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Quarterly Report For The Financial Period Ended 30 September 2017

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Condensed Consolidated Statements Of Profit Or Loss And Other Comprehensive Income
For The Quarter Ended 30 September 2017 - unaudited

Income Statement Ended 31 March 2017

The above condensed consolidated statements of profit or loss and other comprehensive income should be read in conjunction with the audited financial statements for the year ended 31 December 2016 and the accompanying explanatory notes attached to these interim financial statements.

Condensed Consolidated Statements Of Financial Position
As At 30 September 2017 - unaudited

Balance Sheet Ended 31 March 2017

The above condensed consolidated statements of financial position should be read in conjunction with the audited financial statements for the year ended 31 December 2016 and the accompanying explanatory notes attached to these interim financial statements.

Operating Segments Review

Statement of Financial Position

The Group’s financial stability was reflected in net assets per share and cash and cash equivalents with other investments which remain constant at RM6.14 (2016: RM6.14) and RM337.9 million (2016: RM331.0 million) respectively.

Total current assets had decreased by 2.0%, to RM857.8 million which is mainly due to better management of trade receivables. Meanwhile, total non-current assets had increased by 2.0% to RM724.4 million. The increase was mainly due to the purchase of land and building in Australia. The increase in non-current assets is offset by the depreciation of intangible assets.

Current liabilities had decreased by 7.3% to RM272.7 million. The decrease is mainly due to lower trade and other payables where, lesser purchases were made during the quarter as compared to Q4 2016. The decrease in lower trade and other payables is partially negated by the increase in loans and borrowings where the increase was used to finance the purchase of land and building in Australia.

Total non-current liabilities is relatively similar to last year at RM55.3 million (2016: RM53.4 million; an increase of 3.5%.

Looking ahead, the Group’s strong cash and cash equivalents provide flexibility in pursuit of growth and expansion. This is further strengthened with the availability of the Islamic Commercial Papers (“ICPs”) Programme and Islamic Medium Term Notes (“IMTNs”) of up to RM1.5 billion in nominal value.

Capital Expenditure and Cash Flow Position

Capital expenditure for the year was 7.3% of revenue, or RM62.8 million. The purchase was mainly on the building in Kulim, Kedah and purchase of land and building in Australia. In addition, the Group has contracted capital expenditure of RM30.5 million mainly for the tooling of new models.

Cash and cash equivalent as at 30 September 2017 were RM219 million, up RM14.5 million from preceding year same quarter mainly due to capital injection of RM12.4 million by the joint venture partner in respect of a newly incorporated joint venture company during the year.

Analysis of Performance of All Operating Segments
3Q17 vs. 3Q16

The Group’s recorded revenue of RM291.4 million in the current quarter, representing a decrease of 7% compared to 3Q16 of RM313.3 million. The Interior and Plastics registered higher reduction in revenue in view of lower demand from OEM parts for certain car models.

Likewise, Group’s profit before tax was down by 23.9% to RM20.3 million compared to previous year same quarter of RM26.7 million. The lower profit before tax was also attributed to lower production volume while production overheads remained fixed, coupled by rising material cost due to a weaker Ringgit.

Year-to-date 2017 vs. Year-to-date 2016

Revenue YTD 2017 of RM861.0 million was marginally lower by 3.9% compared to YTD 2016’s revenue of RM896.0 million. The reduction in revenue was in tandem with lower off take from OEMs as explained earlier. The decrease in local operation’s revenue was mitigated by higher sales from Indonesia operation which registered double digit (84.2%) revenue growth.

The Group’s profit before tax decreased by 12.9% to RM49.5 million compared to RM56.8 million as a result of lower revenue, higher raw material prices arising from a weak Ringgit and reduction in production volume with production overheads which remained relatively fixed. The pre-operating cost in Thailand operations had further reduced the Group’s bottom-line.

Segmentation Review
Suspension Division

The Suspension Division’s revenue grew by 4.6% to RM54.1 million in 3Q17 compared to RM51.7 million in 3Q16 due to higher export sales for leaf spring products. Profit before tax for 3Q17 on the other hand reduced to RM5.4 million from RM6.7million a year ago. The decrease was a result of higher steel prices and reduction of production volume at shock absorber and coil spring plants with production overheads which remained relatively fixed.

