ANNUAL REPORT 2015 STRENGTH IN DIVERSITY

Transcription

1 ANNUAL REPORT 2015 STRENGTH IN DIVERSITY

2 Steering Wheel Customer Service Servicing Airbags Perodua Tyre Assembly Commercial Vehicles Passenger Vehicles Hino Body & Paint Aftersales Seatbelts Alloy Wheel Steel Wheel Annual Report

3 CONTENTS CORPORATE INFORMATION 03 Corporate Information 04 Corporate Profile 05 Corporate Structure 06 Group Financial Performance: Five-Year Summary 07 MBMR in Numbers 08 Joint Statement to Shareholders 18 Social Responsibility 20 The Year at a Glance 22 Board of Directors Profiles 27 Management Team 29 Statement on Corporate Governance 40 Statement on Risk Management and Internal Control 44 Report on Audit and Risk Management Committee 49 Other Information Required by the Listing Requirements of Bursa Malaysia Securities Berhad 50 Directors Responsibilities Statements in Relation to the Financial Statements 51 List of Properties 55 Analysis of Shareholdings 60 Analysis of Warrant Holdings 65 Report of the Directors and Financial Statements 157 Notice of Twenty-Second (22nd) Annual General Meeting 163 Proxy Form Board of Directors Y. Bhg. Dato Abd Rahim Abd Halim Chairman, Non-Independent Non-Executive Director Mr Looi Kok Loon Group Managing Director Ms Wong Fay Lee Executive Director, Head of Group Legal, Risk and Compliance Division Encik Iskander Ismail Mohamed Ali Senior Independent Non-Executive Director Corporate Office 23-01, Level 23, Menara MBMR 1 Jalan Syed Putra Kuala Lumpur Malaysia Tel : (603) Fax : (603) Company Secretaries Wong Peir Chyun (MAICSA ) Wong Wai Foong (MAICSA ) Stock Exchange Listing Main Market Bursa Malaysia Securities Berhad Stock Code: 5983 Warrant Code: 5983WA Registered Office Unit 30-01, Level 30, Tower A, Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi Kuala Lumpur Wilayah Persekutuan Malaysia Tel : (603) Fax : (603) Auditors Deloitte (AF: 0080) Chartered Accountants Encik Mustapha Mohamed Independent Non-Executive Director Encik Shamshir Ghazali Independent Non-Executive Director Encik Aqil Ahmad Azizuddin Non-Independent Non-Executive Director Mr Low Hin Choong Non-Independent Non-Executive Director Mr Ng Seng Kong Non-Independent Non-Executive Director Principal Bankers Ambank (M) Berhad CIMB Bank Berhad HSBC Malaysia Berhad Malayan Banking Berhad Public Bank Berhad United Overseas Bank (Malaysia) Berhad Share Registrar Tricor Investor and Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A, Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi Kuala Lumpur Wilayah Persekutuan Malaysia Tel : (603) Fax : (603) Financial Calendar 21st Annual General Meeting: 16 June Results Announcements Quarter 1: 25 May 2015 Quarter 2: 19 August 2015 Quarter 3: 18 November 2015 Quarter 4: 24 February 2016 Dividend Payments: First Interim for 2015 : 18 September 2015 Special Dividend for 2015 : 18 September 2015 Second Interim for 2015 : 23 March 2016 Annual Report

4 CORPORATE PROFILE MBM Resources Berhad (MBMR) is an automotive group with diverse investments in distributorship and dealership of major international vehicle brands and automotive parts manufacturing in Malaysia. is well represented in all segments of the market from light trucks to medium and heavy duty trucks and buses in the commercial vehicle market and, from compact entry level cars to luxury cars in the passenger vehicle market. Its automotive parts manufacturing division, consisting of wheels, airbags, seatbelts, steering wheels and noise, vibration and harshness (NVH) products, is a significant supplier to all the major brands in Malaysia. OUR VISION To be a Complete Automotive Group OUR BRAND PARTNERS OUR MISSION To be the Automotive Partner of Choice to our Employees, Customers and Investors CUSTOMER VEHICLE SERVICE ASSEMBLY PARTS & ACCESSORIES Hirotako Holdings Berhad (HHB) 100% THE COMPLETE AUTOMOTIVE GROUP Manufacturing Hirotako Acoustics Sdn. Bhd. (HASB) Autoliv Hirotako Sdn. Bhd. (AHSB) CORPORATE STRUCTURE AS OF 27TH APRIL 2016 Oriental Metal Industries (M) Sdn. Bhd. (OMI) 78% Federal Auto Cars Sdn. Bhd. OMI Alloy (M) Sdn. Bhd. 100% F.A.Wagen Sdn. Bhd. F.A. Automobiles (Ipoh) Sdn. Bhd. THE COMPLETE AUTOMOTIVE Hino Motors GROUP Manufacturing 42% F.A. Trucks Sdn. Bhd. (Malaysia) Sdn. Bhd. (HMMM) FAST Sdn. Bhd. Manufacturing Motor Trading Property Hino Motors Sales (Malaysia) Sdn. Bhd. Hirotako Holdings Berhad (HHB) 100% Daihatsu (Malaysia) Sdn. Bhd. (HMSM) (DMSB) 51.5% Inai Benua Sdn. Bhd. Hirotako Acoustics Sdn. Bhd. (HASB) 100% DMM Sales 70% Sdn. Bhd. (DMMS) Perusahaan Otomobil 100% Kedua Sdn. Bhd. Autoliv Hirotako Sdn. Bhd. MBMR (AHSB) Properties 51% Sdn. Bhd. 100% (Perodua) Federal Auto Holdings Berhad (FAHB) 100% Oriental Metal Industries (M) Sdn. Bhd. (OMI) 78% Federal Auto Cars Sdn. Bhd. 100% OMI Alloy (M) Sdn. Bhd. 100% F.A.Wagen Sdn. Bhd. 100% F.A. Automobiles (Ipoh) Sdn. Bhd. 100% Hino Motors Manufacturing 42% F.A. Trucks Sdn. Bhd. 100% (Malaysia) Sdn. Bhd. (HMMM) FAST Sdn. Bhd. 100% Property ASSOCIATE JOINTLY CONTROLLED 4 MBM RESOURCES BERHAD Annual Report MANUFACTURING MBMR Properties Sdn. Bhd. AUTOMOTIVE PARTS MANUFACTURING SUBSIDIARY AUTOMOTIVE PARTS AFTER VEHICLE SALES ASSEMBLY 100% 51% AFTER SALES PARTS & ACCESSORIES DISTRIBUTION BODY & PAINT SERVICING CUSTOMER SERVICE Motor Trading Daihatsu (Malaysia) Sdn. Bhd. (DMSB) DMM Sales Sdn. Bhd. (DMMS) Federal Auto Holdings Berhad (FAHB) Note: A detailed list of the companies under the Group are shown in Notes 46 to 48 of the Report of the Directors and Financial Statements. Inai Benua Sdn. Bhd. 70% 100% RETAIL / DEALERSHIP DISTRIBUTION BODY & PAINT SERVICING Hino Motors Sales (Malaysia) Sdn. Bhd. (HMSM) Perusahaan Otomobil Kedua Sdn. Bhd. (Perodua) RETAIL / DEALERSHIP 42% 20% 51.5% 100% 100% 100% 100% 100% 100% 100% 42% 20%

