SOUTHERN ACIDS (M) BERHAD 35TH ANNUAL GENERAL

SOUTHERN ACIDS FY2016 FINANCIAL
HIGHLIGHTS 4<br>

SELECTED FINANCIAL HIGHTLIGHTS  - FY2016 Vs FY2015 503,414 536,665 6.2% 15.5% 36,916 25,964 43,691 34,106 Profit before tax Revenue FY2015 (RM’000) FY2016 (RM’000) Change 23.9% Earnings per share Profit for the year 18.2 sen 20.1 sen 9.5% Dividend (net) Dividend pay-out ratio 10.4% No change 5<br>

SELECTED FINANCIAL HIGHLIGHTS
- FY2016 Vs FY2015 626,372 604,922 FY2016 (RM’000) FY2015 (RM’000) Change 3.5% 3.0% 6.7% 67,854 225,424 65,847 211,364 Net Current Assets Total Liabilities Total Assets 513,942 Equity attributable to Shareholders of the Company 493,392 4.2% 6<br>

Southern Acids Financial Results Highlights:-
Revenue was lower by 6.2% in FY2016 compared to FY2015; and
PBT was lower by 15.5% in FY2016 compared to FY2015.

In summary, Oleochemical and Healthcare Divisions achieved a higher PBT whereas Plantation & Milling reported a lower PBT in FY2016. 7<br>

SOUTHERN ACIDS FY2016 REVIEW OF BUSINESS DIVISIONS 8<br>

Highlights:-

The 18.8% lower in revenue was mainly due to 15.8% lower in sales volume. The lower demand from major importing countries has caused stiff competition in international market; and

Analysis of the RM7.2m increase in PBT:-
Operational profit; the efficient sourcing of raw material has cushioned the impact from lower sales. The division achieved a marginal increase of RM0.9m in PBT; and
Non-Operational profit; out of the RM7.2m, RM6.3m was contributed mainly by gain in forex (both realized and unrealized). Review of Oleochemical Division 9<br>

Prospects of Oleochemical Division This division will remain to be challenging in FY2017 and it is expected to face the same uncontrollable factors as follow, amongst others:-

Economy situation of major importing countries which will determine the market demand and pricing;
Higher operating costs due to the increase in regulated price in Malaysia. For example, natural gas price and minimum wages;
Changes in Malaysia foreign labor policy;
Volatility in USD/MYR exchange rate; and
Volatility in CPO price. 10<br>

Oleochemical Division’s Plan For FY2017 In view of the anticipated challenges in FY2017, the following are among the key identified measures to be taken:-

To implement cost optimization;
To increase sales to high margin market via more efficient marketing strategy; and
To look into automation processes to reduce dependency on workers and improve efficiency and productivity;
To look into the possibility of alternative fuel source to reduce the dependency on external energy supply; and
To manage the forex and commodity hedging more diligently. 11<br>

Highlights:-
The increase in revenue was mainly contributed from the new 60MT/hour palm oil mill (“POM”) commissioned in August 2015;
Despite higher revenue, operational profit was lower by RM14.6m was due to the following factors:-
The El Nino effect had severely affected the fresh fruit bunches (“FFB”) supply and its quality;
In view of the low FFB supply, the higher price for external outsourced FFB was higher; and
The average selling price (“ASP”) of CPO realized was lower compared to the ASP of CPO in FY2015. Review of Plantation & Milling Division 12<br>

Prospects Of Plantation & Milling Division The performance of this division in FY2017 will be affected by the following factors, amongst others:-

Impact of post-El Nino on FFB production and its quality;
Changes in Indonesia’s regulated cost such as minimum wages (yearly affair) and export levy;
CPO selling price; and
Effectiveness on the implementation status of biodiesel mandate by Malaysia and Indonesia governments. 13<br>

Plantation & Milling Division’s Plan For FY2017 In view of the anticipated challenges in FY2017, the following are among the key identified measures to be taken:-

To implement cost optimization;
To purchase external FFB more competitively;
To look into mechanization for plantation operations in order to reduce the dependency on workers and to improve efficiency and productivity; and
To look into the prospect of increasing brown field estate. 14<br>

Highlights:-
The 6.7% higher in revenue was contributed by 11.0% higher in average revenue per patient (“ARPP”); and
Analysis of the RM4.2m increase in PBT:-
Operational profit; higher ARPP recorded in FY2016 contributed additional PBT of RM2.7m compared to PBT in FY2015; and

Non-Operational profit; RM1.5m was contributed mainly from the reversal of accounting provisions which no longer required in FY2016. Review of Healthcare Division 15<br>

Prospects of Healthcare Division The performance of this division in FY2017 may be affected by the following factors, amongst others:-

Competition from nearby hospitals;
Recruiting and training the key human resources; and
Economic outlook that may affect patients spending behavior. 16<br>

Healthcare Division’s Plan For FY2017 The main objective of this division is to at least maintain its market share and improve its bottom line for FY2017. Among the identified measures to be taken are as follows:-

Cost optimization;
To enhance branding and awareness via strategic marketing activities;
To continue our staff retention program; and
To improve service delivery via gradual upgrading program. 17<br>

Prospects of Southern Acids Based on the prospects commentary,
the performance of Southern Acids
will remain challenging in
FY2017. 18<br>

SOUTHERN ACIDS FY2016 QUESTIONS
& ANSWERS 19<br>