the performance of the share price during the relevant period under review, expressed in USD. Given these factors, it is not possible to provide shareholders with any more than a very general outlook statement. The first half of 2017 saw a significant recovery in palm oil production in both Malaysia and Indonesia. This resulted in palm oil prices decreasing by more than 20% during the first half of 2017 (a price of MYR 2,400 per MT for CPO was tested). in Malaysia, UP projects the results for 2017 to be satisfactory. If the current share price of MSAB as well as the SEK/ USD exchange rate were to remain unchanged during the remaining part of 2017, the fair value adjustment recognised in UIE s Income Statement for 2017 would be positive compared to a loss of USD 9 million reported in Based on the above, the Board is of the view that UIE s net profit attributable to equity holders of the Company for 2017 will be higher than the result reported in However, whilst the setback in FFB production arising from the impact of the El Niño experienced in 2015 and the first part of 2016 has come to an end, it is now anticipated that the recovery in overall palm oil production for the full year 2017 may not be as large as initially expected. This has triggered a recent price increase and CPO is currently trading at around MYR 2,675 per MT. The main risk for lower-than-anticipated production is the continued labour shortages, especially in relation to crop harvesting and evacuation. This will undoubtedly have a negative impact on all plantation companies during the forthcoming peak crop expected in the period July to September Global vegetable oil stocks are still historically low and therefore any disruption of global vegetable oil production, including palm oil, would be a bullish factor on prices as the expected stock build would not materialize. Nevertheless, with historically high U.S. soybean plantings that took place in early 2017, and which will be harvested from September onwards, there will most likely be a large recovery in global vegetable oil stocks. Whilst this will be a limiting factor for price increases, the weather across the farming regions of the U.S. will be a significant price driver during the coming quarter and must be a factor closely watched. Based on the above and the prices contracted under UP s forward sales policy, coupled with large areas steadily coming into maturity from the replanted areas DIRECTORS REPORT 18

19 CONSOLIDATED KEY FIGURES Q2 Q2 H1 H1 Full Year USD Revenue 82,211 69, , , ,409 Profit before income tax 40,825 19,538 67,785 38,908 93,162 Net Profit 33,102 15,706 54,455 29,110 82,204 Net profit attributable to owners of the Company 19,447 6,198 31,409 11,946 39,459 Current assets 383, , , , ,201 Cash and bank balances 191, , , , ,094 Short-term funds 82, ,734 82, ,734 93,311 Non-current assets 524, , , , ,756 Total assets 908, , , , ,957 Total liabilities 71,117 70,990 71,117 70,990 74,434 Equity attributable to owners of the Company 532, , , , ,179 Non-controlling interests 304, , , , ,344 Total equity 836, , , , ,523 Earnings per share attributable to owners of the Company (USD) Share price, end of period (USD) Share price, end of period (DKK) 1,360 1,165 1,360 1,165 1,241 Return on equity n/a n/a 6.0% 2.3% 7.8% Solvency ratio 92.2% 92.1% 92.2% 92.1% 91.5% CASH, BANK BALANCES AND SHORT-TERM FUNDS USD million EQUITY ATTRIBUTABLE TO OWNERS VS. NCI USD million 1, June June 2016 FY June June 2016 FY 2016 UIE UP Malaysia Owners of the Company (UIE) Non-controlling Interests (NCI) 19 DIRECTORS REPORT

20 CONTENTS Consolidated Income Statement 21 Consolidated Statement of Comprehensive Income 21 Consolidated Statement of Financial Position 22 Consolidated Statement of Changes in Equity 23 Consolidated Statement of Cash Flows 24 Notes to the Consolidated Financial Statements FINANCIAL STATEMENTS

