ANN JOO RESOURCES BERHAD

23RD ANNUAL GENERAL MEETING

DATO’ LIM HONG THYE, GROUP MANAGING DIRECTOR

31 MAY 2019

INDUSTRY OVERVIEW

3

STEEL MARKET PERFORMANCE

2008 – 2010 Subprime Crisis 2016-2017

China Steel Industry Reform & Induction Furnaces Elimination

2013 – 2015China Steel Industry Overcapacity > 400 mil mt, leading to :

a) Overproduction b) Rapid growth in Chinese

exportsc) Prices slumped to huge loss-

making levels in 2H15

2018▪ China prices declined sharply since 4Q18 amidst global trade frictions:

a) US Section 232b) EU Safeguard – 25% import tariff (w.e.f. 19 Jul 18)

▪ Steel prices recovered on rising iron ore & coke prices

(source : Mysteel ) China Rebar HRB400 (RMB/mt Ex-work)

2,050

2,250

2,450

2,650

2,850RM/MT

9 MAY 2018GENERAL ELECTION – 14

(source : Mysteel, MITI Weekly Bulletin)

Malaysia Rebar Price (RM/mt delivered)

DEPRESSED LOCAL STEEL PRICE (↓ 20% Y-O-Y)(FROM RM2,700 TO RM2,150)

2018 STEEL MARKET REVIEW

MALAYSIA vs. CHINA STEEL BAR PRICE (RM/MT)SUPPLY-DEMAND IMBALANCE

4

❑ Domestic demand weakened followingreview of mega infra projects

❑ Intensified competition with emergenceof foreign-owned steel mills in Malaysia

❑ Increased import from non-Chinasources such as Russia, Turkey, UAE,Vietnam amidst trade fictions acrossUS, China & EU

❑ Oil & Gas and Palm Oil Mill Fabricationsectors remained subdued

❑ ASEAN-6 2018 steel demand started torecover in 2018, with an estimatedincrease of around 2-3 mil MT over2017 to as much as 77 mil MT

OCT 2018PRODUCTION OF A 100% FOREIGN-OWNED STEEL MILL

China Rebar HRB400 (USD/mt Ex-work)

VOLATILE RAW MATERIAL & HIKING FUEL COST

5

2018 STEEL MARKET REVIEW

50

60

70

80

90

100

USD/MTIron Ore Price (Jan’17-Dec’18)

(2017 @ USD 71/mt)

(2018 @ USD 69/mt)250

280

310

340

370

400

USD/MTScrap Price (Jan’17-Dec’18)

(2018 @ USD 351/mt)

(2017 @ USD 305/mt)

Iron Ore ↓ 3% y-o-y

Scrap ↑ 15% y-o-y

120

160

200

240

280

320

USD/MT Premium Coking Coal (Jan’17-Dec’19)

(2018 @ USD 207/mt)(2017 @ USD 188/mt)

Coking Coal ↑ 10% y-o-y

240

290

340

390

440

USD/MTCoke (Jan’17-Dec’19)

(2017 @ USD 295/mt)

(2018 @ USD 350/mt)

Coke ↑ 19% y-o-y

(source : Steel Business Briefing)

FINANCIAL HIGHLIGHTS

Profit & Loss (RM mil)

2018 2017

Revenue 2,322.1 2,195.2

EBITDA 229.6 329.7

Pretax Profit 149.9 252.9

Net Profit 149.5 205.4

Basic EPS (sen) 28.13 40.52

DPS (sen) 12.0 19.0

FINANCIAL HIGHLIGHTS

Borrowings

Operating Cash Flow - RM 58.6mil

Notes:1. Free Cash Flow defined as Operating Cash Flow less Investing Cash Flow

Free Cash Flow 1 - RM 99.7mil

+ RM 176.6mil (+ 20.9%)

2018Financial Position

Net Gearing 0.73xBalance Sheet (RM mil)

2018 2017

Shareholders’ Funds 1,325.2 1,227.3

Net Borrowings 966.6 788.9

Inventory 1,085.4 846.7

Trade Receivables 465.7 391.1

RM 193.2mil

RM 171.9mil

- RM 113.0mil (- 11.8%)

2017

0.64x

7

589,064

509,625

547,694

675,725

538,124

1Q18 2Q18 3Q18 4Q18 1Q19

QUARTERLY REVENUE (RM’000)