5 GROUP FINANCIAL PERFORMANCE : FIVE-YEAR SUMMARY MBMR IN NUMBERS 2015 Year ended 31 December RESULTS (RM MILLION) Revenue Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) Jointly controlled entity's results Associates results Profit before tax Profit attributable to equity holders Basic earnings per share (sen) EBITDA per share (sen) BALANCE SHEETS (RM MILLION) 1, , , , , REVENUE +8.7% AUTO PARTS MANUFACTURING Total Wheels Deliveries Steel wheels Alloy wheels -22% +309% MOTOR TRADING Commercial Vehicles REVENUE -6.9% Passenger Vehicles Share capital Shareholders equity Total assets Net assets per share (RM) FINANCIAL RATIOS (%) EBITDA margin Return on equity Return on total assets , , , , , , , , , , NVH PRODUCT DELIVERIES NVH -1% Dampening sheets +7% Felts +100% -21% -13% Total Group Vehicle Sales Total Service Throughputs +11% +1% VEHICLE SALES (UNITS) Passenger Vehicles Commercial Vehicles Total Group 20,319 2,917 23,236 23,495 2,077 25,572 24,560 2,026 26,586 23,130 1,788 24,918 25,617 1,411 27,028 EQUITY INDICES Closing year-end share price (RM) Price-earnings ratio (times) The figures for 2012 and 2013 have been restated to reflect AHSB as a jointly controlled entity under the financial reporting standard MFRS 10. Airbags Airbags Sales Airbags -2% Seatbelts Seatbelts Sales Seatbelts -12% Pretensioners +134% ASSOCIATES vehicle sales Hino Perodua +11% -16% 6 MBM RESOURCES BERHAD Annual Report

6 JOINT STATEMENT TO SHAREHOLDERS STRENGTH IN DIVERSITY It was a year characterised by many external challenges a slowing economy, cautious reaction to the impact of the implementation of the Goods and Services Tax (GST) in April 2015, tightening credit, a slump in Ringgit value and the resulting knock-on effect on both business and consumer confidence. cushioned the negative impact of these factors with more vigorous cost controls and tightened further its working capital management. We reviewed our capital investment plans and where we could we prudently delayed or deferred the investments. The Ringgit s depreciation, its extent and speed of its drop, could not be recovered immediately by measures taken by the Group which had a delayed effect in restoring some of the erosion in margins. The Ringgit dropped by 23% and 22% against the US Dollar and Japanese Yen last year, of which most of the decline was in the second half of the year. This was in part triggered by the collapse in oil prices, which, consequently impacted on the domestic economy which has a high dependence on oil revenues. The domestic economy slowed from a GDP growth of 5.6% in the first quarter of 2015 to 4.5% in the last quarter of the year. Total vehicle sales managed to close the year about the same level as in 2014 at 666,674 units. However, this is not reflective of the underlying weakness in the market as a late surge in sales in December 2015 was prompted by the decision of some brands to increase their prices in the new year. The Malaysian Automotive Association has forecasted a decline in total vehicle sales in 2016 by 2.5%. 8 MBM RESOURCES BERHAD Annual Report

