JC&C 2012 Financial Statements and Dividend

Jardine Cycle & Carriage Limited

2012 Financial Statements and Dividend Announcement

The following announcement was issued today by the Company's 72%-owned subsidiary, Jardine Cycle & Carriage Limited.

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28th February 2013

JARDINE CYCLE & CARRIAGE LIMITED

2012 FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT

Highlights

·; Underlying earnings per share stable

·; Strong growth in Astra offset by the weaker rupiah

·; Lower contribution from other motor interests

"Astra is expected to have a satisfactory year in 2013, although its performance will be influenced by commodity prices and the effects of minimum down-payment regulations in automotive financing. The Group's other motor interests will continue to face challenging trading conditions. Overall, however, the Group's prospects remain sound."

Ben Keswick, Chairman

28th February 2013

The exchange rate of US$1=S$1.22 (2011: US$1=S$1.30) was used for translating assets and liabilities at the balance sheet date and US$1=S$1.25 (2011: US$1=S$1.25) was used for translating the results for the year.

The financial results for the year ended 31st December 2012 have been prepared in accordance with the International Financial Reporting Standards. These results have not been audited or reviewed by the auditors.

(1) The basis for calculating underlying earnings is set out in Note 5 of this report.

(2) The S$ equivalent is an estimate as the actual amount of the final dividend will be determined on Books Closure Date referred to in Note 14.

CHAIRMAN'S STATEMENT

Overview

Jardine Cycle & Carriage produced a stable result in 2012. Astra's strong trading performance was due in particular to excellent results from its motor car operations, which continued to benefit from the growth in the Indonesian economy. The improvement in Astra's rupiah earnings was, however, offset on consolidation due to the decline in the US$/rupiah exchange rate. There was a satisfactory contribution from the Group's other motor interests.

Performance

The Group's revenue for the year grew by 7% to US$22 billion, while underlying profit and underlying earnings per share were largely unchanged from 2011 at US$1,016 million and US¢285.72, respectively. Profit attributable to shareholders was 4% down at US$987 million and earnings per share were also down 4% at US¢277.48 per share after accounting for non-trading items.

Astra's contribution at US$1,017 million was only slightly up on the previous year, as currency movements offset much of its earnings growth in rupiah. Strong results in its motor car and financial services businesses more than compensated for lower earnings from its heavy equipment and mining activities and motorcycle operations. The contribution from the Group's other motor interests was 5% lower at US$58 million.

The Board is recommending a final one-tier tax exempt dividend of US¢105 per share (2011: US¢105 per share). This together with the interim dividend will produce a total dividend of US¢123 per share (2011: US¢123 per share).

Business Activity

Astra

The Indonesian economy grew by 6.2%, supported by strong domestic demand. Astra delivered yet another record profit with good performances from its motor car and financial services operations. Its motorcycle business, however, was partly affected by the new down-payment requirements on financing. Astra Otoparts saw an increase in net income mainly in respect of the OEM and replacement markets. The group's 45%-owned associate, Bank Permata completed a US$212 million rights issue in December as part of its strategy to strengthen its balance sheet to support future business expansion.

Astra's heavy equipment subsidiary, United Tractors, continued to seek new coal mining investment opportunities. United Tractors and its subsidiaries now own interests in nine coal mines with combined reserves estimated at 424 million tonnes.

While Astra Agro Lestari increased its palm oil production, its performance was affected by lower average crude palm oil prices achieved, high production costs and increased operating expenses.

Elsewhere, Astra's infrastructure and logistics and information technology businesses also recorded increased contributions. The group's toll road operations continue to expand and it now has an interest in 124 km of toll roads.

Other motor interests

The Group's other motor interests recorded a lower contribution overall. In Indonesia, Tunas Ridean did well with improved contributions from its motor car, rental and finance businesses, offsetting the lower contribution from its motorcycle business. In Singapore, the motor operations performed satisfactorily, despite competitive pressures, owing to the resilience of Mercedes-Benz sales. In Malaysia, Cycle & Carriage Bintang had a disappointing year as intense competition in the premium car segment led to significant margin erosion. In Vietnam, Truong Hai Auto Corporation's results suffered from higher financing costs and a sharp fall in the automotive market due to poor consumer sentiment in a weak economy.

People

On behalf of the Directors, I wish to thank our 201,000 staff employed across the Group for their hard work and dedication.

Outlook

Astra is expected to have a satisfactory year in 2013, although its performance will be influenced by commodity prices and the effects of minimum down-payment regulations in automotive financing. The Group's other motor interests will continue to face challenging trading conditions. Overall, however, the Group's prospects remain sound.

Ben Keswick

Chairman

28th February 2013

Group Managing Director's Review

Overview

Jardine Cycle & Carriage performed well in 2012 with underlying profit similar to the previous year.