Unlike the growth in current quarter under review, the Suspension Division’s revenue for the three quarters of 2017 decreased by 5.2% to RM151.2 million from RM159.4 million in the same period last year. The lower revenue was mainly due to lower demand from OEM customers, especially for shock absorber products as it has reached the end of product life cycle in the second half of 2016. The profit before tax was however relatively flat at RM15.6 million compared to RM15.7 million in YTD 3Q16 due mainly to reversal of over provision for product warranty claims.

Interior & Plastics Division

Interior and Plastics Division’s revenue recorded RM186.3 million in the current quarter, a decline of 12.5% compared to RM213.0 million for the corresponding quarter in the previous year. Profit before tax slipped to RM9.4 million, a decrease of 36.5% compared to RM14.8 million for the same quarter last year. The reduction in both top and bottom-line was in tandem with the lower demand from OEM markets.

In the first nine months, Interior and Plastics posted RM560.8 million in revenue against RM588.1 million a year ago. The decrease in revenue was attributed to lower demand of vehicle seats from OEM customers. Total Industry Production Volume (“TIP”) for the nine months of 2017 decreased by 1.5% from 386,965 units to 381,171 units in the same period last year. [Source: Malaysian Automotive Association].

Despite lower revenue, the segment’s profit before tax increased by 15.4% from RM22.7 million in previous corresponding period to RM26.2 million due to inventory variance adjustment recorded last year.

Electrical & Heat Exchange Division

The Electrical & Heat Exchange Division achieved revenue of RM37.9 million in 3Q17, a decrease of 7.5% from RM41.0 million compared to the same quarter of preceding year. Profit before tax stood at RM1.5 million, a decrease of 44.4% from RM2.7million in 3Q16. The production phase-outs for certain car models during the third quarter of 2016 and lower demands from OEM parts have resulted in the reduction of revenue and profitability for this division.

On a year-to-date basis, the revenue has decreased 14.6% to RM109.2 million from RM127.9 million in previous corresponding period. Similarly, profit before tax was also lowered to RM2.1 million from RM11.9 million in the corresponding period in 2016. The higher margin recorded last year was due to positive price adjustment in relation to the foreign exchange fluctuation from its OEM customers.

Marketing Division

The Marketing division continued to achieve double digit revenue growth since beginning of the year. Its revenue rose 11.2% to RM64.5 million from RM58.0 million same quarter last year. The division also saw an improvement in profit before tax of RM2.9 million in 3Q17 compared to RM2.4 million in the same period of the previous year. The higher sales were attributed to the aggressive promotional campaigns and the launch of new products for the local replacement markets. Strong export sales for leaf spring product to Europe markets also contributed to the increase in revenue.

For the first nine months of 2017, the division registered revenue of RM183.9 million, representing an improvement of 16.3% from RM158.1 million in the same period last year. The growth was attributed to the reasons mentioned above, coupled with the strong export sales to OEM customers in Thailand. Accordingly, profit before tax has increased by 17.3% to RM7.7 million.

Non-reportable segment, Malaysia

This segment comprises mainly operations relating to the rental of properties in Malaysia, provision of management services, and engineering and research services for companies within the Group. The revenue from these services formed part of inter-segment elimination for the total Group's results (as depicted in Note A9). In addition, this segment also comprises the business of casting, machining and assembly of aluminum parts and components and distribution of motor vehicle to internal and external customers.

For the current quarter of 2017, the non-reportable, Malaysia segment’s profit before tax maintained at RM0.8 million despite the higher revenue. This was mainly due to higher foreign currency translation losses arising from debtors.

For year-to-date of 2017, this segment recorded a profit of RM0.9 million compared to a loss of RM0.9 million in the previous year same period, which was in line with the higher billing of service fee.

Indonesia Operations

Our Indonesia Operations refers to the manufacture of suspension products such as coil spring and leaf spring and the Group’s investment in joint venture and associate in Indonesia.

The Indonesia Operations registered impressive revenue growth with increase of 96.1% for the third quarter of 2017 at RM14.9 million compared to RM7.6 million recorded in the corresponding quarter last year. The revenue from the sale of leaf spring in the local replacement market contributed largely to the increase in revenue. In tandem with the higher revenue, the segmental loss has narrowed by 54.5% compared to loss of RM3.3 million in the same quarter of 2016.