7 JOINT STATEMENT TO SHAREHOLDERS JOINT STATEMENT TO SHAREHOLDERS FINANCIAL PERFORMANCE RM Mil The MBMR Group recorded a 2% growth in revenues to RM1.8 billion in 2015 compared with RM1.7 billion in 2014, helped by the recognising of the contribution from the completion of the new office block, Menara MBMR. Profit before tax (PBT) fell 2% to RM130.2 million. The drop in PBT is steeper by 36% on the ongoing automotive business, excluding property contribution. We paid out RM39.0 million of dividends to shareholders in respect to the performance of financial year 2015 compared with RM31.3 million in the previous year. Our vision of being The Complete Automotive Group is the pillar of both our corporate AND business strategy. At the corporate level, we have pursued this vision via acquisitions and securing new brand partners. Today we are represented in all segments of the automotive market from entry level to luxury vehicles in the passenger segment, and from light commercial vehicles to heavy duty vehicles and buses in the commercial YTD YTD % DEC 2015 DEC 2014 Change Revenue - On going business 1, ,774.1 (5.8) - One-off property development >100 Total revenue 1, , Operating profit - On going business (19.3) (4.0) One-off property development >100 Total operating profit 26.6 (4.0) >100 Net finance costs (14.1) (14.3) (1.3) Share of joint venture results (32.6) Share of associates results (19.9) Profit before tax - On going business (36.2) - One-off property development >100 Profit before tax (1.5) vehicle segment. We have also expanded the range of car components we manufacture from Noise, Vibration and Harshness (NVH) products to wheels and safety products. Our distinct business strategy of being complete is also cascaded down to the way we develop our businesses. In our distributorships and dealerships, we recognise the sale of a vehicle is only the beginning of the relationship with the customer. We offer the customer a complete range of services from selling the vehicle to aftersales services such as maintenance, body and paint repair, car grooming to insurance renewal and claims. In our component manufacturing, we rigorously look at our costs and quality which are benchmarked against our international technical partners to be aligned with world standards. Not only do we offer quality and competitively priced components, we offer our customers complete engineering and design capabilities with responsive support to their needs and product requirements. The Complete Automotive Group strategic initiative required significant investments to be made to increase our capacity and capability to deliver sustainable growth for the future. A substantial part of the investments have been made and are now in the exciting phase of seeing these initiatives translate into returns to our shareholders. The MBMR today has a diverse income stream. We draw our strengths from this diversity which provides growth opportunities in good times and defensive qualities in challenging times. There has been a divergence in the performance of the automotive market. The Perodua Axia which was launched in the fourth quarter of DMMS Sales vs Perodua Sales 9.5% (2011) 17, DMMS 10.2% (2012) 19, % (2013) Share of Perodua Sales 187, Perodua 20, , % (2014) 19, , , , enjoyed continued success with a full year s impact in the market, securing the position of being the best-selling model in Malaysia for This relatively resilient segment of the market is in contrast to the drop in sales of the middle to high segment market which registered significant declines by some brands during the year. This is reflected in the surge in sales of our Perodua dealership, DMM Sales Sdn Bhd (DMMS) by 15.9% compared with the 22.2% drop in sales by our multi-brand entity, Federal Auto Holdings Berhad (FAHB). The net impact is that the MBMR Group recorded a growth of 8.5% in total vehicle sales, which exceeded the market s flat performance. 10.8% (2015) 214, Gross Margins between Vehicle Sales and Aftersales 45.2% 40.4% Vehicle sales Aftersales 54.8% 59.6% 10 MBM RESOURCES BERHAD Annual Report

8 JOINT STATEMENT TO SHAREHOLDERS JOINT STATEMENT TO SHAREHOLDERS Aftersales Revenue (RM Mil) Launch of Iveco Paint pre-treatment process at the OMI alloy wheel plant Seatbelt testing facility at AHSB Our aggressive expansion in our aftersales business has also resulted in a significant shift in the balance of our profit contribution. The aftersales business is defensive, recurring and high margined. We are also focusing on growing our revenues per car via providing the complete offering of services that our customers have now come to expect from our dealerships. Our service throughputs have been growing consistently, recording a growth of 2.4% in revenues. This growth will continue to be driven by the Group s new car sales as well as capturing additional market share. We launched the Iveco distributorship in April 2015, together with the unveiling of Iveco s five commercial vehicles that will be marketed in Malaysia. The Iveco brand is the latest addition to our stable of brand partnerships. As a distributor, we will use our extensive and deep knowledge of the commercial vehicle market to introduce the models best suited for our target market. We handle all aspects of importing the vehicles, including selecting the models most appropriate for local assembly. We are also currently developing the distribution network with a combination of own branches and appointment of dealers, and establishing wholesale provision of vehicles and parts to support the network. We will handle all marketing campaigns and price positioning of our products so as to ensure we build our market share and ensure a long and sustainable business. Our showcase branch in Shah Alam is currently under construction and is expected to be completed by the middle of this year, which serves as another milestone for the establishment of the Iveco brand in Malaysia. Our components manufacturing division has been positioned to capture future trends in the automotive market. The shift in market preference from steel to alloy wheels has continued, with more pronounced migration in recent new model launches by our customers. Our investment in the alloy wheel plant in 2012 has better prepared us to capture this trend, whilst transforming Oriental Metal Industries (M) Sdn Bhd (OMI) into a fully integrated complete wheels manufacturer. The alloy wheels business continued to record losses last year as the heavy upfront investments, resulting in higher interest and depreciation costs, coupled with the plant operating at below its optimum level, weighed on its overall performance. Nevertheless, we recorded a big jump in production volumes from 34,000 pieces of wheels in 2014 to 139,000 in 2015 and expect another leap this year to over 300,000 wheels as we have secured the supply of wheels to some major key volume models, beginning in the middle of this year. There is a growing awareness in safety by consumers. Autoliv Hirotako Sdn Bhd (AHSB), 51%-owned via our subsidiary Hirotako Holdings Berhad, is at the forefront in producing safety restraint systems which include seatbelts and airbags, to car manufacturers in Malaysia. We are the only company that offers the complete service of design, development, testing and manufacturing domestically to our customers. The quick response time and local knowledge places us in a position of strength of providing our customers the technical and engineering support in enhancing their safety features of their products. The ASEAN New Car Assessment Program (NCAP) crash test ratings have helped push the automotive industry to new levels, raising consumer awareness and hence drive to raise vehicle standards. A new rating system for future tests beginning from 2017 will include greater weighting for side-impact crash tests, will see higher fitment rates per vehicle of passive safety products. The trend is therefore encouraging as our business of saving lives through the quality of our products will lend support to the industry s growing emphasis on safety in new product launches by car companies. 12 MBM RESOURCES BERHAD Annual Report