GROUP REVENUE

8

2,291,974

1,760,928 1,870,050

2,195,212 2,322,108

2014 2015 2016 2017 2018

YEARLY REVENUE (RM’000)

82,721

29,312 37,234

680

(10,922)1Q18 2Q18 3Q18 4Q18 1Q19

QUARTERLY PROFIT/(LOSS) BEFORE TAX (RM’000)

GROUP PROFITABILITY

9

24,970

(140,544)

202,128 252,861

149,947

2014 2015 2016 2017 2018

YEARLY PROFIT/(LOSS) BEFORE TAX (RM’000)

61,445

20,700

34,384 33,015

(6,598)1Q18 2Q18 3Q18 4Q18 1Q19

QUARTERLY PROFIT/(LOSS) AFTER TAX (RM’000)

23,388

(135,475)

166,775 205,384

149,544

2014 2015 2016 2017 2018

YEARLY PROFIT/(LOSS) AFTER TAX (RM’000)

*2015 Adj. EBITDA of RM37 mil

*Adj. EBITDA before NRV adj. / impairment & unrealized FX gain/(loss)

10

FINANCIAL HIGHLIGHTS – BALANCE SHEET MANAGEMENT

STRONG FINANCIAL POSITION TO RESTRAIN OVERSUPPLY SITUATION

1,063 927

1,068 1,227 1,325 1,320

2.12 1.85

2.13 2.38 2.46 2.45

0

500

1,000

1,500

2014 2015 2016 2017 2018 1Q19

0.00

1.00

2.00

3.00

Net Assets & Net Assets Per Share

Net Assets Net Assets Per Share

(RM’mil) (RM/share)1,404

1,300

958 845

1,022 1,075 1.26 1.34

0.85 0.64 0.73 0.77

0

500

1,000

1,500

2014 2015 2016 2017 2018 1Q19

0.00

0.50

1.00

1.50Borrowings & Net Gearing Ratio

Borowings Net Gearing Ratio

(RM’mil) (X)

2014 2015 2016 2017 2018 1Q19

275,647

233,928

300,210

391,085

465,666 434,394

Trade Receivables (RM’000)

2014 2015 2016 2017 2018 1Q19

1,165,046

951,990 830,764 846,718

1,085,366 1,090,040

Inventory (RM’000)

11

LONG-TERM FINANCIAL PERFORMANCE

17 16 24 37

69

20

127

198

149

31

121

62

(19)

12 23

(135)

167

205

150

(7)

ANN JOO GROUP PAT (2000-2018 & 1Q19)

2000 Took over Malayawata’smanagement

2007Privatization of AJSB2006

AJSB (Malayawata) became subsidiary of AJR

Oct 2011 BF Commissioning

2016 Total Steel Solution Provider(RM’mil)

FINANCIAL RESULTS : LONG-PRODUCT PRODUCERS

Notes:1) Lion Ind quarterly results refer to the steel segment only (before Interest & Exceptional Items)

680

(24,147)

(60,318)

(5,390)(10,922) (11,444)

(55,950)

(63,929)

Ann Joo Masteel Southern Lion Ind

Profit /(Loss) Before Tax (4Q18 & 1Q19)

4Q18 1Q19

(RM’000)

12

33,015

(24,868)

(44,386)

(5,390)(6,598) (8,678)

(41,550)

(63,929)

Ann Joo Masteel Southern Lion Ind

Profit /(Loss) After Tax (4Q18 & 1Q19)

4Q18 1Q19

(RM’000)

1

1

PROSPECTS

STEEL INDUSTRY DYNAMICS & CHALLENGES

14

SOFTNESS IN DOMESTIC DEMAND1

ADDITIONAL SUPPLY FROM FOREIGN-OWNED STEEL MILLS2

IMPACTS OF US-CHINA TRADE WAR ON WORLD ECONOMY

3 SURGE IN IRON ORE PRICE

4

REVIVAL OF SELECTIVE MEGA PROJECTS

15

LRT 3 MRT 2

ECRL

KVDT2Phase 2

PR

OJE

CTS

RES

UM

PTI

ON

KL-SG HSR MRT3

Bandar Malaysia

SG - JBRTS

PG LRT

REVIVAL OF MEGAPROJECTS AS KEY GROWTH DRIVER FOR

CONSTRUCTION STEEL CONSUMPTION

❑ Revival of ECRL at a lower cost of RM44 bil compared withits original cost of RM65.5 bil, with a cost saving of RM21.5bil

