Jardine Cycle & Carriage Limited (C07) Earnings Call Transcript & Summary

A very good morning to you all. Welcome to Jardine Cycle & Carriage Half Year 2024 Results Presentation. I'm Amy Hsu, JC&C's Group Finance Director, and I will take you through today's presentation. [Operator Instructions] I will first start with some key highlights for the first half of 2024. The group reported an underlying profit of $500 million, 14% down compared to the first half of last year. This is due to lower earnings across our businesses, but much more so because of translation impact from weaker exchange rate against U.S. dollars across the region, including Indonesia rupia, Vietnam dong as well as Singapore dollars. Excluding these translation impact, our underlying profit will be 4% down instead. Our interim dividend, however, will remain at $0.28 per share, same amount as last year. Our holding company debt has also reduced from $1.3 billion to $1.1 billion. In recent years, we have shared with you that we will actively manage our portfolio and rebalance our portfolio by releasing capital for balance sheet flexibility, and we invest in new growth opportunities. We have continued to do so in the first half of the year. By the end of July, we have completed the sale and leaseback of 2 properties in Malaysia, which generated $25 million. It is a smaller transaction as compared to the Singapore sale and leaseback, but nonetheless, an important one to improve return on capital, and it is a good discipline to have. The impact of this will be reflected in the second half results. We continue to look at opportunities to monetize noncore assets within our portfolio, and we have an active pipeline of projects that we are currently working on. On the other hand, we continue to allocate capital to our future market leaders. Last month, we submitted an application for a public tender offer of REE in Vietnam, one of our key investments. Many of you may be aware that over the last few years, we have been steadily increasing our stake through market purchases of REE, and our shareholding currently stands at 34.9%. To further increase our shareholding past the 35% mark, it will require a public tender offer according to the Vietnamese securities law. You see REE as JC&C's future champion, and that will provide us with a very high growth opportunities, particularly in the renewable energy business. It is therefore our intention to allocate more capital to [ descope ] business when suitable opportunities arise. A key role for JC&C is to enable business growth through business, our people and leadership. We are also delighted to share with you that REE has recently appointed a new CEO started last month. He comes with 30 years of experience in construction, infrastructure and project development in Vietnam. And earlier this year, in March, we have also appointed a new CFO, which is a finance talent from Jardine. These are all very exciting developments for us. Besides Vietnam, Astra in Indonesia has also allocated more capital in the renewable energy space by increasing its effective interest in the geothermal assets in Sumatra, Indonesia. Finally, we would like to share another update with you. We recently conducted a review of our portfolio and restructure it to better represent where our strategic focuses are. Let me take you through more details in the next slide. This slide shows our new portfolio structure. This new business segment reporting provides a greater clarity and emphasis to our Indonesian and Vietnamese markets. A third pillar of regional interest is introduced to detail the investments around the region beyond these 2 key markets. Our first pillar is Indonesia. The performance of Astra and Tunas Ridean will be reported under this pillar. The second pillar of Vietnam, we have THACO, REE and Vinamilk. And for the first -- third pillar, regional interest would include our dealership business under the Cycle & Carriage banner, which has operations in Singapore, Malaysia and Myanmar. We also have Siam City Cement and Toyota Motor Corporation in this segment. For Toyota Motor, we have held this investment since 2018, but have not previously included it in any of our segment reporting. For completeness and to improve disclosure, we are now capturing all the investments that we hold in this new segment reporting. Moving on to the first half financial highlights. For the first half of 2024, our underlying profit was $500 million. Indonesia contributed $513 million, down 9% from the prior year, and Vietnam contributed $31 million, down 12%. We will have more details in the subsequent slides. Corporate costs totaled $68 million, and the increase is largely due to higher FX losses from the translation of JC&C's U.S. dollar loans. Turning on to our balance sheet. Shareholders' funds remained strong at $8 billion. JC&C's consolidated net debt position, excluding the net borrowings from Astra's financial services businesses was $543 million. This is compared to the $1.1 billion from the previous year-end due to strong operating cash flow in the first half. Gearing has fell from 6% to 3%. As mentioned earlier, JC&C corporate net debt was further reduced from $1.3 billion to $1.1 billion, with the enhanced dividends received from Astra. I will now take you through each of our business pillars in detail, starting with Indonesia. In the first half, our portfolio companies in Indonesia, which includes Astra and Tunas contributed a total of $513 million, 9% down from the prior year. Astra's contribution was $497 million, 8% lower. It reported weaker performances from its automotive, heavy