9 JOINT STATEMENT TO SHAREHOLDERS JOINT STATEMENT TO SHAREHOLDERS The decline in our volumes last year was Our Associate contributions, namely from HMSM and HMMM were affected by a weak driving test course to train our customers in attributed to lower deliveries to some customers which we anticipate will reverse with the commencement of deliveries to major new car models which we secured to start in mid The cost of components we import in making our products were hit by the decline in the Ringgit, contributing a more than 20% drop in profits when compared to We have in place measures to recover the negative impact of the currency, including continuous cost reductions and re-assessing our sourcing of materials/ components. We should see some recovery in margins if the Ringgit stabilises. Our Noise, Vibration and Harshness (NVH) division under Hirotako Acoustics Sdn Bhd (HASB) supplies a wide range of NVH products to the automotive industry. We offer cost competitive products and leverage off the technological support from our technical Perusahaan Otomobil Kedua Sdn Bhd (Perodua) and Hino Motors Sales Malaysia Sdn Bhd (HMSM) and Hino Motors Manufacturing Malaysia Sdn Bhd (HMMM) were impacted by the Ringgit s decline. Perodua continued to enjoy brisk sales of its Axia model with a full year contribution in 2015 (launched in latter part of 2014). Combined with the Myvi and Alza models, Perodua achieved its highest sales record at units, commanding a market share of 32%. Aftersales also hit new records with 1.96 million service intakes, a 2.3% increase from the previous year. Perodua Sales vs TIV 30.0% (2011) 30.1% (2012) 29.9% (2013) 29.3% (2014) 32.0% (2015) commercial vehicle market and intense competition. The truck and bus segment fell 8.8% during the year. The commercial vehicle segment is particularly sensitive to the performance of the economy which has seen business owners scale back their investments or postpone their investments in the current weak economic environment. The tighter credit conditions have also made borrowing, particularly by the smaller businesses which the light commercial vehicle segment has a high exposure to, more difficult to attain. Despite the challenging operating environment, HMSM will continue to focus on strengthening its dealer network and developing further its Hino Total Support activities through better utilisation of the newly launched Hino Total Support Customer Centre (HTSCC) in Sendayan, Negeri Sembilan, adjacent to the Hino assembly plant. The HTSCC provides a safe-driving and eco-driving skills. This unique programme is available to our customers free to ensure our on-going customer support activities will help reinforce the Hino brand and to achieve our ultimate goal of maximising our customers satisfaction. We believe these initiatives together with continuous product enhancement will help strengthen Hino s position and leadership in the Malaysian commercial vehicle segment. During the year we booked in RM143.9 million in revenues and RM45.9 million in profit before tax from the completion of Menara MBMR. Menara MBMR is a 24 storey state-of-the-art office building, adjacent to the bustling Mid Valley City with easy access to the major highways linking to the Kuala Lumpur city centre, to the Kuala Lumpur International Airport and Klang Valley. MBMR s new corporate headquarters are now based at the top two floors of this Grade A, Green partner, Autoneum, a global leader in acoustic and thermal management solutions for vehicles. We provide our customers lightweight products that help our customers reduce their vehicle weight for better fuel efficiency and help protection against heat and noise for greater vehicle comfort. We are confident that we are positioned to capture the growing trends towards demand for lightweight and noise reducing products. Our felt line which became operational in 2012 has helped us with a cost 179, , , ,753 Share of TIV 196, , , , , ,674 advantage in lowering the production costs of our insulator products. The utilisation rate of the felt line continued to climb as we have also started with external sales opportunities. Contribution from HASB has generally been stable as our wide customer base and the lower raw material prices have been able to partially offset some of the negative impact of the drop 2011 TIV 2012 Perodua Grand opening of the HTSCC in Sendayan, Negeri Sembilan Launching of Perodua s flagship centre, the Perodua Sentral in Petaling Jaya, Selangor in the Ringgit. 14 MBM RESOURCES BERHAD Annual Report

10 JOINT STATEMENT TO SHAREHOLDERS Building Index (GBI) certified office building. Our Volvo showroom will be relocated back to the ground floor, incorporating Volvo s latest showroom design standards. The redevelopment of the property which previously housed FAHB s headquarters and its main Volvo showroom and service centre, is a strategic move to realise the value of the Group s prime property assets. Our continuous discipline in managing our costs saw us trimming our operating costs by almost 5% or over RM7.6 million in This however was not sufficient to offset the foreign exchange impact of the decline in the Ringgit which contributed a negative variance of over RM12 million to the Group s PBT compared to We have continued to prudently reduce our group borrowings from RM416 million to RM374 million, resulting in a comfortable net gearing of 7.3% (2014: 9.2%). Given the softer economic environment, we have also adopted a more conservative provisioning approach in our receivables and inventories which amounted to RM15.8 million. Outlook Notwithstanding the current uncertain economic climate, we believe that we have established very clear strategies in our vision of being The Complete Automotive Group. Our investments of recent years have positioned us to benefit from changing trends in the automotive market. Our continuous refinement and improvement in our operations will ensure that we are constantly evolving with changes in the marketplace. Our goals are not just growing our revenues and profitability. We also have to manage our risks and to ensure that we withstand in even more adverse economic conditions. For this reason, in the immediate term, we have intensified our cost management and we are constantly reviewing our capital investment plans. We have also continued to reduce our borrowings further by more efficient capital management. We draw strength from the diversity in our income streams which provide defensive qualities in the event of further headwinds in the economy and yet well positioned for a rebound in the near future. Appreciation Thank you for the continued support whether as customers, shareholders, business partners or bankers. To our employees we appreciate the dedication and hard work the MBMR team had demonstrated in these trying times. Our success is dependent on the ongoing commitment of the execution of our strategic plans with the advice and guidance of our Board. We also take this opportunity to welcome two additional members to the Board, Encik Shamshir Ghazali as an Independent Non-Executive Director, and Mr. Ng Seng Kong as Non-Independent Non- Executive Director effective from the 1st of October Dato Abd Rahim Abd Halim Chairman Looi Kok Loon Group Managing Director Menara MBMR 16 MBM RESOURCES BERHAD Annual Report

