JC&C Ltd First Quarter Results & Dividend Stmt

Jardine Cycle & Carriage Limited

2016 First Quarter Financial Statements and Dividend Announcement

The following announcement was issued today by the Company's 75%-owned subsidiary, Jardine Cycle & Carriage Limited.

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28th April 2016

JARDINE CYCLE & CARRIAGE LIMITED

2016 FIRST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT

Highlights

· Underlying earnings per share down 25%

· Lower rupiah earnings at Astra further reduced on translation into US dollars

· Direct Motor Interests contribution up 14%

"The Group continues to face challenging trading conditions across the region. In Indonesia, Astra is seeing soft automotive demand, weak commodity prices and a further deterioration in corporate credit quality in Permata Bank. In the Group's other operating markets, increased competitive pressure is expected." 

Ben Keswick, Chairman

28th April 2016

The exchange rate of US$1=S$1.35 (31st December 2015: US$1=S$1.41) was used for translating assets and liabilities at the balance sheet date and US$1=S$1.40 (31st March 2015: US$1=S$1.36) was used for translating the results for the period.

The financial results for the three months ended 31st March 2016 and 31st March 2015 have been prepared in accordance with the International Financial Reporting Standards. These results have not been audited or reviewed by the auditors.

✝The accounts have been restated due to a change in accounting policy upon adoption of amendments to IAS 16 'Property, Plant and Equipment' and IAS 41 'Agriculture', as set out in note 1 to the financial statements.

* The earnings per share for 2015 have been adjusted to reflect the effects of the rights issue completed in July 2015.

CHAIRMAN'S STATEMENT

Overview

The Group's underlying profit in the first quarter declined primarily due to reduced earnings from Astra which faced challenging market conditions in Indonesia. Astra's contribution was impacted further on translation of its rupiah profit into US dollars. There were, however, improved results from the Group's Direct Motor Interests as Truong Hai Auto Corporation in Vietnam, in particular, recorded a strong performance.

Performance

The Group's revenue in the first quarter declined by 9% to US$3.6 billion. Lower revenue was recorded within Astra's heavy equipment and mining businesses and agribusiness, and in addition, following the implementation of the restructuring to a two-tiered distribution model, there was reduced revenue from Astra's Toyota sales operations.

Profit attributable to shareholders was 20% lower at US$141 million. Earnings per share were 25% lower at US¢36, the greater decline reflecting the effects of the rights issue undertaken in 2015.

Astra contributed US$111 million to the Group's underlying profit, with a 22% decline in its results in rupiah translated into a 27% fall in US dollars. The rupiah was on average 5% weaker than in the first quarter of the previous year. The Group's Direct Motor Interests contributed an underlying profit of US$35 million, 14% up on the previous year. No contribution was recognised from the Group's Other Interests as both Siam City Cement and Refrigeration Electrical Engineering have yet to announce their first quarter results.

The Group had consolidated net cash, excluding borrowings within Astra's financial services subsidiaries, of US$424 million. The improvement over the net cash at the end of December 2015 of US$255 million was due largely to strong operating cash flows together with lower capital expenditure. Net debt within Astra's financial services subsidiaries of US$3.2 billion at the end of March was similar to the position at the end of last year. JC&C parent company's net cash was US$129 million, slightly down from the US$136 million at the end of 2015.

The Board has not declared a dividend for the first quarter ended 31st March 2016 (31st March 2015: Nil).

Group Review

Astra

Astra reported a net profit equivalent to US$230 million under Indonesian accounting standards, 22% down in its reporting currency with declines mainly in the heavy equipment and mining, financial services and automotive businesses.

Automotive

Overall automotive demand softened slightly during the period, although a general reduction in discounts has seen some margin improvement.

The wholesale market for cars fell by 5% to 267,000 units. Astra's car sales were 7% lower at 127,000 units, with its market share decreasing from 49% to 48%. The group launched two new models and five revamped models during the period.

The wholesale market for motorcycles decreased by 6% to 1.5 million units. Astra Honda Motor's domestic sales were slightly reduced to 1.1 million units, resulting in its market share increasing from 68% to 72%. Astra Honda Motor launched two new models and seven revamped models during the period.

Astra Otoparts, the group's automotive component business, saw net income fall by 8% to US$6 million, due to a lower contribution from its OEM manufacturing business on higher operating costs.