Consistent with the current quarter review, the revenue in Indonesia Operation for the three quarters of 2017 increased by 84.2%, or RM21.5 million to RM39.6 million, mainly contributed by higher off-take from OEMs and sale of leaf spring.

However, the Indonesia Operation continued to suffer losses of RM6.8 million compared to a loss of RM6.2 million in the same quarter last year. The loss in the segment was due to the higher depreciation, and operating cost for a new plant manufacturing shock absorber which has commenced operation in second quarter of 2017.

All Other Segments

This business segment refers to our operations in Thailand, Vietnam, Australia, the United States of America, Netherlands and Myanmar (“Operations Outside Malaysia”).

Operations outside Malaysia posted revenue of RM33.8 million for its third quarter of 2017, a decrease of 5.6% from RM35.8 million recorded in the corresponding quarter last year. The revenue reduction was mainly caused by lower revenue in Vietnam’s seat division. Correspondingly, profit before tax has decreased to RM2.1 million from RM2.8 million in the same quarter last year.

Revenue for the nine months of 2017 grew slightly to RM94.5 million from RM92.5 million in previous corresponding period, mainly due to stronger foreign currency against Ringgit Malaysia. The venture in Australia continued to be the main contributor of the total segment revenue with contribution of 49.2% for the nine months period of 2017.

Profit before tax on the other hand decreased by 47.9% to RM3.8 million from RM7.3 million in YTD 3Q16. The segment profit was marked down by the higher operating cost resulting from shifting of plant for Australia operations. The higher operating cost which comprised mainly staff costs and depreciation for Thailand operation has also contributed to the decline of the Segment’s profit.

Commentary On Strategies andd Risk, Prospects and Targets

APM is primarily engaged in the design, manufacturing and supply of automotive parts with a reach that extends not only throughout Malaysia but internationally as well. Currently, APM has active presence in the United States of America, Netherlands, Australia and many countries in the ASEAN region including Thailand, Vietnam and the Republic of Indonesia.

The performance of APM may be affected by regulatory and policy changes, unfavorable economic, social and political conditions in countries where it operates, currency fluctuation and the rapid changes of technologies.

In mitigating these risks and for sustainable growth, APM has created and embarked on a 5-year transformation plan since 2015 that emphasizes on five strategic priorities, i.e. expansion, efficient and cost effective operations, research and development and branding enhancement activities.

APM believes that innovation is one of the keys to success and has not allowed the current challenging economic climate to be a deterrent in its pursuit of the same. In this respect, APM has invested in and established a fully functional research and development centre that houses more than 80 engineers. This centre is equipped with some of the latest cutting edge technologies and a central testing laboratory. APM’s engineers have been carefully selected and are capable of handling a range of tasks, including product design and development as well as manufacturing process and technology improvement.

Having the credentials that include over 30 years of manufacturing experience have enabled APM to remain competitive over the years but APM is aware that it cannot rest on its laurels and rely on past successes to drive it forward. APM aims to further improve on its competitiveness and market share through the gradual introduction of automation into its manufacturing processes, the continued adoption of forward transactions based on actual commitments rather than leveraging on derivatives and speculative hedging to curb losses associated with currency fluctuation and the increased focus on the export market for its products.

Continued drive for growth will be effected through mergers, acquisitions, partnerships and jointventures with the aim of developing and conveying products and services that are not only beneficial and in line with the APM’s vision but also provide synergistic value to the APM’s business and customer base.

Malaysia economy is expected to continue growing at faster pace with GDP growth for the 2017 expected to expand ranging 5.2% to 5.7% compared with 4.3% to 4.8% estimated earlier (Source: Malaysia Budget 2018). Nevertheless, the automotive industry is seen to be operating in challenging environment following the continued weakening of Ringgit Malaysia against the US Dollar, softened domestic demand for motor vehicles and more stringent hire purchase approval.

On the backdrop of the tough environment, the Group’s results for the year remain challenging and affected by the economy. Nonetheless, the Group is looking to sustain its long-term earnings by pursuing Group wide strategies as mentioned earlier.