11 SOCIAL RESPONSIBILITY At MBMR, we have built in a culture of a responsible corporate in the way we conduct our business. We continue to refine our approach with the changing business environment. WORKPLACE Our people form the foundation of the success of MBMR. We believe in attracting skilled talents and developing and retaining them as our employees by keeping them engaged and motivated in helping grow our business. We have scheduled training sessions to empower and enhance the skills of our employees; we have regular employee communication such as holding staff assemblies; we organize teambuilding sessions and business retreats to keep our staff engaged, motivated and aligned with the group s strategy for expansion and growth; we support results-driven behaviour and encourage entrepreneurship and creativity; safety at the workplace is of great importance and we continue to target zero injuries in our workplace; we conduct safety awareness campaigns and training to help our employees prevent any future risk of accidents. ENVIRONMENT We are constantly creating awareness of the impact of the way we conduct our business has on the environment. We continuously assess energy saving programmes to reduce energy consumption in our operations; we actively explore new methods of carrying out our processes to minimize wastes and where possible, to encourage recycling. Our manufacturing facilities are Environment Management System (EMS) MS ISO and Occupational Health and Safety Management System (OHSAS 18001) certified. COMMUNITY MBMR encourages and provides opportunities for its employees to participate in community service programmes. We support local charities and initiatives in the communities we operate in. During the year we also responded with providing aid to victims of disasters such as the earthquakes in Nepal and Sabah. We continued to support the Relay for Life event organized by the National Cancer Society Malaysia, an annual event to raise public awareness about cancer in the community. Our subsidiary, AHSB, plays an important role in the automotive industry in making products that help save lives and reducing traffic injuries. Therefore, helping to save lives with the installation of our products in vehicles is our core contribution to our social responsibilities. We also initiate road safety campaigns internally as well as for the public to raise the safety awareness on the roads. We support agencies on road safety such as the Malaysian Institute of Road Safety Research (MIROS) by participating in their programmes and developments on road safety issues. During the year we hosted the ASEAN NCAP Child Safety Day at our premises in Balakong. The Child Restraint System (CRS) performance test was demonstrated at our test lab to promote the importance of child safety in vehicles. 18 MBM RESOURCES BERHAD Annual Report

12 THE YEAR AT A GLANCE February Official opening of Hino Total Support Customer Centre, Sendayan 28 April Iveco launch press conference 10 June MBMR Group Summit I 4 September Official opening of Perodua Sentral, Petaling Jaya 7 Septemeber Official signing of Dealership Agreement between DMM Sales Sdn Bhd and Perodua 18 September Mr. Yasumitsu Morita, President of Perodua Manufacturing Sdn Bhd visits OMI Alloy and Tyre Assembly plant 16 June MBMR 21st Annual General Meeting 25 June Datuk Aminar Rashid Salleh, President and CEO, Perodua visits OMI Alloy 19 October MBMR Group Summit II 28 October OMI Bio CNG exchange of contract with Gas Malaysia 20 August Analyst Briefing 2 September Mr. Hiroyuki Yokoyama, Executive Vice-President, Daihatsu Motor Co., Ltd visits DMSB 3 September Mr. Motoya Kitazume, Executive Vice-President, Central Motors Wheel Co., Ltd visits OMI 6 November Mr. Yasumitsu Morita, President of Perodua Manufacturing Sdn Bhd visits Autoliv Hirotako Sdn Bhd, Balakong 11 November ASEAN NCAP Child Safety Day hosted at Autoliv Hirotako Sdn Bhd, Balakong 20 MBM RESOURCES BERHAD Annual Report

13 PROFILE OF DIRECTORS From Left to Right: Encik Aqil Ahmad Azizuddin Non-Independent Non-Executive Director Encik Shamshir Ghazali Independent Non-Executive Director Y. Bhg. Dato Abd Rahim Abd Halim Chairman Non Independent Non-Executive Director Encik Iskander Ismail Mohamed Ali Senior Independent Non-Executive Director Mr. Ng Seng Kong Non-Independent Non-Executive Director Encik Mustapha Mohamed Independent Non-Executive Director Ms. Wong Fay Lee Executive Director Head of Group Legal, Risk and Compliance Division Mr. Low Hin Choong Non-Independent Non-Executive Director Mr. Looi Kok Loon Group Managing Director 22 MBM RESOURCES BERHAD Annual Report