21 CONSOLIDATED INCOME STATEMENT FOR THE PERIOD ENDED 30 JUNE 2017 Q2 Q2 H1 H1 Full Year USD Revenue 82,211 69, , , ,409 Costs of goods sold (52,813) (52,917) (117,403) (104,846) (219,266) Other income 2,042 4,032 2,757 11,878 8,928 Profit from operations before financial items 31,440 20,131 52,892 38,996 86,071 Changes in fair value of MSAB 6,758 (2,690) 9,422 (5,465) (9,062) Changes in fair value of Greenbridge (861) 1,595 (1,621) 1,710 2,133 Dividend income MSAB Results from investing activities - portfolio investments 711 (109) 1,518 (487) 93 Interest income 1,650 1,814 3,112 3,620 6,998 Interest expense (2) (2) (4) (3) (5) Net foreign exchange gain/(loss) 305 (1,931) 1,642 (193) 6,204 Profit before income tax 40,825 19,538 67,785 38,908 93,162 Income tax (7,723) (3,832) (13,330) (9,798) (20,906) One-off settlement of tax position ,948 Net profit 33,102 15,706 54,455 29,110 82,204 Profits attributable to Owners of the Company 19,447 6,198 31,409 11,946 39,459 Non-controlling interests 13,655 9,508 23,046 17,164 42,745 33,102 15,706 54,455 29,110 82,204 Earnings per share attributable to owners of the Company (USD) OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2017 Q2 Q2 H1 H2 Full Year USD Net profit 33,102 15,706 54,455 29,110 82,204 Items that are or may be reclassified to the Income Statement Equity adjustment on foreign currency translation, net of tax of USD nil 17,176 (16,446) 24,713 42,130 (24,474) Other comprehensive income 17,176 (16,446) 24,713 42,130 (24,474) Total comprehensive income 50,278 (740) 79,168 71,240 57,730 Total comprehensive income attributable to Owners of the Company 27, ,389 33,827 35,706 Non-controlling interests 22,355 (1,309) 35,779 37,413 22,024 50,278 (740) 79,168 71,240 57, FINANCIAL STATEMENTS

22 CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE PERIOD ENDED 30 JUNE June 30 June 31 Dec. USD Assets Current assets: Inventories 40,396 28,917 42,342 Cash and bank balances 191, , ,094 Short-term funds 82, ,734 93,311 Trade and other receivables 50,546 51,037 75,042 Derivatives Portfolio investments 18,420 11,159 11,216 Current tax receivable 32 3,965 1,426 Total current assets 383, , ,201 Non-current assets: Goodwill 7,096 7,096 7,096 Bearer plants 108, , ,212 Biological assets 7,771 6,871 6,301 Property, plant and equipment 258, , ,883 Land use rights 8,415 8,810 8,067 Deferred tax assets - - 2,346 Strategic investments 133, , ,839 Other financial assets Non-current derivatives - 2,747 - Total non-current assets 524, , ,756 Total assets 908, , ,957 Liabilities and shareholders equity Current liabilities: Current tax liability 6,344 2,248 3,640 Trade and other payables 21,808 24,699 27,268 Derivatives 784-3,190 Other current liabilities Total current liabilities 29,116 27,206 34,289 Total non-current liabilities 42,001 43,784 40,145 Total liabilities 71,117 70,990 74,434 Share capital 35,556 35,556 35,556 Treasury shares (17,860) (2,429) (13,646) Other reserves 514, , ,269 Equity attributable to owners of the Company 532, , ,179 Non-controlling interests 304, , ,344 Total equity 836, , ,523 Total liabilities and shareholders equity 908, , , FINANCIAL STATEMENTS

23 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2017 Trans- Non- Share Share Treasury lation Other Retained controlling Total USD 000 capital premium shares Reserves Reserves profits Total interests equity On 1 January ,556 9,159 (13,646) (69,736) - 548, , , ,523 Total comprehensive income for the period Profit for the period ,409 31,409 23,046 54,455 Equity adjustment on foreign currency translation , ,980 12,733 24,713 Total comprehensive income for the year ,980-31,409 43,389 35,779 79,168 Transactions with owners Treasury shares purchased - - (4,214) (4,214) - (4,214) Dividends paid (17,350) (17,350) (21,218) (38,568) Total transactions with owners - - (4,214) - - (17,350) (21,564) (21,218) (42,782) On 30 June ,556 9,159 (17,860) (57,756) - 562, , , ,909 Trans- Non- Share Share Treasury lation Other Retained controlling Total USD 000 capital premium shares Reserves Reserves profits Total interests equity On 1 January ,556 9,159 - (66,081) , , , ,155 Total comprehensive income for the period Profit for the period ,946 11,946 17,164 29,110 Equity adjustment on foreign currency translation ,979 (98) - 21,881 20,249 42,130 Total comprehensive income for the year ,979 (98) 11,946 33,827 37,413 71,240 Transactions with owners Treasury shares purchased - - (2,429) (2,429) - (2,429) Dividends paid (10,749) (10,749) (19,689) (30,438) Total transactions with owners - - (2,429) - - (10,749) (13,178) (19,689) (32,867) On 30 June ,556 9,159 (2,429) (44,102) - 521, , , , FINANCIAL STATEMENTS