Financial Services 

Net income from the group's financial services businesses decreased 46% to US$47 million. Increased earnings at Federal International Finance and Toyota Astra Financial Services were more than offset by a decline in the contributions from its other financial services interests, in particular Permata Bank.

The consumer finance businesses saw an increase in the amount financed by 4% to US$1.2 billion, including balances financed through joint bank financing without recourse. Net income at motorcycle-focused Federal International Finance was up 23% at US$29 million, benefiting from improved market share and product diversification. Car-focused Astra Sedaya Finance reported net income 27% lower at US$16 million, whereas Toyota Astra Financial Services recorded net income 10% higher at US$6 million. The amount financed through the group's heavy equipment-focused finance operations increased by 16% to US$75 million. Surya Artha Nusantara Finance which is focused on small-medium heavy equipment financing, reported net income 47% lower at US$1 million.

Astra's 45%-held joint venture, Permata Bank, reported a net loss of US$28 million (2015: net income US$44 million) due to an increase in loan loss provisions as non-performing loans rose to 3.5% from 2.7% at the prior year end, despite a 3% increase in net interest income.

The group's general insurance company, Asuransi Astra Buana, recorded net income 31% lower at US$15 million, primarily due to lower investment earnings.

The group's life insurance joint venture with Aviva plc, which markets its products and services as "Astra Life powered by Aviva", acquired more than 19,000 individual life customers (full year 2015: 28,500) and more than 64,000 participants of its corporate employee benefits programmes in the first quarter of 2016 (full year 2015: 186,000).

Heavy Equipment and Mining

United Tractors, which is 60%-owned, reported net income of US$54 million, a 55% decrease due to lower revenue on lower business volumes. In the construction machinery business, revenue declined 13% as Komatsu heavy equipment sales fell by 35% to 499 units. The contract mining operations of subsidiary, Pamapersada Nusantara, reported a 20% decrease in revenue as contract coal production declined 4% to 24 million tonnes, with contract overburden removal down 7% at 163 million bank cubic metres. United Tractors' mining subsidiaries reported 2% higher coal sales at 2 million tonnes, with revenue decreasing by 11% due to lower coal prices.

General contractor Acset Indonusa, 50%-held by United Tractors, reported net income of US$1 million, 59% up on the previous year, with US$176 million of new contracts secured for the quarter, compared to US$228 million for the whole of 2015.

Agribusiness

Astra Agro Lestari, which is 80%-held, reported net income of US$31 million, an increase of 168%. Although crude palm oil sales were 5% higher at 271,000 tonnes and olein sales increased by 78% to 106,000 tonnes, average crude palm oil prices achieved were 16% lower at Rp6,593/kg. During the first quarter, the benefit of a stronger rupiah as at the end of March 2016 compared to December 2015 led to a translation gain on its US dollar monetary liabilities, which more than offset the impact on its US dollar denominated and linked income.

Infrastructure, Logistics and Others

Net income from infrastructure, logistics and others increased by 128% to US$6 million, mainly due to higher toll road earnings.

The 72.5 km Tangerang-Merak toll road, operated by 79%-owned Marga Mandalasakti, reported a 6% increase in traffic volumes to 11 million vehicles. Construction continues at the wholly-owned 40.5 km Kertosono-Mojokerto toll road near Surabaya. Section 1, which is 14.7 km long, began operations in October 2014 and further stages are expected to be operational during 2016 and 2017, subject to the timely completion of land acquisitions. In July 2015, Astratel acquired a 25% interest in the 72.6 km Semarang-Solo toll road, of which sections 1 and 2, being 22.8 km long, are operational. 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 an interest in 196.8 km of toll roads.

PAM Lyonnaise Jaya, which operates the western Jakarta water utility system, experienced an increase in sales volume of 3% to 38 million cubic metres.

Serasi Autoraya's revenue increased by 1% and net income increased by 29% to US$2 million, with an 11% decline in the number of vehicles under contract at its car leasing and rental business to 24,000 units more than offset by higher gains on used vehicle sales and logistic volumes.

Anandamaya Residences, the group's 60%-held luxury residential development project located in Jakarta's Central Business District is 91% sold. Completion of Anandamaya Residences and the group's adjacent grade A office tower, Menara Astra, is expected in 2018, as planned.

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$3 million, down 8%.

Direct Motor Interests

The Group's Direct Motor Interests contributed an underlying profit of US$35 million, a 14% increase over the previous year. The improvement was due mainly to the strong performance of Truong Hai Auto Corporation in Vietnam, which benefited from significantly higher sales, partly offset by lower margins. There was an improved performance from Singapore motor operations due to an increase in sales of passenger cars and parts. In Malaysia, Cycle & Carriage Bintang's contribution was higher due largely to the increase in sales. In Indonesia, Tunas Ridean's contribution increased due mainly to higher motor vehicle sales and improved results from Mandiri Tunas Finance, partly offset by lower motorcycle sales.

Other Interests

The Group did not recognise any contribution from its Other Interests in the first quarter of 2016 as its listed associates, 24.9%-held Siam City Cement Public Company Limited in Thailand and 23%-held Refrigeration Electrical Engineering Corporation in Vietnam, have yet to announce their first quarter results. These results are not expected to have a material impact to the Group and will be accounted for in the second quarter.

Outlook

The Group continues to face challenging trading conditions across the region. In Indonesia, Astra is seeing soft automotive demand, weak commodity prices and a further deterioration in corporate credit quality in Permata Bank. In the Group's other operating markets, increased competitive pressure is expected. 

Ben Keswick

Chairman

28th April 2016

Statement pursuant to Rule 705(5) of the Listing Manual

The directors confirm that, to the best of their knowledge, nothing has come to the attention of the Board of Directors which may render the accompanying unaudited interim financial results for the three months ended 31st March 2016 to be false or misleading in any material respect.

On behalf of the Directors

Ben Keswick

Director

Hassan Abas

Director

28th April 2016

1 Basis of preparation

The financial statements are consistent with those set out in the 2015 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 2015 audited accounts except for the adoption of the following amendments:

The adoption of these amendments did not have any impact on the results of the Group except for the adoption of IAS 16 'Property, Plant and Equipment' and IAS 41 'Agriculture'. These IASs provide definition to a bearer plant and require bearer plants to be accounted for in the same way as property, plant and equipment in IAS 16, because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41. The produce growing on bearer plants will remain within the scope of IAS 41. The adoption of these amendments has been accounted for retrospectively and the comparative financial statements have been restated. The adoption has resulted in a decrease in the profit attributable to shareholders for the quarter ended 31st March 2015 by US$1.4 million and a decrease in the shareholders' funds as at 31st December 2015 by US$100.8 million.

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$1.3518 (2015: US$1=S$1.4144), US$1=RM3.9175 (2015: US$1=RM4.2945), US$1= IDR13,276 (2015: US$1=IDR13,795), US$1=VND22,280 (2015: US$1=VND22,495) and US$1=THB35.2460 (2015: US$1=THB36.1000).

The exchange rates used for translating the results for the period are US$1=S$1.3961 (2015: US$1 =S$1.3616), US$1=RM4.1001 (2015: US$1=RM3.6502), US$1=IDR13,506 (2015: US$1=IDR12,857), US$1=VND22,272 (2015: US$1=VND21,417) and US$1=THB35.5893.

2 Net operating costs and operating profit

nm - not meaningful

(1) Net exchange loss in 2016 due mainly to impact of stronger rupiah on monetary assets and liabilities denominated in US dollars

 3 Tax

The provision for income tax is based on the statutory tax rates of the respective countries in which the companies operate after taking into account non-deductible expenses and group tax relief.

4 Earnings per share

* The weighted average number of shares in issue for 2015 has taken into account the effect of the rights issue completed in July 2015, in accordance with IAS 33 Earnings per Share.

As at 31st March 2015 and 2016, there were no dilutive potential ordinary shares in issue.

5 Borrowings

Certain subsidiaries of the Group have pledged their assets in order to obtain bank facilities from financial institutions. The value of assets pledged was US$1,828.9 million (31st December 2015: US$1,903.0 million).

6 Share capital

There were no rights, bonus or equity issues during the period between 1st January 2016 and 31st March 2016.

The Company did not hold any treasury shares as at 31st March 2016 (31st March 2015: Nil) and did not have any unissued shares under convertibles as at 31st March 2016 (31st March 2015: Nil).

7 Revenue reserve