14 PROFILE OF DIRECTORS PROFILE OF DIRECTORS Y. Bhg. Dato Abd Rahim Abd Halim Aged 67, Malaysian Chairman Non-Independent Non-Executive Director Y. Bhg. Dato Abd Rahim was MBM Resources Berhad s (MBMR) Managing Director until 28 February He is currently the Chairman of MBMR. Prior to his appointment to MBMR s Board on 17 December 1993, he was the Chairman of Daihatsu (Malaysia) Sdn. Bhd. (DMSB). Dato Abd Rahim has extensive experience in the automotive industry and is presently on the Board of Rubberex Corporation (M) Berhad as well as several other private companies. He is also the Chairman of the Board of Oriental Metal Industries (M) Sdn. Bhd. (OMI) and a Board member of Perusahaan Otomobil Kedua Sdn Bhd (Perodua). He holds a Bachelor of Economics (Honours) degree from the University of Malaya. Mr. Looi Kok Loon Aged 49, Malaysian Group Managing Director Mr. Looi Kok Loon was appointed to the Board of MBMR on 18 May 2001 and subsequently Group Managing Director since 1 March He had previously worked for a foreign investment bank, heading their Kuala Lumpur office in 1996 and 1997 and was subsequently based in their offices in London and Hong Kong. Mr. Looi holds a Bachelor s degree in Government and Economics from Brunel University and a Master s degree in Management from the University of Kent, United Kingdom. He represents MBMR on the Boards of the following companies Perodua, Hino Motors Sales (Malaysia) Sdn. Bhd. (HMSM), Hino Motors Manufacturing (Malaysia) Sdn. Bhd. (HMMM), DMSB, Federal Auto Holdings Berhad (FAHB), Hirotako Holdings Berhad (HHB), Autoliv Hirotako Sdn. Bhd. (AHSB), Hirotako Acoustics Sdn. Bhd. (HASB) and OMI. Ms. Wong Fay Lee Aged 52, Malaysian Executive Director Head of Group Legal, Risk and Compliance Division Ms. Wong has been Group General Counsel to the MBMR Group of Companies since Ms. Wong started her career in 1987 with the Sydney office of Mallesons Stephens Jaques (now King & Wood Mallesons) as a corporate finance lawyer and later joined the South East Asian practice of Mallesons. Her former positions include having been a Manager in the Research & Development Division with the Malaysian Securities Commission, Chief Executive Officer of Malaysian Derivatives Clearing House and an adviser to the Clearing Division of the Hong Kong Exchanges and Clearing Limited. She is also currently a director of Apex Investment Services Bhd. She has a Bachelor s degree in law from the University of Sydney and post-graduate qualifications in finance and investments from the Securities Institute of Australia. She is admitted as a solicitor to the NSW Supreme Court and the High Court of Malaya. Encik Iskander Ismail Mohamed Ali Aged 66, Malaysian Senior Independent Non- Executive Director Encik Iskander was appointed to the Board of MBMR on 8 May 2009 and re-designated Senior Independent Director on 22 August He is currently Chairman of MBMR s Audit and Risk Management Committee and a member of the Nominating and Remuneration Committee. Encik Iskander is a member of the Malaysian Institute of Accountants and fellow member of the Association of Chartered Certified Accountants and was formerly the Executive Director and Chief Executive Officer of Kenanga Fund Management Berhad. Having worked in the fund management industry since 1982, he had previously held various senior management roles in the fund management division/ subsidiary of Bumiputra Merchant Bankers Berhad and MIDF Berhad, where he was also a director of several MIDF subsidiary companies. He was the first (and for a few years thereafter) Chairman of the Malaysian Association of Asset Managers, which he helped establish in November He also served on the Capital Market Advisory Council and was a member of the Bursa Malaysia Securities Berhad Listing Committee and of the Institutional Shareholders Pro Tem Committee under the Minority Shareholder Watchdog Group. He is an independent director of an asset management company in Malaysia and also sits on the Board of Trustees of a local educational foundation. Encik Mustapha Mohamed Aged 70, Malaysian Independent Non-Executive Director Encik Mustapha was appointed to the Board of MBMR on 25 February 2013 and is currently Chairman of MBMR s Nominating and Remuneration Committee. He is a member of the Malaysian Institute of Accountants, Certified Public Accountants (Malaysia) and a fellow member of the Association of Chartered Certified Accountants. He was previously with Coopers & Lybrand Malaysia (now known as Pricewaterhouse Coopers) for 22 years from 1971 to 1993 of which he was a Partner from 1987 to He previously served as a director of Gadek Berhad, Gadek Capital Berhad, Ipmuda Berhad, Credit Corporation of Malaysia Berhad, Ho Hup Construction Company Berhad and MHC Plantations Berhad. He is presently a director of Majuperak Holdings Berhad, Rubberex Corporation (M) Berhad and manages his own advisory services firm. Encik Shamshir Ghazali Aged 66, Malaysian Independent Non-Executive Director En. Shamshin was previously a Director of MBMR from 17 December 1993 and an Executive Director from 1997 until 23 May He was re-appointed to the Board of MBMR on 1 October 2015 and on 1 April 2016 appointed as a member of the Audit and Risk Management Committee. He started his career in Bank Negara Malaysia as an Accounts Clerk in the Accounts and Investments Department in July In March 1973, he joined Kassim Chan & Co as an Audit Assistant and subsequently Esso Malaysia Berhad as Corporate Analyst from October 1973 to March In 1975, he joined MARA as Financial Analyst in Industry & Investment Division and promoted as Accountant in 1978, Deputy Director in 1980, Director of Finance in March 1982, Director of Finance and Deputy Director General in April 1985, Director of Finance in May 1986 and Deputy Director General from 1991 until He joined MBMR as a Director to the Company from 1993 to In 2004 to 2006, he was an adviser to DMSB. Encik Shamshin is a member of the Malaysian Institute of Accountants and the Chartered Institute of Management Accountants, and past member of the Association of Chartered Certified Accountants. 24 MBM RESOURCES BERHAD Annual Report

