JC&C 2013 Financial Statements and Dividend

Jardine Cycle & Carriage Limited

2013 Financial Statements and Dividend Announcement

The following announcement was issued today by the Company's 73%-owned subsidiary, Jardine Cycle & Carriage Limited.

For further information, please contact:

Jardine Matheson Limited

Neil M McNamara (852) 2843 8227

GolinHarris

Kennes Young (852) 2501 7987

CHAIRMAN'S STATEMENT

Overview

Jardine Cycle & Carriage produced a reasonable result in 2013, particularly as a number of its businesses faced difficult trading conditions, with the decline in earnings largely due to the impact on translation of an 11% fall in the average rupiah exchange rate used.

Performance

The Group's revenue for the year was down by 8% to US$19.8 billion, primarily due to a decline in heavy equipment sales and the impact on translation of the weaker rupiah. Underlying profit and underlying earnings per share both declined by 12% to US$894 million and US¢251.36, respectively. Profit attributable to shareholders was 7% down at US$915 million and earnings per share were also 7% lower at US¢257.24 after accounting for non-trading items.

Astra's underlying contribution of US$849 million was 13% lower largely due to the impact of the weaker rupiah on translation. In rupiah terms Astra's net income was maintained at the same level as 2012. The underlying profit contribution from the Group's other motor interests at US$59 million was in line with the previous year.

The Board is recommending a final one-tier tax-exempt dividend of US¢90 per share (2012: US¢105 per share). This together with the interim dividend will produce a reduced total dividend of US¢108 per share (2012: US¢123 per share).

Business Activity

Through 50.1%-owned Astra, the Group is involved in six business segments in Indonesia; being automotive, financial services, heavy equipment and mining, agribusiness, infrastructure, logistics and other and information technology. The Group's other motor interests operate in Singapore, Malaysia, Indonesia, Vietnam and Myanmar. Jardine Cycle & Carriage's strategy is to support the growth of Astra's businesses, and to develop its other interests in Southeast Asia through organic growth and through acquisition.

Astra

Astra's underlying profit contribution of US$849 million was down on the previous year, principally due to the weakening of the rupiah on translation as its net income in its reporting currency was unchanged. Strong results from Astra's financial services and mining contracting businesses were offset by a decline in earnings from its heavy equipment and palm oil businesses. Astra's automotive activities delivered slightly improved results, as a decline in the contribution from the components businesses was countered by an improved result from the motorcycle operations.

Astra pursued a number of business development initiatives over the past year. In April, Astra Otoparts acquired a 51% interest in a wheel rim manufacturer for US$72 million, which it followed with a US$306 million rights issue to strengthen its capital base. Astra subsequently placed out 16% of Astra Otoparts shares to help increase the liquidity of the stock, thereby reducing its shareholding to 80%.

In October, Astra announced plans to develop 2.4 hectares of land in Jakarta's city centre into an office tower and residential apartment complex, with the residential portion to be undertaken in joint venture with affiliate, Hongkong Land. In December, Permata Bank completed a US$180 million senior and subordinated debt issuance. In January 2014, Permata Bank completed a US$123 million rights issue, with Astra taking up its share, equivalent to US$55 million. The capital raisings will strengthen core capital and fund a 25% equity investment in Astra Sedaya Finance, which was approved by Bank Indonesia in December 2013 and is expected to complete during the second quarter of 2014.

In January 2014, Astra has entered into a 50-50 joint venture with Aviva plc, the UK's largest insurer, called Astra Aviva Life, which will sell and distribute life insurance products in Indonesia.

Group's other motor interests

The contribution from the Group's other motor interests was little changed. The Singapore operations did well, with only a marginal decline in earnings despite various government measures to curb demand, including a lower quota for new vehicles and restrictions on vehicle financing. In Malaysia, intense competition and severe margin erosion in the premium car segment led to a fall in profit for Cycle & Carriage Bintang, although investment continued with the opening of a tenth outlet, the Glenmarie Autohaus in Shah Alam. In Indonesia, Tunas Ridean's profits suffered from lower margins and increased labour costs, although earnings were higher in its finance business. In Vietnam, Truong Hai Auto Corporation produced a significant increase in its contribution following improvements in both unit sales and margins helped by lower interest costs.

The Group is pursuing opportunities in Myanmar where it has recently entered into a 60%-owned automotive joint venture and has secured rights for the distribution and after-sales service of Mercedes-Benz, Mazda and Fuso vehicles.

People

The Group's satisfactory performance in 2013 in the face of the difficult trading conditions is a reflection of the hard work and dedication of our more than 200,000 employees. On behalf of the Board, I would like to thank them for their fine effort and wish them well in the year ahead.