equipment and mining operations. This resulted from softer consumer demand for the auto business and lower commodity prices. I'll go through the details in the next slide. There was also a translation impact on the underlying profit contribution, had the foreign exchange rate being equivalent to last year. Astra's contribution will be just 2% lower. Tunas Ridean also faced similar challenges of a softer automotive market as Astra. Let me take you through the segmental details of Asia. For automotive, the net income was down 3% to $345 million. The 4-wheel wholesale market was down by 19% due to cautious consumer sentiment in an election year. Astra's 4-wheel sales decreased by only 17%, which resulted in an increased market share from 55% to 57%. Indonesia's ex EV market is 9% of the total [indiscernible] market in the first half, of which about 70% are hybrids, and [ Hatalkar ] has a commanding market share. In the first half of 2024, Astra grew its hybrid sales by 33% to 15,000 units. Our motorcycles, the 2-wheel wholesale market was slightly down. Astra's 2-wheel sales declined by 4%, with this market share stood at 77%. For financial services, the net income increased by 8% to $257 million. This is due to a larger loan portfolio compared to last year. On heavy equipment, mining, construction and energy, the net income decreased by 15% to $365 million. This was due to lower coal selling prices compared to the previous high as well as lower commodity sales. However, the overburden removal remains strong with a growth of 13% on the back of still elevated coal prices. For Agribusiness, the net income was 36% higher at $25 million. This was due to both higher sales volume and selling prices. Lastly, Astra's Infrastructure segment reported a 24% increase in the net income to $39 million. The [ total ] business continued to see promising results. Traffic volume was up by 5% compared to last year. We see consistent growth in this business, and we are excited about its prospects. Turning now to our Vietnam portfolio. JC&C's businesses in Vietnam contributed a total of $31 million to our underlying profit, down 12%. THACO contributed $15 million. The Vietnamese market was flat in the first half of this year, and THACO's unit sales was up by 10% year-on-year, which improved its market share from 21% to 23%. THACO's agriculture and property businesses continue to largely break even. We look forward to them contributing profits meaningfully in the near future. Moving on to REE.We captured only its first quarter of profits in this round of reporting. Its contribution to JC&C reduced from $11 million to $7 million, and this is due to lower hydropower demand in the country. The power business REE is REE's largest business. There are positive developments in the pipeline, including acquisition of 3 new greenfield operating projects this year and in the hydro and in the wind segments. Wrapping up our investments in Vietnam for Vinamilk, we recorded a dividend income of $8 million. Finally, moving on to the performance of our regional interest. The Cycle & Carriage business contributed $9 million to JC&C's underlying profit. This is 46% down from the same period of last year. In Singapore, the contribution to JC&C was down due to higher rental expenses after the sale and leaseback transaction and lower contributions from the used car operations. New car sales were actually higher by 16% at 3,174 units. Margins across our brand portfolio remains healthy, supported by stable COE prices. We are also pleased to share that ORA, a new EV brand that we bought into Singapore in the second half of last year, is seeing growth in customer acceptance of this brand. In April this year, we soft launched Smart, which is a premium EV brand by Mercedes-Benz and Geely. A dedicated Smart showroom will open in August. For those of you that are based in Singapore, I welcome you to experience this venture in the Mercedes-Benz brand Center. We are also delighted to become the exclusive distributor of Gogoro electric scooters in Singapore. We are partnering Shell to roll out battery swapping in some of Shell's petrol stations. In Malaysia, the profitability of the operations was lower as the business transitioned to the agency model since the start of 2024. In regards to our presence in the country, yesterday, we announced that we are partnering Stellantis and we'll first start as a dealer of Peugeot in Malaysia. This partnership extends to the other brands under the house of Stellantis as well. We are excited to be able to offer and expand the range of products to the customers in Malaysia. Next, on Siam City Cement, it contributed $12 million, up from $9 million of last year. This is due to lower energy costs with the decline in coal prices as well as improved production efficiencies. Lastly, we received a dividend income of $4 million from Toyota Motors Corporation for the first half of the year. Overall, we are satisfied with the first half performance considering some of the challenging market conditions, the performance is well within our expectations. Looking ahead, we expect the second half to improve as political environment stabilizes and consumer sentiment gradually recovers. We are confident that the performance of our businesses will be resilient for the rest of the year. Nevertheless, there will also be headwinds on foreign exchange rates and commodity prices. Finally, we will continue to actively manage our portfolio to deliver long-term growth and returns to our shareholders. Thank you very much for joining us this morning. I will now close today's presentation then. Have a good day.