Performance

The Group reported an underlying profit of US$1,016 million, marginally lower than the previous year. Profit attributable to shareholders at US$987 million was down 4% after accounting for a net non-trading loss of US$29 million. Non-trading items mainly comprised a provision for deferred tax of US$31 million from dividends receivable from Astra, an impairment loss of US$45 million on the Group's investment in Vietnam, and a fair value loss of US$16 million on Astra's oil palm plantations, partly offset by a gain of US$57 million on the disposal of an investment and a fair value gain of US$7 million on Astra's investment properties. 

Astra's underlying profit contribution at US$1,017 million was similar to the previous year, as strong results from its motor car and finance businesses were partially offset by lower contributions from its heavy equipment and mining activities and motorcycle operations and the impact on consolidation of a weaker rupiah. Profit contribution from the Group's directly-held motor interests fell 5% to US$58 million as, outside of Indonesia, the Group's operations continue to face difficult trading conditions.

The Group's consolidated net debt at the end of 2012 was US$864 million, excluding borrowings within Astra's financial services subsidiaries, compared to the net debt of US$108 million at the end of 2011. The increase in net debt was primarily due to Astra's investment and capital expenditure in the heavy equipment and mining, automotive and agribusiness segments. Net debt within Astra's financial services subsidiaries was US$3.8 billion at the end of 2012, reflecting an increase in volume financed. The parent company had net cash of US$4 million at the end of 2012.

Group Review

Astra

Astra reported a net profit equivalent to US$2,062 million under Indonesian accounting standards, 9% up on the previous year in its reporting currency.

Automotive

Domestic car demand benefited from rising income and low per capita car ownership. New minimum down-payment requirements in conventional automotive financing introduced in mid-June 2012 adversely affected the overall market for motorcycle sales, as did a tightening of underwriting standards at certain third-party consumer finance companies throughout the year. The impact on the market for motor car sales was mild. New minimum down-payment requirements in automotive Shariah-financing introduced for finance companies from 1st January 2013, and to be introduced for banks from 1st April, are expected to negatively impact the 2013 market for both motorcycles and motor cars.

The wholesale market for motor cars grew by 25% to 1.1 million units. Astra's motor car sales rose by 25% to 605,000 units with a stable market share of 54%. Astra launched 18 new models and 26 revamped models during 2012. 

The wholesale market for motorcycles declined by 12% to 7.1 million units. Astra Honda Motor's sales declined by 4% to 4.1 million units, with its market share increasing from 53% to 58%. Astra Honda Motor's increased market share was due in part to the product line-up, with 4 new models and 10 revamped models launched during 2012, and the ability to offer attractive Shariah-financing packages not subject to minimum down-payment requirements.

Astra Otoparts, the Group's 96%-owned component manufacturing business, reported a net income of US$112 million, an increase of 5%. A 12% increase in revenue, which was mainly in the OEM and replacement markets, was partly offset by higher raw material and labour costs that could not be passed on to customers in full.

Financial Services

The aggregated amount financed through Astra's automotive-focused consumer finance operations, Federal International Finance, Astra Credit Companies and Toyota Astra Financial Services, grew by 2% to US$5.3 billion, including balances financed through joint bank financing without recourse. The aggregated amount financed through Astra's heavy equipment-focused finance operations, Surya Artha Nusantara Finance and Komatsu Astra Finance, decreased by 2% to US$755 million.

Astra's 45%-held joint venture, Bank Permata, reported net income of US$145 million, an increase of 18%, with growth in net interest income and fee-based income partly offset by higher operating costs.

Group insurance company, Asuransi Astra Buana, recorded higher earnings with strong growth in gross written premiums, partly offset by higher commissions and claims expenses.

Heavy Equipment and Mining

United Tractors, which is 60%-owned, reported net income down 2% at US$614 million.

In its construction machinery business, net revenue fell by 19% as sales of Komatsu heavy equipment fell 27% to 6,200 units. This followed lower demand from the mining sector due to the fall in coal prices, as well as increased competition from excess production redirected from the China market. This was partly mitigated by strong spare parts and after sales service revenue growth.

The coal mining contracting operations of subsidiary, Pamapersada Nusantara, reported a 25% improvement in net revenue as contract coal production increased 9% to 94million tonnes and contract overburden removal rose 7% to 855 million bcm.

Although United Tractors' mining subsidiaries reported an increase in net revenue of 7%, with coal sales increasing 24% to 5.6 million tonnes, the decline in coal prices and increased fuel costs adversely impacted margins.

