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5. APM Automotive Holdings Berhad Business Report FY ended Dec. 2015

APM Automotive Holdings Berhad Business Report FY ended Dec. 2015

Recent Development

Factors
1) Sales
-The Company’s sales for the fiscal year ended December 31, 2015, decreased by 6.1% from the previous year to MYR 1,152.8 million. Decreased domestic demand in both the OEM and replacement market were the main contributors to the decrease in sales, despite a 52.5% growth in revenue for sales outside of Malaysia.

2) Profit before taxes
-In the fiscal year ended December 31, 2015, the Company’s profit before tax was MYR 95.0 million, decreasing 34.6% from the previous year. Factors contributing to this decrease include higher raw material prices, reduction in total production volume, and a negative one-time adjustment on inventory value.

3) Suspension Division sales
-The Company’s Suspension Division had sales of MYR 108.8 million in the fiscal year ended December 31, 2015, a decrease of 11.6% from the previous year. Lower demand from both OEM customers and the replacement parts market contributed to the decrease in sales.

4) Interior & Plastics Division sales
-The Interior & Plastics Division’s sales decreased by 8.2% in the fiscal year ended December 31, 2015 to MYR 614.0 million. The decrease in sales was due to lower demand as two of the Company’s key OEM customers had scheduled no production for much of the second half of 2015. In addition, sales were further impacted by unfavorable product mix and a negative one-time adjustment on inventory value.

5) Electrical & Heat Exchange Division sales
-During the fiscal year ended December 31, 2015, the Company’s Electrical & Heat Exchange Division had sales of MYR 154.6 million, a decrease of 15.3% from the previous year. Lower domestic demand was the main cause of the decrease in sales.

Acquisitions

-In August 2014, the Company announced that APM Auto Components (Australia) Pty Ltd has completed the acquisition from McConnell Seats Australia Pty Ltd of its public sector mass transit seating manufacturing business known as "McConnell Seats Australia" including all goodwill and assets associated with the business for cash considerationsof AUD 4.7 million (approximately USD 4.4 million). APM Auto Components (Australia) is a wholly-owned subsidiary of Auto Parts Holdings Sdn Bhd which in turn is a wholly owned subsidiary of APM. McConnell Australia designs and manufactures seats for bus and rail markets in Australia. (From a press release on August 4, 2014)

Joint Ventures

-The Company has announced that its wholly owned subsidiary, APM Auto Components Europe B.V. (AACE), has established a joint venture company with Bent Holding B.V. in the Netherlands. The new company, APM-TS B.V., was incorporated to carry out the business of development of springs, absorbers and coilovers for the automotive markets. As part of its establishment, APM-TS B.V. will acquire certain assets and business of TS-Automotive B.V. AACE owns 80% in the new company, while Bent Holding owns 20%. (From a press release on November 13, 2015)

-In January 2013, the Company announced that the Company and Tachi-S Co., Ltd. will establish a new company "APM Tachi-S Seating Systems" in Selangor, Malaysia through a joint investment. The company will produce automotive seats for 40,000 vehicles a year, starting in the second half of 2014. The seats will be supplied to the plants of Japanese automakers. Production operations will be initially outsourced to Auto Parts Holdings, to which Tachi-S is licensing-out technologies. APM Tachi-S Seating Systems will be capitalized at MYR 3.5 million, of which 60% will be provided by Auto Parts Holdings and 40% by Tachi-S Thailand Co., Ltd. The capital composition is planned to be adjusted when the factory is completed. Sales are expected to reach JPY 3.2 billion by the fiscal year ended December 31, 2015.

Awards

R&D Facilities

-APM Engineering & Research Sdn Bhd, which provides engineering design and development services to companies with in the Group, moved to Oasis Square, Ara Damansara in Selangor, Malaysia in 2014.

Technological Alliance

Investments in Malaysia

-During the fiscal year ended December 31, 2015, the Company was in the process of constructing a manufacturing plant in Kulim, Malaysia, for its Interior & Plastics Division. Operations are expected to begin at the plant by the end of 2016.

Investments outside Malaysia

-In 2014, the Company is building a plastic and components plant in Rayong, Thailand.

-In December 2013, the Company announced that it has established the new company, APM Auto Components (Thailand) Ltd. (AACT). APM Automotive International Ltd., APM Automotive IndoChina Ltd. and APM Automotive Thailand Ltd. subscribed for the new company's shares . APM Automotive Thailand holds 14,999,995 shares of the total 15,000,000 shares of AACT, which is capitalized at THB 112.5 million (approximately USD 3.5 million). The new company will be principally involved in the manufacturing of automotive plastic parts and components and carrying out the business of importing and exporting automotive parts and components.


-In 2013, the Company's leaf spring manufacturing plant saw significant improvements in operational efficiencies. Over 49% of the products manufactured at the plant are exported.


-In December 2014, the Company announced that the Ministry of Law and Human Rights of the Republic of Indonesia has approved the deed of establishment of the Company's two wholly owned subsidiaries. P.T. APM Leaf Springs Indonesia, which is capitalized at USD 15 million, will manufacture and sell leaf springs. Meanwhile, P.T. APM Shock Absorbers Indonesia, which is capitalized at USD 5 million, will manufacture and sell shock absorbers. Both subsidiaries are 75% owned by P.T. APM Automotive Indonesia and 25% owned by P.T. APM Auto Components Indonesia. (From a press release on December 8, 2014)

-In 2014, the second plant in Karawang, Indonesia, commenced construction, and will be ready for the production of leaf springs by the end of 2015.

-In 2013, PT APM Armada Suspension commenced supply of coil springs to a local car makers. The plant was able to improve operational efficiencies.


-In October 2013, the Company announced that it has received a Permit from Myanmar Investment Commission (MIC) to approve an investment proposal by APM Automotive Myanmar Ltd. and APM Automotive Indochina Ltd. for manufacturing and marketing automotive parts and modules in the industrial area of Bago Region, Myanmar. The new company's name is "APM Auto Components Myanmar Co., Ltd. (APM Myanmar)". The new company will have an authorized capital of USD 10 million. Construction of the plant will commence within one year from the date of the MIC Permit and is expected to be completed in three years. The initial outlay of APM Group for the construction of manufacturing plant, purchase of machinery and equipment for the first three years is estimated at USD 9 million.