24 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE 2017 H1 H1 Full Year USD Cash flows from operating activities Receipts from customers 172, , ,306 Payment to suppliers - - (142,790) Payment of operating expenses (93,561) (84,640) (73,969) Payment of taxes 1,512 (10,544) (19,388) Other receipts 1, ,021 Net cash generated from operating activities 82,381 33,352 49,180 Cash flows from investing activities Proceeds from sale of property, plant and equipment ,119 Interest income 2,916 4,237 7,787 Proceeds from sale of shares available for sale - - 5,075 Investment in Greenbridge (219) - (3,158) Dividend income Portfolio investments, net (5,593) (487) (1,455) Pre-cropping expenditure incurred (4,379) (4,772) (10,657) Purchase of property, plant and equipment (18,214) (9,169) (19,932) Land use rights payments (212) (158) (362) Net change in deposits with a tenure more than 3 months (3,316) 44,527 44,307 Net change in short-term funds 14,746 (30,299) (15,872) Net cash (used in)/generated from investing activities (13,458) 4,596 8,714 Cash flows from financing activities Interest paid (4) (3) (5) Dividends paid (38,726) (30,438) (38,716) Purchase of treasury shares (4,214) (2,429) (13,646) Movement in associated company balances - - (1) Net cash used in financing activities (42,944) (32,870) (52,368) Net change in cash and cash equivalents 25,979 5,078 5,526 Cash and cash equivalents at the beginning of year 122, , ,709 Foreign exchange adjustment 3, (997) Cash and cash equivalents at end of period 151, , ,238 Cash and cash equivalents 151, , ,238 Bank overdrafts included in cash and cash equivalents (4) (3) (24) 151, , ,262 Deposits with a tenure more than 3 months 39,797 39,161 34,832 Total cash and bank balances 191, , ,094 Short-term funds 82, ,734 93,311 Cash and short-term funds 273, , , FINANCIAL STATEMENTS

25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SEGMENTATION The segment reporting includes the following two segments: UIE UP UIE: a holding company which primarily invests in companies in the agro-industrial sector. UIE exercises longterm and active ownership via involvement at board level and via close dialogue with the management about operational and strategic issues. Its current portfolio is built around the world of vegetable oils and is primarily involved in the first and second phases of the vegetable oil value chain. DIFFERENCE BETWEEN BUSINESS REPORTING AND CONSOLIDATED FINANCIAL STATEMENTS Both of the segments exclude the fair value adjustments of UP s assets, related to the retrospective acquisition accounting of UP in 2003, the adoption of amended IAS 41, which are recognised in UIE s consolidated financial statements, and changes due to translation of UP figures from Malaysian GAAP to IFRS. In the UIE segment, the investment in UP is measured by UIE s share of UP s net profit (equity accounting), and the other investments are measured by changes in the fair value of the investments. UP: a company incorporated in Malaysia and its shares are publicly traded on Bursa Malaysia. Its primary business activity is cultivation and processing of oil palms and coconuts on plantations in Malaysia as well as palm oil cultivation and processing in Indonesia and the manufacturing and processing of oils and fats in Malaysia. In the UP segment, the results, assets and liabilities are based on translation of UP s reported figures from Malaysian Ringgit to USD. 25 FINANCIAL STATEMENTS

