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Quarterly Report For The Financial Period Ended 30 September 2016

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Condensed Consolidated Statements Of Profit Or Loss And Other Comprehensive Income
For The Quarter Ended 30 September 2016 - unaudited

Income Statement Ended 30 September 2016

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 2015 and the accompanying explanatory notes attached to these interim financial statements.

Condensed Consolidated Statements Of Financial Position
As At 30 September 2016 - unaudited

Balance Sheet Ended 30 September 2016

The above condensed consolidated statements of financial position should be read in conjunction with the audited financial statements for the year ended 31 December 2015 and the accompanying explanatory notes attached to these interim financial statements.

Operating Segments Review

Analysis of Performance of All Operating Segments
3Q16 vs. 3Q15

The Group recorded revenue of RM313.3 million in the current quarter, an increase of 22.5% compared to 3Q15 of RM255.8 million. The Interior & Plastics Division led the growth in revenue in view of higher demand from OEM customers following new model launches and localization of certain OEM parts.

Backed by stronger revenue, the Group's profit before tax improved by 60.2% to RM26.7 million in 3Q16 from RM16.7 million recorded in the same quarter last year underpinned by higher sales volume and improved gross profit margin resulting from adjustment of price for foreign currency fluctuation by OEM customers.

Year-to-date 2016 vs. Year-to-date 2015

On a year to date basis, the Group's revenue reached RM895.9 million, posting a 1.8% growth from RM879.9 million in the same period of the preceding year supported by the higher contribution across all countries outside Malaysia aside from the Marketing Division.

However, the Group profit before tax dropped to RM56.8 million, a dip of 26.3% from RM77.0 million in the nine month period of last year. Profit before tax was adversely affected by the losses suffered in Indonesia Division as a result of higher operating costs for the newly set-up manufacturing plant coupled with the lower profitability in Interior & Plastic Division in the first half of 2016 caused by the continuing negative impact of the foreign exchange rate on raw material costs, unfavourable product-mix and inventory variance adjustment.

Segmentation Review
Suspension Division

Revenue for the Suspension Division was relatively flat at RM51.8 million in the current quarter compared to RM51.1 million in 3Q15. The low revenue growth was caused by lower off-take from OEM as certain OEM parts have reached the end of product life cycle. Nevertheless, the Division's profit before tax increased substantially by 49.8% to RM6.7 million from RM4.4 million in the same quarter of the previous year from better margin attributed to a more favourable product mix and a stronger US Dollar and Euro for its export market.

For the nine months period ended 30 September 2016, revenue for the Suspension Division segment decreased by 3.6%, down to RM159.4 million from RM165.4 million in the corresponding period last year. Profit before tax stood at RM15.7 million for the current nine months period under review against RM13.5 million over the same period of the previous year. The higher margin for products that were exported has positively contributed to the bottom-line of the Division.

Interior & Plastics Division

The Interior & Plastics Division registered revenue growth of 39.7% to RM213.0 million in the current quarter under review as opposed to RM152.5 million in 3Q 2015 due to the new model launches and higher localization content for certain OEM parts.

Correspondingly, profit before tax surged by more than threefold to RM14.8 million from RM4.7 million recorded in same period last year. The higher profit before tax is also attributed to the improved gross profit margin resulting from adjustment of price for foreign currency fluctuation by OEM customers.

Despite the lower Total Production Volume (TIP) in the automotive sector, for the nine months period ended 30 September 2016, the revenue for Interior and Plastics Division has posted a modest increase of 0.8% to RM588.1 million compared to RM583.4 million in the previous corresponding period. This is mainly due to consolidation of revenue from APM Tachi-S Seating Systems Sdn Bhd ("ATS") of RM44.2 million for the nine months period as ATS (previously as joint venture) become a subsidiary of the Group during end of 2015. In the previous years, the Group's consolidated financial statements include only the Group's share of the profit or loss of ATS.

Profit before tax weakened to RM22.7 million, or a decline of 47.6% from RM43.3 million recorded in the same period of the preceding year. The negative effects from foreign exchange rate on the raw material costs and unfavourable products mix continued to weigh down the performance of the Division.

Electrical & Heat Exchange Division

The third quarter revenue in the Electrical & Heat Exchange Division fell slightly by 2.4% to RM41.0 million from RM42.0 million in the corresponding quarter of the preceding year owing to the lower demand from OEM customers. However, profit before tax in 3Q16 improved to RM2.7 million from RM1.2 million in 3Q15 mainly due to the price adjustment in relation to the foreign exchange fluctuations from its OEM customers.