Lim Ho Kee retired as Director of the Company in February 2014 after more than 16 years on the Board. On behalf of the Board, I would like to record our appreciation and to thank Ho Kee for his valuable contribution to the Group.

Cheah Kim Teck retired as Chief Executive Officer, Group Motor Operations in January 2014. I am pleased that the Group will continue to benefit from his experience in his new position as Managing Director of Business Development. Haslam Preeston, who joined the Group in February 2014, has taken over management responsibility for JC&C's non-Astra businesses.

Outlook

Jardine Cycle & Carriage is expecting another year of mixed performances from its businesses in 2014. Astra expects the heightened competition in the Indonesian car market and weakness in coal prices to continue, while concerns remain about increases in interest rates and rupiah volatility. The Group's non-Astra motor businesses do not foresee any significant improvement in trading conditions.

Ben Keswick

Chairman

27th February 2014

GROUP MANAGING DIRECTOR'S REVIEW

Overview

A number of the Group's businesses faced challenging trading conditions in 2013. However, the principal reason for the decline in earnings was the reduction in Astra's contribution due to a weaker rupiah exchange rate. 

Performance

The Group reported an underlying profit of US$894 million for 2013, down 12%. Profit attributable to shareholders was US$915 million, 7% lower, after a profit of US$21 million from non-trading items, which included gains of US$23 million arising from Astra's sale of an interest in a subsidiary to an affiliate, Hongkong Land, and US$10 million from the revaluation of investment properties, partly offset by a loss of US$12 million from the write-down of Astra's interest in a joint venture. This compares to a net loss of US$29 million from non-trading items in 2012.

Astra's underlying profit contribution to the Group at US$849 million was 13% lower than the previous year. Astra's little changed rupiah earnings translated into an 11% decline in US dollar terms. Astra saw strong results from its financial services and mining contracting businesses and a slightly improved performance from its automotive activities, but there was a decline in earnings in its heavy equipment and palm oil businesses. The underlying profit contribution from the Group's other motor interests at US$59 million was in line with the previous year.

The Group's consolidated net debt at the end of 2013 was US$303 million, excluding borrowings within Astra's financial services subsidiaries, compared to the net debt of US$867 million at the end of 2012. The reduction was largely due to proceeds arising from the sale by Astra of part of its interest in Astra Otoparts and a reduction in working capital in its heavy equipment businesses. The consolidated net debt from Astra's financial services subsidiaries was US$3.5 billion at the end of December, down from US$3.8 billion at the end of 2012 as the impact of the weaker rupiah on translation more than offset the increase in volumes financed.

Group Review

Astra

Astra reported a net profit for 2013 equivalent to US$1,838 million under Indonesian accounting standards, which in rupiah terms was unchanged from the prior year.

Automotive

Automotive demand remained favourable during 2013, however, increased competition from additional domestic capacity coupled with higher labour costs led to the earnings contribution from the car sector being little changed. The group's automotive component businesses achieved higher sales volumes, but earnings fell due to rises in both material and labour costs. There was, however, an improved contribution from the motorcycle businesses, which benefited from good demand and a higher market share.

The wholesale market for cars in Indonesia grew by 10% to 1.2 million units. Astra's car sales rose by 8% to 655,000 units, leading to its market share dipping from 54% to 53%. The group launched 23 new models and 12 revamped models during the year, which included the release in September of the two Low Cost Green Car models, the Astra-Toyota Agya and the Astra-Daihatsu Ayla.

The wholesale market for motorcycles increased by 10% to 7.7 million units. Astra Honda Motor's sales rose 15% to 4.7 million units, with its market share increasing from 58% to 61%. Astra Honda Motor launched two new models and nine revamped models during the year.

Astra Otoparts, the 80%-owned automotive component manufacturing business, reported a net income down 4% to US$95 million despite higher volumes in the original equipment manufacturer, replacement and export markets. This was due largely to higher raw material and labour costs that could not be covered by increased prices.

Financial Services

Net income from Astra's financial services businesses grew by 15% to US$405 million in 2013. Strong growth in Permata Bank and the automotive-focused Astra Credit Companies, Toyota Astra Financial Services and Federal International Finance, was offset in part by a decline in the finance companies serving the heavy equipment sector, Surya Artha Nusantara Finance and Komatsu Astra Finance.

The amount financed through Astra's automotive-focused consumer finance operations grew by 13% to US$5.4 billion, including joint bank financing without recourse. The amount financed in the heavy equipment sector declined by 30% to US$473 million, reflecting a significant reduction in equipment sales.

Astra's 45%-held joint venture, Permata Bank, reported net income of US$163 million, an increase of 26%, with growth in net interest income arising from a 26% increase in the loan book, partly offset by higher operating costs.