❑ Development of Bandar Malaysia with GDV of RM33.8 bilwithin China’s Global “Belt & Road” Initiative will beresumed

PR

OJE

CTS

UN

DER

REV

IEW

1,950

2,150

2,350

2,550

2,750

2,950

RM/MT

9 May 2018GE-14

7 Apr 2018Dissolution of Parliament

Oct 2018A wholly foreign-owned steel mill commenced bar production

End-Jan 2019Iron ore price surged on supply tightness

(source : Mysteel, MITI Weekly Bulletin)

Malaysia Rebar Price (RM/mt delivered) * MS 146 standard ≈ HRB 500 @ RMB100-150/mt > HRB400

As of 28 May 2019

MYS Bar PriceRM 2,120/MT

STEEL PRICE REBOUNDED POST-CNY ON COST PUSH FACTOR

MALAYSIA vs CHINA STEEL BAR PRICE (RM/MT)

China Bar Price RM 2,467 /MT

China Rebar HRB400 (USD/mt Ex-work)

16

❑ Scrap price dropped to USD306/mt from USD343/mt sincemid March due to weak market sentiment

❑ Current spot price @ USD306/mt vs 4Q18 avg. @USD341/mt, ↓ 10.3%

KEY RAW MATERIAL PRICES – IRON ORE & SCRAP

IRON ORE

❑ Iron Ore surpassed USD100/mt on increased demand &concerns on supply tightness from Brazil & Australia

60

70

80

90

100

110

IODEX 62% Fe / North China import CFR Average Quarterly Price

USD/MT Iron Ore Price (Jan’18-May’19)(source: SBB)

(source: Platts, Steel Business Briefing)

SCRAP

290

310

330

350

370

390

410

Scrap HMS CFR East Asia Import CFR $/t Average Quarterly Price

USD/MT Scrap Price (Jan’18-May’19)(source: SBB)

17

ANN JOO STRATEGIC DIRECTION - KEY FOCUS AREAS

18

Continuous productivity improvement programme

Flexible sales mix amongst Pig Iron, Billet, Bar & Wire Rod for both local & export markets

Actively pursue export opportunities, leveraging on operational flexibility

Continue engagement with Government to curb oversupply situation domestically

Proactive balance sheet management – inventory, receivables & gearing 1

2

3

4

5

Active hedging of iron ore & coking coal in SGX market to mitigate price volatility 6

19

MARKET CAP OF STEEL PLAYERS

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Ann Joo Southern Lion Ind Masteel

2013-2015China Factor

STEEL PLAYERS’ MARKET CAPITALIZATION (1996 – YTD2019)

2008Subprime Crisis

2016-2017AJ expanded market leadership due to cost advantage

Oct 2011AJ’s BF Commissioned

Oct 2007 Merger of AJR & Malayawata

1996AJ listed on main market

1998Asian FinancialCrisis

2001911 Terrorist Attack

RM’mil

2018AJ remained the largest steel counter by market cap despite slump in domestic market

INVESTMENT RESEARCH ON ANN JOO

RESEARCH REPORTS BASED ON 1Q19 RESULTSRESEARCH HOUSE DATE OF

REPORTRECOMMENDATION TARGET

PRICE (RM)

PE (X)

NET PROFIT (RM MIL)

EPS (SEN)

FY19 FY20 FY19 FY20 FY19 FY20

KAF-Seagroatt & Campbell

29/05/2019 Hold 1.38 55.0 11.0 11.1 77.9 2.7 13.3

Maybank Investment Bank

29/05/2019 Hold 1.34 9.6 8.3 82 96 15.3 17.7

UOB KayHian 29/05/2019 Hold 1.30 21.7 10.7 42.5 86.0 6.8 13.7

KenangaInvestment Bank

29/05/2019 Underperform 1.15 69.1 54.4 11 14 2.1 2.7

Hong Leong Investment Bank

29/05/2019 Sell 1.12 10.6 9.6 90.5 99.3 14.0 15.3

TA Securities 29/05/2019 Sell 1.00 (72.5) 15.9 (11.1) 51.7 (2.0) 9.2

AmInvestmentBank

29/05/2019 Underweight 0.97 16.6 12.1 53.0 74.2 8.9 12.1

21

THANK YOU