15 PROFILE OF DIRECTORS PROFILE OF DIRECTORS Encik Aqil Ahmad Azizuddin Aged 57, Malaysian Non-Independent Non-Executive Director Science (Honours) degree in Business Administration & Computer Science and is currently managing his Fellow Member of Chartered Institute of Management Accountants (UK) and Chartered Global Encik Aqil began his career with DMSB where he held various senior management positions prior to his appointment to the Board of MBMR on 18 May He is currently a member of MBMR s Audit and Risk Management Committee and the Chairman of DMSB, FAHB, own successful software applications business. He is also a director on the Board of HHB, AHSB and HASB. Mr. Ng Seng Kong Aged 62, Malaysian Non-Independent Non-Executive Director Management Accountant. Notes: 1. None of the Directors has any family relationship with any Director and/or major shareholder of the Company. 2. None of the Directors has any conflict of interest with the Mr. Looi Kok Loon Group Managing Director Ms. Wong Fay Lee Executive Director Head of Group Legal, Risk and Compliance Division MANAGEMENT TEAM MBM Resources Berhad Mr. Ong Guan Hock Group General Manager, Corporate Development Ms. Kareena Tan Ee Loun General Manager, Human Resources Mr. Poh Chee Kwan Group General Manager Mr. Kong Kam Seong Group Financial Controller HHB, HASB and HMSM. He is Company. also a director on the Board of Perodua, HMMM and AHSB. He holds a Bachelor of Science degree in Business Economics and an Associate Degree in Commercial Graphics from Southern Illinois University, USA. Mr. Ng was appointed to the Board of MBMR on 1 October He was an auditor in a chartered accountant firm in London from 1975 to In 1980, he joined MKS Sdn Bhd as Financial Controller and in August 1981, he was appointed to the Board of UMS Holdings Berhad. Mr. Ng 3.None of the Directors has been convicted of any offences other than traffic offences within the past 10 years. was appointed as a deputy Mr. Low Hin Choong Managing Director of UMS Aged 55, Malaysian Non-Independent Non-Executive Director Holdings Berhad in 1995 and subsequently promoted as its Managing Director in In Mr. Low Hin Choong joined the Board of MBMR on 18 May 2001 and is currently a member of the Nominating and Remuneration Committee. He has more than 20 years experience in the IT industry, having worked as a systems analyst and software manager. He graduated from Queen s University of Belfast, United Kingdom with a Bachelor of 2011, he was also appointed as Managing Director of UMS Corporation Sdn Bhd, a wholly owned subsidiary of UMS Holdings Berhad. He is presently a director in several other subsidiary companies and associate companies within UMS Group and other private limited companies. Mr. Ng is a Fellow Member of Chartered Association of Certified Accountants (UK), Lobby - Menara MBMR 26 MBM RESOURCES BERHAD Annual Report

16 COMPANY NO V Statement on Corporate Governance The Board of Directors of MBMR ( Board ) is committed to the implementation and maintenance of good corporate governance practices and procedures for the whole Group. This statement sets out the principles of good corporate governance practised by MBMR and the extent to which the Company complies with the principles and standards of governance and behaviour recommended by the Securities Commission of Malaysia contained in the Malaysian Code on Corporate Governance 2012 ( MCCG 2012 ) as required by Paragraph in Part E of Chapter 15 of the Bursa Malaysia Securities Berhad s Main Market Listing Requirements ( Listing Requirements ). PRINCIPLE 1 ESTABLISH CLEAR ROLES AND RESPONSIBILITIES Clear functions reserved for the Board and those delegated to Management The Board has full and effective control over the business undertakings of the Company subject to the powers reserved for shareholders under the Company s Memorandum and Articles of Association, the Listing Requirements and applicable laws. This includes responsibility for determining the Company s overall strategic direction as well as the approval of annual and interim results, specific items of investments and divestments, as well as the risk management framework and internal control policies and procedures for the Company. The Board has adopted a Board Charter which sets out the functions that are reserved for the Board. Managing Director, who is also the Chief Executive Officer of the Company, is responsible for matters which are not specifically reserved for the Board or delegated to the Board Committees (such as the day-today management of the operations of the Company). The Board however, continues to oversee and monitor the Group Managing Director to ensure that all actions and decisions are made by him towards achieving the Company s goals, within the limits of authority which have been imposed by the Board. Clear roles and responsibilities The Board s role and responsibilities are set out in the Company s Board Charter. While the day-to-day management of the operations of the Company is delegated to the Group Managing Director, the Board retains effective control over important policies and processes covering areas such as internal controls, risk management and the remuneration of executives and employees of the Company. Lift lobby Menara MBMR The Board also assumes among others, responsibilities which include reviewing, approving, adopting and monitoring the implementation of the annual strategic and business plan for the Company and the Group as a 28 MBM RESOURCES BERHAD Annual Report