Agribusiness

Astra Agro Lestari, which is 80%-held, reported net income of US$256 million. While average crude palm oil prices achieved were 3% lower at Rp7,322 per kg, palm oil production increased by 16% to 1.5 million tonnes, leading to a 7% increase in revenue. Net income was flat, however, due to higher production costs and operating expenses.

Infrastructure and Logistics

The contribution to Astra's net income from infrastructure and logistics was up by 13% to US$73 million, despite 2011 having benefited from the reversal of a tax provision, excluding which net income rose 35%.  

The 72.5 km Tangerang-Merak toll road operated by 79%-owned Marga Mandalasakti reported a 15% increase in traffic volume to 37 million vehicles. The group's 95%-owned greenfield 40.5 km Kertosono-Mojokerto toll road near Surabaya, acquired in late 2011, remains under construction and subject to the timely completion of land acquisitions, is expected to be completed in 2014. Taken together with Astratel's 40% interest in the greenfield 11.2 km Kunciran-Serpong toll road on Jakarta's outer-ring road, the group has a combined interest in 124.2 km of toll road. 

PAM Lyonnaise Jaya, which operates the western Jakarta water utility system, increased its sales volume by 4% to 160 million cubic metres. Serasi Autoraya's improved profit was supported by a 12% increase in vehicles under contract at its TRAC car rental business to over 31,000 units.

Information Technology

77%-owned Astra Graphia, which is active in the area of information technology solutions and is the sole distributor of Fuji Xerox equipment in Indonesia, reported a 23% increase in net income to US$18 million.

Other Motor Interests

Underlying profit from the Group's other motor interests at US$58 million was 5% down on the previous year.

Singapore

Profit from the Group's wholly-owned Singapore motor operations was 2% lower at US$32 million, despite the difficult trading conditions, due to the growth in Mercedes-Benz and used car sales. The passenger car market fell slightly to 27,900 units. The Group sold 5,000 passenger cars, 4% down, but maintained its 18% market share. Sales of Kia, Citroen and Mitsubishi fell, but the Mercedes-Benz brand was resilient with sales growing by 8%. Used car unit sales grew by 9%.

Malaysia

In Malaysia, 59%-owned Cycle & Carriage Bintang's ("CCB") contribution fell by 39% to US$3 million, owing to intense competition for market share in the premium car segment. CCB's sales of Mercedes-Benz passenger cars were marginally lower year-on-year, but margins suffered.

Indonesia

In Indonesia, 44%-owned Tunas Ridean contributed a profit of US$20 million, 23% up, reflecting an improved performance across its motor car, rental and finance businesses, which more than outweighed a decline in its motorcycle business. Motor car sales grew by 24% to 47,600 units, while motorcycle sales declined 12% to 175,300 units. Consumer finance associate, Mandiri Tunas Finance, benefited from a 17% increase in new lending.

Vietnam

In Vietnam, the Group's 32%-owned Truong Hai Auto Corporation ("Thaco") contributed a profit of US$4 million, 52% down on the previous year, due mainly to a fall in unit sales and sharply higher interest expenses. The automotive market in Vietnam continued to be challenging, due to the weak economy, poor consumer sentiment and a lack of affordable credit. The motor vehicle market fell 31%, while Thaco's sales fell 24% to 24,700 units.

Outlook

Astra and the Group's other motor interests continue to face challenges in their trading environments and the continued impact of the weak global economy remains uncertain. Nevertheless, the prospects for the Group in 2013 are expected to be satisfactory.

Alex Newbigging

Group Managing Director

28th February 2013

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1 Basis of preparation

The financial statements are consistent with those set out in the 2011 audited accounts which have been prepared in accordance with International Financial Reporting Standards ("IFRS"). There have been no changes to the accounting policies described in the 2011 audited accounts except for the adoption of the Amendments to IFRS 7 - Financial Instruments: Transfer of Financial Assets. The adoption of these amendments did not have any impact on the results of the Group.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. Estimates and judgments used in preparing the financial statements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results.

The exchange rates used for translating assets and liabilities at the balance sheet date are US$1=S$1.2226 (2011: US$1=S$1.2996), US$1=RM3.0591 (2011: US$1=RM3.1744), US$1=IDR9,670 (2011: US$1=IDR9,068) and US$1=VND20,830 (2011: US$1=VND21,033).

The exchange rates used for translating the results for the year are US$1=S$1.2457 (2011: US$1 =S$1.2546), US$1=RM3.0849 (2011: US$1=RM3.0554), US$1=IDR9,419 (2011: US$1=IDR8,773) and US$1=VND20,869 (2011: US$1=VND20,689).

2 Net operating costs and operating profit

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(1) Increase due mainly to the disposal of investment in a company and fair value gain on investment properties

(2) Increase due mainly to fair value loss on plantations in 2012 (2011: fair value gain)

3 Revenue and Profit after tax