26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SECTION 1: OPERATING ACTIVITIES CONTINUED Adjustments Elimi- UIE Con- USD 000 UIE UP Total to IFRS nations solidated INCOME STATEMENT FOR THE PERIOD ENDED 30 JUNE 2017 Revenue - 167, , ,538 Other income 52 2,757 2,809 - (52) 2,757 Changes in fair value of MSAB 9,422-9, ,422 Changes in fair value of Greenbridge (1,621) - (1,621) - - (1,621) Dividend income MSAB Results from investing activities - portfolio 1,518-1, ,518 Share of results of equity-accounted investments 20,236-20,236 - (20,236) - Total operating income 30, , ,726 - (20,288) 180,438 Operating expenses (1,384) (116,908) (118,292) (117,403) Interest income 434 2,678 3, ,112 Interest expense (2) (2) (4) - - (4) Foreign exchange gain/(loss) 1,642-1, ,642 Profit before tax 31,121 56,063 87, (20,236) 67,785 Income tax (194) (13,074) (13,268) (62) - (13,330) Net profit 30,927 42,989 73, (20,236) 54,455 Profits attributable to Owners of the Company 30,927 42,751 73, (42,636) 31,409 Non-controlling interests ,400 23,046 STATEMENT OF FINANCIAL POSITION FOR THE PERIOD ENDED 30 JUNE 2017 Assets Cash & short-terms funds 99, , , ,961 Other current assets 18,705 90, , ,394 Strategic investments 426, ,750 - (292,891) 133,859 Other non-current assets , ,462 36,254 7, ,812 Total assets 544, ,656 1,157,567 36,254 (285,795) 908,026 Liabilities and shareholders equity Total liabilities 2,346 59,166 61,512 9,605-71,117 Shareholders equity: Equity attributable to owners 542, ,045 1,094,610 12,615 (575,221) 532,004 Non-controlling interest - 1,445 1,445 14, , ,905 Total shareholders equity 542, ,490 1,096,055 26,649 (285,795) 836,909 Total liabilities and shareholders equity 544, ,656 1,157,567 36,254 (285,795) 908,026 STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE 2017 Operating activities 8,435 73,946 82, ,381 Investing activities 14,613 (8,859) 5,754 - (19,212) (13,458) Financing activities (21,566) (40,590) (62,156) - 19,212 (42,944) FINANCIAL STATEMENTS 26

27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SECTION 1: OPERATING ACTIVITIES CONTINUED Adjustments Elimi- UIE Con- USD 000 UIE UP Total to IFRS nations solidated INCOME STATEMENT FOR THE PERIOD ENDED 30 JUNE 2016 Revenue - 131, , ,964 Other income 43 11,835 11, ,878 Changes in fair value of MSAB (5,465) - (5,465) - - (5,465) Changes in fair value of Greenbridge 1,710-1, ,710 Dividend income MSAB Results from investing activities - portfolio (487) - (487) - - (487) Share of results of equity-accounted investments 15,356-15,356 - (15,356) - Total operating income 11, , ,686 - (15,356) 140,330 Operating expenses (1,057) (105,209) (106,266) 1,420 - (104,846) Interest income 183 3,437 3, ,620 Interest expense - (3) (3) - - (3) Foreign exchange gain/(loss) (193) - (193) - - (193) Profit before tax 10,820 42,024 52,844 1,420 (15,356) 38,908 Tax (176) (9,503) (9,679) (119) - (9,798) Net profit 10,644 32,521 43,165 1,301 (15,356) 29,110 Profits attributable to Owners of the Company 10,644 32,445 43,089 (15,787) (15,356) 11,946 Non-controlling interests ,088-17,164 STATEMENT OF FINANCIAL POSITION FOR THE PERIOD ENDED 30 JUNE 2016 Assets Cash & short-terms funds 105, , , ,777 Other current assets 11,372 84,147 95, ,519 Strategic investments 423, ,091 - (297,236) 125,855 Other non-current assets , ,992 38,282 7, ,367 Total assets 539, ,663 1,156,379 38,282 (290,143) 904,518 Liabilities and shareholders equity Total liabilities 1,308 59,492 60,800 10,190-70,990 Shareholders equity: Equity attributable to owners 538, ,224 1,094,632 (342,595) (232,603) 519,434 Non-controlling interest ,687 (57,540) 314,094 Total shareholders equity 538, ,171 1,095,579 28,092 (290,143) 833,528 Total liabilities and shareholders equity 539, ,663 1,156,379 38,282 (290,143) 904,518 STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE 2016 Operating activities (628) 33,980 33, ,352 Investing activities 18,013 4,228 22,241 - (17,645) 4,596 Financing activities (13,178) (37,337) (50,515) - 17,645 (32,870) 27 FINANCIAL STATEMENTS