In the first nine months of the current year, the Division registered revenue of RM127.9 million against RM131.6 million recorded in the same period last year, representing a drop of 2.8%. The end of the product life cycle for certain OEM parts has impacted its revenue stream. Nevertheless, the Division's profit before tax improved to RM11.9 million from RM9.2 million in the same period of the preceding year, which was attributed to the positive price adjustment as mentioned above.

Marketing Division

Marketing division increased its revenue by RM13.7 million, or 31.1% quarter on quarter to RM58.0 million in 3Q2016. The higher sales activities were fueled by the aggressive promotional campaigns, the launch of new products and stronger export sales to OEM customers in Thailand and Australia. Profit before tax lowered by 12.7% from RM2.7 million in 3Q2015 to RM2.4 million in the current quarter, in view of the expenditures incurred on promotional activities and unfavourable products mix.

For year-to-date 2016, this division recorded revenue of RM158.1 million, representing an improvement of 24.2% from RM127.3 million in the same period last year. The growth was attributed to the increase of 29.5% in export sales which has in turn translated to a better profit before tax of RM6.5 million as compared to RM5.6 million in the same period of last year. Favourable product mix also contributed to the improvement of the Division’s profitability.

Non-reportable segment, Malaysia

This segment comprises mainly operations relating to the rental of properties in Malaysia, provision of management services, engineering and research services for companies within the Group. The revenue streams were mainly rental and services fee charged within the Group and formed part of inter-segment elimination for the total Group's results (as depicted in Note A9).

Third Quarter revenue rose slightly in the non-reportable, Malaysia segment by 14.2% to RM13.0 million from RM11.4 million whilst its profit before tax stood at RM0.8 million, representing an increase of RM0.4 million from the same period in 2015. The improved performance was in line with the higher billing of service fee.

On a year-to-date basis, this segment recorded a loss of RM0.9 million compared to RM1.9 million in the previous year same period.

Indonesia Operations

Our Indonesia Operations refers to the Group's wholly-owned subsidiaries operations producing suspension products such as coil spring and leaf spring as well as the Group's investment in joint venture and associate in Indonesia.

Revenue for the Indonesia Operations of RM7.6 million for the third quarter of 2016, almost doubled from RM4.0 million recorded in the corresponding quarter last year, attributable to the higher off-take from OEMs and launch of new models.

However, the Indonesia Operation has recorded a loss of RM3.3 million compared to a loss of RM0.7 million in the same quarter last year. Higher loss in the segment was due to the onset of depreciation charges, and operating cost for its new manufacturing plant for leaf spring which has since commenced operation in June 2016 as well as the higher losses from the joint venture company i.e. P.T. Armada Autoparts.

Consistent with the above-mentioned factors, while the revenue in Indonesia Operation for the first nine months of 2016 increased by 84.3%, or RM9.8 million to RM21.5 million, the loss before taxation widened to RM6.2 million from loss before tax of RM1.6 million in the nine months period of the preceding year.

All Other Segments

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

Revenue from Operations Outside Malaysia continued to register growth of 12.6% for the third quarter of 2016, to RM35.8 million compared to RM31.8 million in corresponding quarter last year. The coach seat business in Australia and Vietnam operations continued to be the two largest revenue contributors in Operations Outside Malaysia, accounting for 43% and 45% of the 3Q16's segment revenue respectively. In addition, our recent Netherlands venture has also contributed RM1.6 million to the segment revenue for the current quarter under review.

The segment profit before tax for the third quarter of 2016 was RM2.8 million as compared to RM3.8 million in 3Q2015. The pre-operating cost (particularly in relations to land and staff costs related expenses) incurred for Myanmar and Thailand operation has lowered the profitability of the segment.

Year-to-date, revenue for this segment was RM92.5 million, a growth of 27.5% from RM72.6 million while its profit before tax deteriorated slightly to RM7.3 million compared from RM8.5 million in the same period last year.

Commentary On Prospects and Targets

The automotive industry continues to operate in tough environment with weakening of Ringgit and low consumer confidence as a result of the economic uncertainties and apprehension about job outlook. As a result, the Malaysian Automotive Association ("MAA") has revised its total industry volume downward for this year to 580,000 units from 650,000 forecasted earlier.

As a major OEM supplier, the Group's financial position is very much dependent on the performance of the domestic automotive industry. In spite of the expected reduction in Total Industry Volume, the Group remains optimistic that our strategies of product innovation and regional expansion will bring about sustainable growth. At the same time, we are focused in improving operational efficiency and reducing costs to stay ahead of the heightened competition amidst this challenging economic environment.