Proton

Transcription

Proton

PROTON SHARES
IN MALAYSIA’S
50TH YEAR
CELEBRATIONS
The Malaysian flag flying resplendent, symbolically leads the way
for a country and her people celebrating 50 years of nationhood.
As PROTON carries the mantle of national car manufacturer, the
2007 Annual Report is a reflection of our commitment to grow
alongside Malaysia, with the people of the Group playing an
integral part.
Malaysiaku Gemilang.
Individuals on the cover are staff from the various divisions of the
PROTON Group of companies.
Contents
06
Corporate Mantra & Core Values
20
Corporate Information
08
Financial Calendar
22
Group Operations
09
Key Financial Indicators
24
Profile of Directors
10
Summary of Financial Highlights
32
Senior Management
for Five Years
36
Chairman’s Statement
14
Corporate Profile
48
Managing Director’s Review
18
Awards & Recognition
PROTON Holdings
Berhad
58
Operations Review
134
Statutory Financial Statements
96
Statement on
224
Shareholdings Statistics
Corporate Governance
227
Properties Owned by
111
Additional Compliance Information
114
Statement on Internal Control
233
Share Price and Volume Traded
118
Risk Management
234
Notice of Annual General Meeting
124
Calendar of Events 2006 - 2007
236
Statement Accompanying the
PROTON Group
Notice of Annual General Meeting
Form of Proxy
PROTON in Malaysia
PROTON WAJA
6
PROTON 2007 ANNUAL REPORT
corporate mantra & core values
The PROTON Way
PROTON employees are dedicated to the Group's long-term success.
Every PROTON employee shall operate under the Group's shared values
and rely on these values to guide their behaviour with each other and the
customers. These values form the foundation of how we work and
conduct business.
CORE IDEOLOGY
AUDACIOUS GOAL
Driving Malaysia's transformation into a leader in technology
and quality.
VIVID DESCRIPTION
We deliver innovative and superior quality products and services.
Our brands inspire confidence and pride.
PURPOSE
We are a passionate group of people working together, creating
exhilarating products and services for global markets, synonymous
with great styling, innovation and leading technology.
corporate mantra & core values
QUALITY
We make products that work the first time, every time.
CUSTOMER FOCUS
Customers are the source of our income. We deliver on our
promises to our customers’ satisfaction
INNOVATION
We challenge convention, always seeking new and better ways
of doing things. We view change as opportunity.
TEAMWORK
We trust, respect and share knowledge to foster teamwork at
the workplace.
SPEED
We have a “can-do” attitude and will not rest until the problem
is solved. We have an inherent sense of urgency in everything
we do.
CARING
As a responsible corporate citizen, we invest in safety, health
and the environment.
7
8
financial calendar
•
29 August 2006
•
Unaudited First (1st) Quarter results for the period ended
30 June 2006
•
8 September 2006
Unaudited Third (3rd) Quarter results for the period
ended 31 December 2006
•
Third (3rd) Annual General Meeting
•
•
31 May 2007
Unaudited Fourth (4th) Quarter results for the period
ended 31 March 2007
14 September 2006
Entitlement date for the final dividend of 5 sen (tax exempt)
for the financial year ended 31 March 2006.
•
13 October 2006
•
Unaudited Second (2nd) Quarter results for the period
ended 30 September 2006
15 August 2007
Notice of 4th Annual General Meeting
•
30 November 2006
31 July 2007
Audited accounts for the financial year ended 31 March 2007
Payment of the tax exempt dividend of 5 sen for the
financial year ended 31 March 2006
•
27 February 2007
6 September 2007
4th Annual General Meeting
key financial indicators
BASIC EARNINGS
PER SHARE (Sen)
NET ASSETS
PER SHARE (RM)
10.67
197.7
10.69
10.08
9.52
9.46
92.9
80.6
8.5
-107.3
2003
2004
2005
2006
2007
DIVIDEND PAID
(RM’ Million)
2003
2004
2005
2007
RETAINED PROFITS CARRIED
FORWARD (RM’ Million)
137.3
4,916.9
4,611.8
87.9
2006
4,908.7
4,291.7
4,195.1
93.3
54.9
27.5
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
9
10
summary of financial highlights for five years
BALANCE SHEET AS AT 31 MARCH
2007
2006
(Restated)
2005
(Restated)
2004
(Restated)
2003
(Restated)
3,179.4
3,312.9
3,299.0
2,890.1
2,203.5
29.0
29.0
29.0
29.0
29.0
Other intangible
169.1
18.0
14.3
18.3
17.9
Associated companies
169.8
160.4
165.6
171.9
146.9
Jointly controlled entities
223.6
245.3
251.8
108.9
75.2
10.4
10.4
6.3
6.3
6.3
-
105.8
38.4
46.6
25.7
3,781.3
3,881.8
3,804.4
3,271.1
2,504.5
Inventories
1,273.6
1,389.0
967.1
795.8
813.6
Receivables
1,192.0
1,244.0
1,403.2
930.0
822.5
73.4
212.0
201.5
182.0
166.4
626.5
1,586.0
2,454.7
2,877.4
3,713.7
3,165.5
4,431.0
5,026.5
4,785.2
5,516.2
6,946.8
8,312.8
8,830.9
8,056.3
8,020.7
RM Million
Non-Current Assets
Property, plant and equipment
Goodwill
Other long term investments
Deferred tax assets
Current Assets
Current investments
Deposits, bank and cash balances
Total Assets
BALANCE SHEET AS AT 31 MARCH
2007
2006
(Restated)
2005
(Restated)
2004
(Restated)
2003
(Restated)
Share capital
549.2
549.2
549.2
549.2
549.2
Other reserves
389.7
412.7
