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Chairman’s Statement

Dear Stakeholders,

On behalf of the Board, it is my honour to present the CB Industrial Product Holding Berhad’s (“CBIP” or “Group”) annual report and audited financial statements for the financial year ended 31 December 2018.

Tan Sri Datuk Dr. Yusof Bin Basiran
2018 In Review

The Group achieved a revenue of RM478.1 million, profit before taxation of RM88.6 million and profit attributable to owners of the Group of RM41.3 million for financial year 2018.

The total revenue for financial year 2018 decreased by 32.1% as compared to the financial year 2017. This is mainly due to the decrease in activities in our Special Purpose Vehicle Segment in the second half of 2018. As a result, profit before taxation and profit attributable to owners of the Group decreased by 9.9% and 20.6% respectively. However, the decrease was mitigated by a reduction in losses on foreign exchange and currency translation differences for foreign operations. Our core profit attributable to owners of the Group for 2018 stands at RM41.3 million as compared with RM52.0 million for the 2017.

The Palm Oil Equipment and Engineering Segment achieved a revenue of RM340.3 million and profit before taxation of RM82.1 million for financial year 2018. Despite a lower revenue, the profit before taxation increased by 4.3%. The increase in profit before taxation was largely due to the recovered bad debts and gain on disposal of a property of RM5.8 million and RM2.2 million respectively. The financial year 2018 was an exceedingly challenging year but nevertheless our order book remains healthy and closed at RM335 million as at 31 December 2018.

The Special Purpose Vehicles Segment achieved a revenue of RM120.7 million and profit before taxation of RM43.9 million for financial year 2018 which represent a year-on-year decrease of 631.8% but an increase of 22.6% respectively. The profitability of this segment increased due to higher project billings and lower project costs towards the end of contract period. Although all the contracts have been completed, this segment aims to continue to pursue opportunities not only in Malaysia but also with a plan to expand its business in overseas market.

The Palm Oil Plantation and Milling Segment posted a loss of RM8.8 million for financial year 2018 as compared to a loss of RM9.2 million in 2017. This segment was still incurring losses because the age profile of the palm trees are relatively young, thereby generating low revenue. However, losses have been narrowed as the oil palm trees mature. While set up and operating costs will continue to be incurred by this segment until maturity of the oil palm trees, our first palm oil mill which has commenced operation in the early of 2019 should be able to improve the profitability in the coming years.

Our Plantation Associates and Joint Venture posted a loss of RM4.9 million in the financial year 2018 which is a decrease of 138.0% from a profit of RM12.9 million in the preceding financial year. This was mainly due to decrease in prices and production of palm products. As the palm trees in these companies are mostly mature, the future performance is dependent on their yield and future prices of palm products.

The independent auditors reported a qualified opinion on the Associates and Joint Venture on the basis that the audited financial statements and the auditors’ report of the Associates and Joint Venture were not available. The Associates and Joint Venture have been consolidated in the Group’s audited financial statement for financial year 2018 using unaudited management accounts. The management and operation of the Associates and Joint Venture were not carried out by our Group.

Prospects Ahead

The Palm Oil Equipment and Engineering Segment will continue to focus on growing our order book and increasing our clientele base. In view of the technological advantage of our Modipalm Continuous Sterilisation palm oil mills as well as our track record of excellent deliveries, we will continue to, not only expand existing business relationships but also to develop new clientele base with the hope of achieving a sustainable growth path. We will also continue to invest in research and development, as the management is slowly progressing towards the commercialisation of the “zero discharge” technology, a new innovation in the field of waste management for palm oil mills.

The Special Purpose Vehicles Segment, remains optimistic of securing more new supply and delivery contracts through active marketing of new products across new geographical markets. We will continue to build on our capabilities to grow our Special Purpose Vehicles Segment.

The Palm Oil Plantation and Milling Segment, with a land bank of approximately 32,000 hectares, whereby 12,700 hectares have been planted in totality, the management remains committed to improve the plantation development based on our plan to drive our Group’s long-term growth.

Corporate Exercises

During the financial year, the Group through its subsidiary, AVP Engineering (M) Sdn. Bhd. (“AVP”) acquired additional 20% equity interests in TPG Aeronautik Sdn. Bhd. (“TPGA”) for cash consideration of RM100,000. In consequent thereof, TPGA become a wholly owned subsidiary of AVP.

In addition, the Group acquired additional 31% equity interest in TPG Oil & Gas Sdn. Bhd. (“TPGOG”) for cash consideration of RM15,500. TPGOG become an 80% subsidiary of the Group.

The Group also acquired 70% equity interests in Modipalm Engineering Solution Sdn. Bhd. for cash consideration of RM70.

Upholding Shareholders’ Value

In line with our practice of distributing cash dividends amounting to a target 30% of the profit after taxation attributable to owner of the parents, the Board have declared a total adjusted cash dividend payout of 4 sens for the financial year ended 31 December 2018, despite a weaker growth environment. We will continue to explore sustainable growth strategies to further enhance our shareholders’ value.

A Word of Appreciation

I wish to take this opportunity to express my heartfelt gratitude and appreciation to our Board of Directors, the management team and our employees for their dedicated and unwavering support toward the well-being of the Group.

Last but not least, I would like to thank our shareholders, customers, vendors and other stakeholders, who have placed their faith in us since our humble beginnings until today.