17 Statement on Corporate Governance whole, overseeing the conduct of the Company s business to ensure that it is being properly managed, and taking appropriate measures in succession planning including the recruitment, appointment, training and replacement of key management, where appropriate. The Board has delegated certain of its responsibilities to the Board Committees, which operate within clearly defined terms of reference. Standing committees of the Board include: the Audit and Risk Management Committee (please refer to the Report on the Audit and Risk Management Committee set out on pages 44 to 48); the Nominating and Remuneration Committee; and the Long Term Incentive Plan Committee. The Board Committees Terms of Reference detailing the responsibilities of each Committee and how they exercise their authority are available on the Company s website. There is a clear division of responsibility between the Chairman and Group Managing Director to ensure a balance of power and authority. The principal duties of the Chairman are to conduct the meetings of the Board and shareholders and to facilitate constructive discussions at these meetings. Managing Director is responsible for the day-today running of the businesses of the Group and to develop and implement strategies. Code of Conduct The Board has adopted a formal Code of Conduct that applies to the activities of the Directors as well as all employees of the Group. The Code of Conduct is reviewed periodically by the Board and revised as and when appropriate. A summary of the code is made available on the Company s website. The Board has established and approved a whistleblowing policy to encourage all its employees and persons who have dealings with the Group to report suspected and/or known fraud, corruption, unlawful acts, violation of the Group s policies or standard operating procedures and instances of waste or abuse of corporate resources. The policy sets out and identifies the appropriate communication and feedback channels which facilitate whistleblowing. Promoting sustainability MBMR s approach to governance is to drive business revenues and profits and manage risks prudently in order to deliver long-term profitability and provide value to shareholders on a sustainable basis. This approach includes meeting expectations of stakeholders such as customers, shareholders, regulators, bankers, joint venture partners and the communities in which the MBMR Group operates. MBMR s Board and management view its commitment to Business Sustainability and Environmental, Social and Governance (ESG) objectives as part of its responsibility to its stakeholders and the communities in which it operates. MBMR is committed to the implementation of safe work practices and aims to provide an injury free workplace for all its employees. The MBMR Group of companies engages in the wider community through Corporate Social Responsibility programs undertaken at the level of each Group company and by its staff. Details of the Group s community initiatives are detailed in Social Responsibility on page 18 to 19. Board members access to information and advice Each Board member receives quarterly operating results, including a comprehensive review and analysis. Prior to each Board meeting, Directors are sent an agenda and a full set of Board papers for each agenda item to be discussed at the meeting. This is issued in sufficient time, at least 3 days in advance to enable the Directors to obtain further explanations, where necessary, in order to be sufficiently briefed before the meeting. Directors have access to all information within the Company whether as full Board or in their individual capacity, in furtherance of their duties. Directors also have direct access to the advice and the services of internal and external legal advisers and the Group s Company Secretary who is responsible for ensuring that Board procedures are followed. Qualified and competent Company Secretary s Company Secretaries are appointed by the Board of Directors. The appointment is based on criteria related to the qualifications, experience and competence of the individuals concerned to carry out their duties and responsibilities having regard to the Group s business, size of operations and compliance with the Listing Requirements. The roles and responsibilities of the Group s Company Secretaries are set out more specifically in the Board Charter. Formalise and review Board Charter The Board has adopted a formal Board Charter which is available on the Company s website. The Board Charter is subject to an annual review and more frequently, if required, due to a change of law or of company policy that affects the Board Charter. The current Board Charter was last reviewed and approved concurrently with this Statement of Corporate Governance PRINCIPLE 2 STRENGTHEN COMPOSITION DIRECTORS Composition of the Board and Board Committees Currently, the Board has nine members, of whom seven are Non-Executive Directors, and three of whom are Independent Directors. No individual or group of individuals dominates the Board s decision-making and the number of Directors fairly reflects the investment of the shareholders. Details of the members of Board and Board Committees are set out on pages 22 to 26. considers that its complement of Non- Executive Directors provide for an effective Board with a mix of industry-specific knowledge and commercial experience. This balance enables the Board to provide clear and effective leadership to the Company and bring informed and independent judgement to many aspects of the Company s strategy and performance so as to ensure that the Company maintains the highest standards of conduct, integrity and character. One-third of the Board comprises Independent Directors as required by the Listing Requirements. recognises the contribution of Independent Directors as vital to the development of the Company s strategies, the importance of representing the interest of public shareholders and providing a balanced and independent view to the Board. All Independent Directors are independent of management and free from any relationship that could interfere with their independent judgement. The Nominating and Remuneration Committee ( NRC ) comprises two Independent Directors and one Non- Independent Non-Executive Director. This Committee is empowered to bring to the Board recommendations as to the appointment of any new executive or non-executive Director, provided that the Chairman of the NRC in developing such recommendations, consults all Directors and reflects that consultation in any recommendation of the NRC brought forward to the Board. The NRC is also responsible for Group remuneration policies and the remuneration of Executive Directors as provided for under its terms of reference. Criteria for recruitment The NRC ensures that the Board has an appropriate balance of a broad range of skills, expertise, experience and competence. The NRC also ensures, through its selection, interview and review processes that prior to appointment, each of the Company s Directors, including the Group Managing Director and Executive Director, and the Group Financial Controller has the requisite character, experience, integrity, competence and time to discharge his/her role and responsibilities. An assessment against the requisite criteria is also performed as part of the annual evaluation process in respect of each Director who retires by rotation and puts himself/herself up for re-election. In addition to these criteria, when considering new candidates to fill a vacancy or to add to its Board, the Company will apply its policy of promoting gender and boardroom diversity as well as to ensure a highly effective and committed board of directors. The policy generally advocates that whilst all Board appointments will be based on its merits wherein candidates are measured against objective criteria, due consideration is still given towards the benefits of diversity on the Board and the Board s goals in this regard. Nomination and Election process The NRC regularly reviews the required skills and attributes that would form part of a director s profile. This profile is used to assess the suitability as Executive or Non-Executive Directors of candidates put forward by the Directors. All new candidates will be assessed by the NRC in accordance with the steps laid out in the Company s Procedure for Appointment of New Directors which comprises among others, the following steps: 1. Evaluation of the current Board to identify current gaps; 2. Assessing the need for additional Directors; 3. Assessing the suitability of the proposed candidates based on the skills, knowledge, expertise, experience, time, commitment, character, professionalism and integrity; 4. Assessing independence (for Independent Directors). On appointment, Directors take part in an induction programme where they receive a presentation package that provides them with a business and financial overview of the Company as well as latest information about the Group. This is supplemented by visits to key locations and meetings with senior executives. Directors are also advised, upon appointment, of their legal and other obligations as a director of a public-listed company. In accordance with the Company s Articles of Association, all Directors shall retire from office once at least in each three years but shall be eligible for re-election. Annual Assessment The NRC carries out an annual assessment of the effectiveness of the Board as a whole and the performance of each of the Board Committees against a set of criteria 30 MBM RESOURCES BERHAD Annual Report