28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2: ACCOUNTING POLICIES UIE s interim report is presented in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and additional Danish disclosure requirements regarding interim reporting for listed companies. The accounting policies applied in these financial statements are the same as those applied in UIE s consolidated financial statements See the Annual Report 2016 for a comprehensive description of the accounting policies applied. Amendments to IAS 41, as adopted by the EU, was early implemented by the Group in The implementation of the amendments has resulted in biological assets (fruit bunches and nuts) growing on palms and trees (bearer biological assets) being measured at fair value less cost of sales. The change in the fair value of the biological assets in each accounting period is recognised in the consolidated income statements. In the first quarter of 2017, the change in the fair value of the biological assets amounted to USD 0.4 million and is recognised in the consolidated financial statements. Please see pages in the Annual Report 2016 for further explanation. JUDGMENTS AND ESTIMATES The preparation of interim reports requires management to make accounting judgments as well as estimates that affect the use of accounting policies and recognized assets, liabilities, income and expenses. Actual results may differ from these estimates. The most significant estimates made by management when using the Group s accounting policies and the most significant judgment uncertainties attached hereto are the same for the preparation of the interim report as for the preparation of the Annual Report DEFINING MATERIALITY The consolidated financial statements are a result of processing large numbers of transactions and aggregating those transactions into classes according to their nature or function. When aggregated, the transactions are presented in classes of similar items in the consolidated financial statements. If a line item is not individually material, it is aggregated with other items of a similar nature in the consolidated financial statements or in the notes. CHANGES TO ACCOUNTING POLICY The Group has with effect from 1 January 2017 implemented the Standards and Interpretations that became effective in the EU from None of these Standards and Interpretations have had material impact on profit or loss, assets, liabilities or equity. NOTE 3: SEASONAL AND CYCLICAL NATURE OF UP S PRODUCTS AND OPERATIONS The prices of UP segment s products are not controlled entirely by UP, but are determined by the global supply and demand situation for edible oils, which is somewhat related to the price of mineral oil. The prices obtainable for UP s products as well as the volume of production, which is cyclical in nature, will affect the profits for the Group. Crop production is seasonal. Based on statistics, the Group s production of CPO and PK gradually increases from March, peaking around July to September, and then declines from October to February. This pattern can, however, be affected by severe global weather conditions, such as El Niño. FINANCIAL STATEMENTS 28

29 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 4: EVENTS AFTER THE REPORTING DATE No material events occurred after the reporting date. NOTE 5: FAIR VALUE OF FINANCIAL INSTRUMENTS The Group s financial instruments measured at fair value consist of investments in quoted and unquoted shares and bonds amounting to USD million and derivatives amounting to negative USD 2.2 million. Other financial instruments include receivables and payables, which are measured at amortised cost. The fair value is approximately equal to amortised cost. The fair value of investments in quoted shares is determined based on quoted prices in active markets. The fair value of derivatives and debt instruments is determined by discounted cash flow models, which are based on oberservable market data, such as interest and currency rates. FAIR VALUE HIERARCHY The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: Quoted (unadjusted) prices in active markets for identical assets and liabilities. Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: Techniques that use inputs, which have a significant effect on the recorded fair value that are not based on observable market data. 29 FINANCIAL STATEMENTS

30 STATEMENT BY THE BOARD OF DIRECTORS AND THE MANAGEMENT The Board of Directors and the Management have today discussed and approved the Company s report for the period 1 January - 30 June The interim report, which has not been audited or reviewed by the Company s auditor, has been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU, and additional Danish interim reporting requirements for listed companies. In our opinion, the consolidated financial statements give a true and fair view of the Group s assets, liabilities and financial position as at 30 June 2017, and of the results of the Group s operations and cash flow for the period 1 January - 30 June In our opinion, the Directors Report gives a true and fair account of the developments in the operations and financial circumstances of the Group, of the results for the period and of the financial position of the Group. It also gives a fair account of the significant risks and uncertainty factors that may affect the Group. Kuala Lumpur, 21 August 2017 BOARD OF DIRECTORS Carl Bek-Nielsen Martin Bek-Nielsen John A. Goodwin Chairman Deputy Chairman Bent Mahler Jørgen Balle Frederik Steen Westenholz MANAGEMENT Ulrik Juul Østergaard Managing Director STATEMENT BY THE BOARD 30