Chairman's Statement

2009 proved to be an unprecedented year for the global automotive industry with auto sales severely affected by the worst global financial crisis that has devastated a majority of the world's economies and saw vehicle production dropped to the lowest level in decades.

The automotive industry in Malaysia was not spared. However, the decline in total industry production (TIP) was fortunately not as severe compared to Japan, the US, Europe and other countries. Only China and India bucked the trend. Production in Malaysia for the first six months was low but swiftly recovered in the third quarter with further improvement in the last quarter of the year. As a whole, TIP volume only dropped by 7.8% from 530,810 units to 489,269 units compared with the previous year. (Source: Malaysian Automotive Association).

As for the Group, I am proud to report a year of extremely good results for the financial year ended 31 December 2009. Despite the challenges, the Group's revenue dropped by a mere 2.6% from RM 943.5 million recorded last year to RM 918.5 million. I am as proud to report the Group's best ever pretax profit of RM 100.6 million, surpassing RM 100 million for the first time!

Among our two business segments, operations in Malaysia which accounted for 88% of the total sales, recorded a higher revenue than the previous year. Operations outside Malaysia - mainly Indonesia, Vietnam and Australia, which accounted for the remaining sales, recorded a decline of 24.8%. Despite this drop, both business segments were more profitable than in the previous year. For operations in Malaysia, pretax profit improved by 5.7% from RM 86.3 million to RM 91.2 million while operations outside Malaysia turned around from a loss of RM 5.4 million to a pretax profit of RM 10.1 million.

OPERATIONS IN MALAYSIA

Our operations in Malaysia supply a wide range of automotive components for use in the manufacture of new vehicles (OEM), as well as for use as replacement parts (REM). Additionally, our products are also exported to more than 40 countries and we expect this number to grow in the years to come.

The Group's OEM sales, which accounted for 67% of its revenue in 2009, were dependent on the number of vehicles produced in the country. When TIP volume dropped in the first quarter of the year, the Group's operations and sales were significantly affected, resulting in weak OEM sales at the beginning of the year. However, OEM sales started to pick up from the third quarter when vehicle production increased and rose further into the fourth quarter.

Sales for the aftermarket (REM) which accounted for 13% of the total revenue dropped marginally by 0.2% during the year. In our effort to further improve our aftermarket sales, the Group held several technical training courses for workshop technicians in the various parts of the country aiming to enhance the value of APM brand and at the same time expanding the Group's distribution network. We will continue our efforts in this area to further consolidate our presence locally.

The Export market sector, accounting for 8% of the Group's revenue, recorded a drop of 16.4% compared with the previous year. Although progressive marketing efforts were taken to capture and improve sales, the weak and sluggish demand caused by the financial crisis had inevitably caused our export sales to decline. The Group is currently exporting to more than 40 countries, including countries in Europe, the United States, Central/South America, Australia, the Middle East, Africa and ASEAN countries. Though market conditions in these major exporting countries are not expected to improve in the near term, the Group will, nevertheless, continue with its marketing efforts to boost its export sales by setting up more distribution channels and expanding its overseas distribution network. A new company, APM Auto Components (USA), Inc., was recently set up in the US for this purpose. Although not expected to immediately contribute to the Group's revenue growth, it would in the longer term provide an avenue of growth in the North American market.

Pretax profit for operations in Malaysia recorded a 5.7% improvement, from RM 86.3 million to RM 91.2 million, despite a very low first quarter and a one-off provision for relocation expenses of RM 6.0 million during the year. The Group had reacted appropriately to the adverse conditions and its ability to maintain its profitability was the result of its cost reduction efforts through restructuring, production efficiencies and intensive supply chain management.

As part of the Group's consolidation and improvement plan, the Group will complete its final phase of relocating and centralizing its seating and interior businesses to Bukit Beruntung during the year. The next rationalization plan would involve the consolidation and centralization of its Sri Kembangan facilities to the existing Port Klang site. For this, the Group has already provided for the relocation expenses for the financial year ended 2009.