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

Heavy Equipment and Mining

United Tractors, which is 60%-owned, reported a decline in revenue of 9% and net income reducing 16% to US$458 million.

Sales of Komatsu heavy equipment declined 32% to 4,200 units and revenue fell 29% as weaker coal prices led to lower demand in the mining sector. The earnings impact was partly mitigated by growth in service revenue.

The coal mining contracting operations of subsidiary, Pamapersada Nusantara, benefited from increased mine site capacity. It reported a 13% improvement in revenue as contract coal production increased 11% to 105 million tonnes, although contract overburden removed was 1% down at 845 million bank cubic metres.

United Tractors' mining subsidiaries reported a decline in revenue of 34% in rupiah terms, with coal sales 26% lower at 4.2 million tonnes and average coal sale prices declining by 14%. The lower coal prices and increased fuel costs reduced gross profit margins. United Tractors and its subsidiaries own interests in nine coal mines with combined reserves estimated at 409 million tonnes.

Agribusiness

Astra Agro Lestari, which is 80%-held, reported net income down 25% at US$171 million. Crude palm oil sales increased by 11% to 1.6 million tonnes, but average crude palm oil prices achieved were 1% lower. Income was also impacted by lower crop yield, higher labour costs and foreign exchange translation loss on US dollar borrowings.

Infrastructure, Logistics and Other

The contribution to Astra's net income from infrastructure, logistics and other businesses increased by 10% to US$71 million after accounting for a net non-trading gain of US$19 million comprising a revaluation and part disposal of a land holding in Central Jakarta and the write-down of the group's interest in a joint venture. Excluding these non-trading items, net income was 19% lower at US$52 million.

The 72.5 km Tangerang-Merak toll road operated by 79%-owned Marga Mandalasakti reported a 9% increase in traffic volume to 41 million vehicles with 3% higher average tariffs. The group's 95%-owned greenfield 40.5 km Kertosono-Mojokerto toll road near Surabaya remains under construction, and subject to the timely completion of land acquisitions is expected to be completed by the end of 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 interests in 124.2 km of toll road.  Serasi Autoraya's revenue improved despite a modest decrease in the number of vehicles under contract at its TRAC car rental but its net income fell 33% to US$19 million due to higher depreciation and operating costs.

Information Technology

Astra Graphia, 77%-owned, which is active in the area of document information and communication technology solutions and is the sole distributor of Fuji Xerox office equipment in Indonesia, reported net income of US$20 million, up 22%.

Group's Other Motor Interests

Underlying profit from the Group's other motor interests in 2013 was in line with 2012 at US$59 million despite mixed results from the various businesses in challenging trading environments.

Singapore

The Singapore motor operations produced a profit contribution of US$31 million, marginally down, as lower profits from passenger car sales were largely compensated by an improvement in taxi and commercial vehicle sales as well as after-sales. The Singapore vehicle market was impacted by government measures to reduce demand, including a reduction in the quota for new vehicles and restrictions on vehicle financing. This led to a 19% decline in the passenger car market to 22,500 units. The Group sold some 4,000 passenger cars, 18% lower than the previous year with declines in all brands, while its market share was maintained at 18%.

Malaysia

In Malaysia, the profit contribution from 59%-owned Cycle & Carriage Bintang ("CCB") fell by 74% to US$1 million as it faced an extremely difficult trading environment. CCB's Mercedes-Benz passenger car unit sales were stable but increased competition in the premium segment led to heavy discounting and reduced profitability. 

Indonesia

In Indonesia, 44%-owned Tunas Ridean contributed a profit of US$12 million, 36% lower than the previous year. Motor car sales were 15% higher at 54,500 units, but margins were lower owing to intense competition for market share. Tunas Ridean's motorcycle sales, which are concentrated in Indonesia's palm oil provinces, benefited from a modest increase in palm oil prices in the last quarter and ended the year slightly higher at 177,300 units. The contribution from its 49%-owned associate, Mandiri Tunas Finance, was up 51% due to a larger loan portfolio and lower credit losses.

Vietnam

In Vietnam, 32%-owned Truong Hai Auto Corporation ("Thaco") produced an improved performance, with its contribution almost four times the previous year at US$15 million. The motor vehicle market in Vietnam recovered in 2013, with sales increasing by 26% to 129,300 units, while Thaco's sales grew by 14% to 28,200 units. Thaco's earnings benefited from increases in unit sales and margins as well as from lower interest costs.

Alex Newbigging

Group Managing Director

27th February 2014

1 Basis of preparation

The financial statements are consistent with those set out in the 2012 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 2012 audited accounts except for the adoption of the following standards, amendments and interpretations: