Exactly one hundred days after the signing of the Definitive Agreement between DRB-HICOM Berhad (DRB-HICOM) and Zhejiang Geely Holding Group (Geely Holding) on 23 June, the two companies have confirmed the new board structures and part of the executive team for PROTON Holdings Berhad and its related companies (PROTON Group).
At the PROTON Holdings Berhad (PHB) level, Dato’ Sri Syed Faisal Albar remains as the Chairman, and he is joined on the board by Shaharul Farez Hassan and Amalanathan Thomas as nominees from DRB-HICOM. Farez and Nathan are both part of the senior management team at DRB-HICOM.
Geely Holding has nominated Daniel Donghui Li and Feng Qing Feng as their nominees to the PHB board. Daniel Donghui Li is the current Executive Vice President and CFO of Geely Holding, while Feng is the Group Vice President and CTO of Hong Kong-listed Geely Auto.
All five nominees also sit on the Perusahaan Otomobil Nasional Sdn Bhd (PONSB) board, along with Dr. Nathan Yu Ning, who is the Vice President of International Business at Geely Holding. Winfried Vahland, who was formerly the Chairman and Chief Executive Officer of Skoda Auto, is also on the board of PONSB.
Syed Faisal, Farez, Nathan, Daniel Donghui Li and Dr. Nathan Yu Ning also sit on the board of PROTON Edar Sdn Bhd, the Malaysian distribution arm of PROTON.
The Board of Directors has set the global revitalisation of the PROTON brand as their core priority.
Backed by better performance from PROTON Holdings Berhad (PROTON) and Pos Malaysia Berhad (Pos Malaysia), DRB-HICOM Berhad (DRB-HICOM, the Group) posted a 33% rise in first quarter revenue compared to the same period last year. The Group recorded revenue of RM3.34b in the period, compared with RM2.5b. The performance saw pre-tax losses reduced by 40% compared the same period a year ago, to RM72.7m.
All sectors recorded an increase in revenue compared to the same period a year ago, with the services sector recording a 72% revenue jump. The automotive and property sectors saw revenue increase by 19% and 33% respectively.
The automotive sector recorded revenue of RM2.1b in the period, boosted by better sales during the Aidilfitri festive period. PROTON and other carmakers in the Group offered various promotions to boost sales, and the DRB-HICOM Raya Autofest held in late May also helped to boost sales of the sector.
In the services sector, Pos Malaysia’s courier and logistics business as well as Bank Muamalat largely contributed to chart revenue of RM1.1b in the period, while in the property, assets and construction sector, revenue was recorded at RM97.07m.
DRB-HICOM Berhad (DRB-HICOM, the Group) today signed the Definitive Agreement for China’s Zhejiang Geely Holding Group (ZGH) to take 49.9% equity in Malaysia’s first carmaker, PROTON Holdings Berhad (PROTON).
On the same day, the Group also sold its entire stake in Lotus Advance Technology Sdn Bhd to ZGH and Etika Automotive Sdn Bhd. The signing took place exactly 30 days after both parties signed a Heads of Agreement on the deal in Putrajaya. The signing was presided over by Prime Minister YAB Dato’ Sri Mohd Najib Tun Abdul Razak, along with DRB-HICOM Chairman, Brig. Gen. (K) Tan Sri Dato’ Sri Haji Mohd Khamil Jamil and ZGH Chairman, Li Shufu. DRB-HICOM Group Managing Director, Dato’ Sri Syed Faisal Albar signed on behalf of the Group while An Conghui, President and CEO of Geely Auto Group did the honours for ZGH. Also present was Chinese Ambassador to Malaysia, Dr Huang Huikang.
DRB-HICOM Berhad has trimmed its pre-tax loss for the year ended 31 March 2017 to RM222.18m, compared to RM822.13m the previous year. The Group managed to keep similar revenue levels during the year, coming in at RM12.06b against RM12.17b the previous year.
The services sector continued to boost revenue for the Group during the year, as the national automotive sector saw a volume shrinkage in calendar year 2016. The services sector recorded a 41% increase to RM3.55b against RM2.51b in the previous cycle.
Pos Malaysia Berhad’s (Pos Malaysia) was a major boost for the Group as it became a subsidiary during the year under review. In September 2016, DRB-HICOM completed the disposal of its 100% equity in airport services provider KL Airport Services Sdn Bhd (KLAS) Group to Pos Malaysia. Pos Aviation Sdn Bhd (formerly KLAS Group) now includes Pos Logistics Berhad (formerly Konsortium Logistik Berhad) and Pos Asia Cargo Express Sdn Bhd. Pos Malaysia is now a 53.5% percent owned subsidiary. The Group previously held 32.2% of the postal and logistics services company.
The property sector boosted revenue by 45% to RM427.31m in the year. The sector also saw a gain of RM398.11m following the disposal of its entire 90% equity in Corwin Holding Pte Ltd in Singapore in November 2016, by subsidiary HICOM Megah Sdn Bhd.
The automotive sector saw revenue slip by 14% to RM8.08b largely due to lower sales, as the industry recorded a contraction in calendar year 2016. 2015’s Total Industry Volume’s (TIV) record high of 666,677 units declined by 13% to 580,124 units in calendar year 2016, and this affected all the brands under the Group, including national car PROTON.
DRB-HICOM Berhad (DRB-HICOM) has reached an agreement with China-based Zhejiang Geely Holding Group Co., Ltd (Geely Holding) for the Chinese car group to acquire 49.9% equity in PROTON Holdings Berhad. DRB-HICOM currently owns 100% of the manufacturer of the first national car. The two parties signed the agreement in Putrajaya today, witnessed by YB Datuk Seri Johari Abdul Ghani, the Minister of Finance II.
The deal will enable PROTON to tap into Geely Holding’s vast range of platforms and powertrains, and will also enable PROTON to have access to existing markets of the Chinese carmaker, as well as right-hand drive markets in south-east Asia.
DRB-HICOM Group Managing Director, Dato’ Sri Syed Faisal Albar says the PROTON brand will remain present and will grow significantly with the new foreign strategic partner on board.
6 April 2017-MODENAS today launched the new model, KRISS MR2. The bike, which features a rotary gear system, is powered by an engine capable of achieving 6.2kw @ 7,500rpm. Other features include sportier head lamps and tail lamp designs, while the large 4.5 litre capacity fuel tank is capable of covering 200km per full tank. Apart from the larger tank, it also has an extra-large luggage compartment of 6.6 litres with a toolkits compartment under the seat. The unique 17” alloy rim is also fitted with a front disc brake for an efficient braking.
With the “MR” in the new machine’s name standing for Motosikal Rakyat, the KRISS MR2 is intended for the lower end of the market, as utility transportation. The KRISS MR2 is a two tone body colour concept with the options of Sand White with Celebration Red, Strike Blue and Canary Yellow.
Dato’ Abdul Harith Abdullah, Chief Operating Officer of Automotive Distribution and Manufacturing & Engineering was honoured to launch the model and witnessed by Amiruddin Abd Kadir, Chief Executive Officer of MODENAS and President of Malaysia Motorcycle and Scooter Dealers Association (MMSDA), Mr Wee Hong.
DRB-HICOM Berhad (DRB-HICOM Group) has recorded a profit before tax of RM33.4m in the nine months to 31 December 2016, on the back of a revenue of RM8.6b. The automotive sector was again the main contributor to revenue, boosted by the multiple launches of the Group’s wholly-owned unit, PROTON Holdings Berhad (PROTON).
During the period, the Group also recorded a gain on the disposal of its investment in Singapore’s Corwin Holding Pte. Ltd. The transaction generated proceeds of RM508m.
SECTOR PERFORMANCE
In the automotive sector, PROTON saw rising sales numbers in the final quarter of 2016. The carmaker sold 22,199 units in Q3FY16, compared to 14,364 units the previous quarter. The marque had launched a total of four new models in 2016.
The services sector saw its revenue boosted as contribution from Pos Malaysia Berhad (Pos Malaysia) was recognised for the first time as a subsidiary.
On 13 September 2016, DRB-HICOM completed the disposal of its 100% equity in airport services provider KL Airport Services Sdn Bhd (KLAS) Group to Pos Malaysia. KLAS Group is now re-named Pos Aviation Sdn Bhd which includes Pos Logistics Berhad (formerly known as Konsortium Logistik Berhad) and Pos Asia Cargo Express Sdn Bhd. The disposal value was satisfied via the issuance of new Pos Malaysia shares, resulting in the postal and logistics services provider becoming a 53.5% percent owned subsidiary. The Group previously held 32.2% of Pos Malaysia.
LOOKING AHEAD
With the Malaysian economic growth in 2017 forecast at between four to five percent, the challenging business terrain will remain.
Despite PROTON’s improved performance, overall the national automotive sector saw sales decline 7% in December 2016 compared to the same month the previous year. For the entire 2016, total industry volume fell by 13% year-on-year, its first contraction after six years of growth. The automotive industry is however expecting a small growth in sales for 2017, on the back of increased demand via new model launches as well as an increase in construction projects across the country.
DRB-HICOM’s search for a foreign strategic partner (FSP) for PROTON is expected to be concluded by first half of 2017. The eventual FSP is expected to enable PROTON to have access to better and newer technologies apart from enlarging its footprint beyond local shores.
Despite the challenging business environment, DRB-HICOM will continue to strengthen its business operations across the Group aiming at improving operational efficiencies and ultimately achieving better results.
DRB-HICOM Berhad (DRB-HICOM) hopes that the public will not be misled by various reports that we have already selected a foreign strategic partner (FSP) for our wholly-owned carmaker, PROTON Holdings Berhad (PROTON). At present, we are focussed on going through the critical process of identifying the ideal FSP for PROTON, and an announcement of the decision will be made in due course.
There have been many reports that have suggested that DRB-HICOM’s search for a FSP will be finalised by today, 15 February. We wish to reaffirm that as we have stated previously, we will conclude and announce our decision within the first half of this year. We will however endeavour to complete as early as possible.
We have also stated previously that this search is complex and thus, a time-consuming process. Upon receipt of the bids, DRB-HICOM will start detailed negotiations with the bidders to ensure the key considerations we stated before are met by the potential FSP; these are the strategic, operational and culture fit.
DRB-HICOM will then start the process for internal approvals, including convening a Shareholders’ meeting; as well as obtaining the necessary regulatory approvals and clearance that will pave the way for the selected FSP to acquire shares in PROTON.
We urge the public to not be misled by reports related to the FSP search. DRB-HICOM will make the proper announcement once this process is completed.
This revitalization of PROTON’s market share underlines DRB-HICOM’s intent to keep the brand as a player in the automotive market. PROTON has been in the market since the mid-1980s, and it has some brand equity in the domestic market, despite past and current challenges.
DRB-HICOM remains committed to revive PROTON’s fortunes, and finding the right FSP is critical to that goal. History has shown that collaborations between a smaller carmaker and a larger carmaker can revive the former’s fortunes. DRB-HICOM is confident that with the right FSP, PROTON will enhance its brand equity can again be a successful carmaker as it was in the 1980s and 1990s.
In finding the right FSP for PROTON, DRB-HICOM will evaluate three key criteria, which are strategic, operational and cultural fit.
A strategic fit will enable both parties to derive tangible benefits from the range of technology and products available, which will complement each other’s needs in their own markets. This strategic fit will also ensure that PROTON can achieve economies of scale from its domestic operations. In evaluating the potential partners, DRB-HICOM will insist that the PROTON badge and its technology will be expanded into ASEAN markets first and global arena subsequently.
An operational fit with the FSP ensures that both PROTON and the partner will complement each other’s strengths. The structures that exist within each company must be able to blend well so as to achieve seamless operation at PROTON and the partner themselves.
As in any collaboration, a cultural fit will ensure a successful union. This “chemistry” between the two parties will be critical in pushing PROTON forward while enhancing the FSP’s own operations vis-à-vis their short and long-term plans.
These criteria are aimed at ensuring that both parties will be able to achieve each other’s strategic targets as quickly as possible and with minimum interruptions to business operations. With a close fit that matches the items listed, DRB-HICOM is confident the venture will be beneficial to all parties.
Contrary to common belief, PROTON too has plenty to offer to the eventual FSP. First, they will have at their disposal PROTON’s own range of affordable cars, such as Persona, Saga, Preve and Iriz. These cars are manufactured to high production standards and meet global safety standards. Any carmaker that is on board with PROTON will be able to find a range of cars to offer specific markets across the globe.
Secondly, one of the immediate advantages available to any carmaker partnering with PROTON is the ability to immediately increase their production capacity through PROTON’s Tanjung Malim Plant in PROTON City. The plant has a low utilization rate presently, and optimising the use of the modern facility will also benefit the local workforce. This means Malaysians can benefit from increased employment opportunities with full capacity utilisation at the plant.
Finally, PROTON has its own in-house research and development team, as well as the lightweight platform technology of Lotus Cars UK. The combined engineering capabilities of PROTON and the legendary Lotus Cars offers a FSP enhancements to their current capabilities, which will enable them to enhance their existing R&D capabilities.
It is important to point out that DRB-HICOM’s search for a FSP for PROTON is a critical exercise to ensure the sustainability of the national carmaker. As a local company, DRB-HICOM is proud to be the owner of the first national and ASEAN’s only car manufacturer.
We have stated before that we will maintain a significant equity in PROTON, and this has not changed. The FSP search is not about shirking our national responsibility but about enhancing PROTON as a bona-fide carmaker, and eventually putting them, and Malaysia, on the global map.
As a responsible shareholder, as part of the evaluation, DRB-HICOM shall also assess the intention of the potential partners in utilizing the current “home-grown” vendor network. This is a very significant element in our evaluation, as DRB-HICOM who also own subsidiaries serving PROTON as vendors, would avoid for these “home-grown” network to be diluted substantially.
As we have stated previously, the parties have conducted their own due diligence on PROTON over the past weeks. DRB-HICOM is now waiting for the submission of bids from the parties, after which an earnest evaluation of the bids will commence. Also as stated previously, we aim to complete the selection by the first half of this year, although we strive to conclude it earlier and this remains the target for DRB-HICOM.