OPERATIONS OUTSIDE MALAYSIA

This business segment refers to our operations in Indonesia, Vietnam and Australia, which together generated a total revenue of RM 109.4 million or 12% of the total revenue in 2009. The Group's facilities outside Malaysia are beginning to gain recognition and are supplying parts to some of the major OEM customers not only in its domestic country but also for export. Efforts are underway by the country teams to secure more business through strong cooperation with Malaysia, as part of the ASEAN cooperative scheme.

In 2009, sales from this segment were affected due to the decline in vehicle production arising from the financial downturn. Sales of our Indonesia joint ventures plunged 32.6% during the year, the decline was more drastic in the first quarter but gradually picked up from the second quarter onwards. Our Vietnam and Australia operations were also affected but the declines were less severe, recording declines of 4.9% and 5.4% respectively.

Despite the decline in sales, operations outside Malaysia managed to turn around from a loss of RM 5.4 million in the previous year to a pretax profit of RM 10.1 million. The positive results came in after the first quarter when market conditions improved. The improved profitability was mainly a result of the positive price adjustments from customers and the strengthening of the functional currencies resulting in gains in foreign exchange, lower material prices and operational improvements. All operating units in this segment were profitable except for the coil spring business in Indonesia which, being in the second year of operation was operating below production capacity. We expect the operation of this operating unit to improve with efforts now being put into securing export contracts.

Overall, business conditions in this segment had improved since the second quarter of 2009 and continued well into this year - a good sign of sustainable recovery. With the improved economy and as part of its growth plans, the Group will be expanding into more products that will lead to additional revenue for this segment.

PROSPECTS

The upturn in global automotive production which began in the second half of 2009 is set to continue into 2010. In the domestic market, Malaysian Automotive Association has projected an increase of 2.4% growth in total industry volume (TIV) from 536,905 units to 550,000 units. The Group's domestic OEM sales will benefit directly from the higher vehicle production and is expected to grow in tandem with this increase.

In general, the Malaysian economy has shown signs of recovery since the third quarter of 2009. The business environment is expected to experience a more sustained growth in 2010. Against this back drop and with the increasing number of aging vehicles on the road, the Group's aftermarket sales is expected to perform better than the previous year

It is the Group's goal to become a full service tier-one automotive modules supplier: interior & seatings, suspensions and heat exchange & auto electric. A multiyear technical development plan is being put together to bring our knowledge and skill to the level expected by the OEMs. The Group expects to see a transformation from a traditionally strong manufacturing company to one which is also known for design, development, innovation and research. Having gone through a series of restructuring and rationalization activities, the Group is now ready to advance into the next level on technology development. The Group is planning to allocate more of its resources on upgrading its technical, testing and design capabilities.

The Group will continue to evaluate its operational and strategic alternatives so as to maintain its competitiveness and to meet the ever changing needs of its customers. While the Group continues to strengthen its position in the home market, it will at the same time evolve towards increasing global business operations outside Malaysia. Though operations in Malaysia will remain the main contributor to the overall business, the Group believes that operations outside Malaysia offers more growth opportunities as automotive manufacturers are planning to expand their production in these regions to meet their long term demand. By drawing on the Group's main strength, i.e, its diversified products, its strong customer relations as well as its strong cash flow, the Group will continue to make its presence felt by increasing its products base in these countries. The Group will also be taking advantage of the low cost resources in these countries so as to provide maximum value to its world wide customers. Currently under construction are the Group's new interiors, seating and air conditioners facilities in Vietnam, which is expected to be completed and ready to better support the domestic OEM and aftermarket customers by end of 2010.

DIVIDENDS

An interim dividend of 6% less 25% tax (2008 - 6% less 26% tax) amounting to RM 8.86 million was paid to shareholders on 16 September 2009.

The directors recommend a final dividend payment of 10% less 25% tax (2008 - 9% less 25% tax) amounting to RM 14.68 million based on the total number of ordinary shares outstanding at 31 December 2009. The amount, if approved at the forthcoming Annual General Meeting, will result in a total dividend payment of RM 23.54 million (2008 - RM 22.09 million) for financial year ended 31 December 2009.

ACKNOWLEDGMENT

The Board would like to extend a sincere thanks to all the employees for their continued support in ensuring quality, safety and timely deliveries as well as executing our action plans during a very challenging year.

We would also like to thank all our valued customers, suppliers, bankers, business associates as well as shareholders for their continuous support and confidence in the Group.