CMSB reports stable earning with pre-tax profit of RM320 million

Kuching (Sarawak), Friday, 24 February 2017 – Cahya Mata Sarawak Berhad (CMSB – 2852), the State’s leading infrastructure facilitator, is pleased to announce its financial performance for the financial year ended 31 December 2016 (FY2016). The Group reported a total revenue of RM1.55 billion and pre-tax profit (PBT) of RM302.14 million for FY2016. Revenue and PBT decreased by 13% and 22% in comparison to the preceding year’s (FY2015) record result of RM1.79 billion and RM388.60 million.

The Group, however, recorded a strong recovery in profits during the second half of 2016 (2H2016) with PBT of RM236.47 million in comparison to the first half of 2016’s (1H2016) PBT of RM65.67 million. The Group’s PBT for the fourth quarter ended 31 December 2016 (4Q16) of RM141.73 million improved by 50% in comparison to the third quarter ended 30 September 2016’s (3Q16) PBT of RM94.74 million and 16% in comparison to the fourth quarter ended 31 December 2015’s (4Q15) PBT of RM122.32 million.

Despite challenging market conditions, the Group’s Cement Division recorded a PBT of RM105.00 million for its contribution towards the results for FY2016 which is 2% higher than FY2015’s PBT of RM103.17 million. The Construction Materials & Trading Division reported a PBT of RM106.75 million for FY2016, comparable with FY2015’s PBT of RM107.99 million despite lower revenues, due to improved margins partly from lower costs of bitumen and diesel. The Construction & Road Maintenance Division recorded a PBT of RM85.40 million (excluding the share of results of joint ventures), a decline in comparison to FY2015’s profit of RM133.33 million by 36%. This was due to less construction works undertaken and due to the reinstatement of arrears of revenue from routine maintenance work during 2015 resulting in exceptionally solid financial results for the year. The Property Development Division’s PBT improved to RM23.51 million during FY2016 from a PBT of RM19.85 million in FY2015, representing an 18% increase.

The Group also recorded losses of RM35.17 million in FY2016 from the share of results of its associates. This is largely due to the losses reported by the Group’s 25% associate, OM Materials (Sarawak) Sdn Bhd during the first half of this year. The results have since improved as CMSB recorded a profit of RM13.73 million from the share of results of its associates during the second half of 2016 (2H2016). This performance level, going forward, is expected to steadily improve.

Commenting on the results, Dato’ Richard Curtis, Group Managing Director of CMSB, said: “The previous year (2016) was a challenging period for us in terms of Group performance meeting targets as we had faced challenging market and operational conditions. These macro factors included low commodity selling prices, higher costs of raw materials in the Cement Division resulting from the strong U.S. dollar, and generally the sluggish private and public sector demand attributable to bank lending restraints and the lack of any new big projects. Our Group’s core businesses, however, remained resilient during this period and continued to report stable earnings.

We continue to remain optimistic that CMSB will generate stable financial performances in the medium term, as this is evidenced by the strong recovery in profits during the second half of 2016 (2H2016). We expect this upturn to be sustained with performance levels rising further in 2017 and 2018 when it is expected that the market sectors CMSB are involved in are likely to see demand growth and price improvements. At a macro level we remain positive on a steady albeit modest recovery in oil and commodity prices to levels that enable CMSB’s businesses to grow positively. Within Sarawak, the continued focus towards a development oriented State budget bodes well for our core businesses.”

“Our confidence in our prospects is supported by our healthy balance sheet, our experienced management team and our focused portfolio of core business Divisions which are well positioned to benefit from the State’s ever growing infrastructure needs including the RM27.0 billion Pan Borneo Highway project, which is now kicking off. Looking further to the future, CMSB’s potential high growth investments in SACOFA Sdn Bhd, Malaysian Phosphate Additives (Sarawak) Sdn Bhd and OM (Sarawak) Sdn Bhd are confidently expected to materially transform our longer-term profits growth.

“We believe that CMSB continues to be one of the best proxy listed investments for Sarawak’s economic growth. This is consistent with the State’s promotion of energy intensive industries under the Sarawak Corridor for Renewable Energy (SCORE) initiative, its rural transformation plans and the infrastructure and related services that will therefore be required across the State. These few drivers, which reflect CMSB’s business focuses, are set to propel the State’s economy and CMSB to new heights in the medium and long term”, said Dato’ Curtis.

CMSB’s dividend policy provides for a net payout ratio of 40% of its annual consolidated profit after tax and non-controlling interests (PATNCI) to shareholders subject to a minimum of 2 sen per share. For FY2016, the Board is proposing a first and final tax exempt (single-tier) dividend of 6.30 sen per share subject to shareholders’ approval at the forthcoming Annual General Meeting. This represents a payout ratio of 40.01% and amounts to a dividend payable of RM67.69 million (FY2015:RM48.35 million).