393.8
406.1
421.8
Retained profits
4,291.7
4,908.7
4,916.9
4,611.8
4,195.1
Equity attributable to equity holders of the parent
5,230.6
5,870.6
5,859.9
5,567.1
5,166.1
-
-
0.3
-
1.6
5,230.6
5,870.6
5,860.2
5,567.1
5,167.7
181.6
100.3
759.6
447.4
221.3
0.8
0.8
1.1
1.0
1.0
182.4
101.1
760.7
448.4
222.3
1,531.6
2,324.2
2,207.4
1,900.5
2,438.4
2.2
16.9
2.6
140.3
192.3
1,533.8
2,341.1
2,210.0
2,040.8
2,630.7
Total Liabilities
1,716.2
2,442.2
2,970.7
2,488.2
2,853.0
TOTAL EQUITY AND LIABILITIES
6,946.8
8,312.8
8,830.9
8,056.3
8,020.7
RM Million
Equity and Liabilities
Minority interest
Total Equity
Non-Current Liabilities
Long term liabilities
Deferred tax liabilities
Current Liabilities
Payables
Taxation
11
12
INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH
RM Million
2007
2006
(Restated)
2005
(Restated)
2004
(Restated)
2003
(Restated)
4,911.8
7,796.9
8,483.3
6,361.2
9,268.0
(Loss)/Profit before taxation
(618.1)
18.0
399.3
556.2
1,352.7
(Loss)/Profit after taxation
(589.5)
46.7
442.4
510.3
1,086.0
4,319.2
4,963.6
5,054.2
4,705.1
4,283.0
(27.5)
(54.9)
(137.3)
(93.3)
(87.9)
4,291.7
4,908.7
4,916.9
4,611.8
4,195.1
2007
2006
2005
2004
2003
Basic (loss) earnings (sen)
(107.3)
8.5
80.6
92.9
197.7
Tax-exempt dividend paid
5.0
10.0
25.0
17.0
16.0
9.52
10.69
10.67
10.08
9.46
549,213
549,213
549,213
549,213
549,213
Revenue
Retained profit attributable to shareholders
Dividend
Retained profit carried forward
SHARE INFORMATION
Per Share
Net assets
Issued share capital
14
corporate profile
corporate profile
PROTON was incorporated on 7 May 1983 with three
primary national policy objectives:
•
To spearhead the development of component
manufacturing industries,
•
To acquire/upgrade technology and industrial skills
within the automotive manufacturing industry,
•
To strengthen the international competitiveness of
Malaysia's industrial capability.
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16
corporate profile
PROTON commands a substantial share of the domestic market
for passenger cars and over the years has been building up
distribution networks in key market centers across the four regions:
•
•
•
•
United Kingdom / Western Europe,
the Middle East,
South-East Asia, and
Australasia.
The business of the Group encompasses engineering consultancy,
manufacturing, distribution, financial services and property
investments.
The Group designs and produces cars for diverse consumer
preferences. The portfolio of PROTON models includes the reliable
family-sedan Waja, the stylish Gen.2, the versatile Arena, the
proven Saga and Wira range, the fun-to-drive Savvy and the
desirable sporty Satria Neo. The Group also has in its portfolio, the
world-renowned Lotus sports cars, with models such as Elise,
Esprit, Exige and Europa. These cars are manufactured in Malaysia
and the United Kingdom.
PROTON GEN.2
corporate profile
The Group conducts research in its centers in the United Kingdom
and Malaysia on new technologies with the ultimate aim of putting
these innovations into production through partnerships with TierOne Suppliers of OEM customers. A number of these patents have
been licensed to leading car manufacturers.
Currently, the Group has almost 11,000 employees who are
involved in the whole spectrum of the business, from research,
design, development, testing, stamping, casting, machining and
assembly to marketing, distribution and after-sales.
Strong customer orientation and competitively priced products are
the foundation of our business and essential to our success. We
aim to maintain market leadership by continuing to develop
innovative products and satisfy our customers better and more
profitably than our competitors.
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18
awards & recognition
Awards & Recognition
PROTON received the following awards and accolades from
various organisations as testimony of our efforts in leading the
Malaysian automotive industry as well as making inroads in
branding and motorsports.
2005
•
•
•
2007
•
•
Reader's Digest Trusted Brand 2007 Gold Award for Car
Category.
Winner of Coolest Car of 2006,
Awarded for PROTON Satria Neo by The Malay Mail.
2006
•
•
Reader's Digest Trusted Brand 2006 Gold Award for Car
Category.
Nanyang Siang Pau's 2006 Chinese New Year Greeting
Advertisement Award - Full Color Category - 5th Runner Up.
Reader's Digest Super Brand 2005 Gold Award for Car
Category.
Merdeka Millennium Endurance Race 2005 - 1st place Overall
and Class 'O' Winner.
Malaysian Rally Championship 2005 - Overall Class Winner
P10 Category.
2004
•
•
•
Malaysia’s Best Brand Award.
National Creativity & Innovation Award 2004.
PROTON Waja - 4.5 star out of a 5 star rating for being the
Most Economical and Greenest Sedan in Australia.
2003
•
•
•
Industry Excellence Award 2003,
Quality Management Category III.
Industry Excellence Award 2003.
Best Landscape Competition
(First Place - Factory Category).
awards & recognition
2002
•
•
•
•
•
•
Best Landscape Competition
(Second Place - Factory Category).
Appreciation Award for Contribution to the Development of
Malaysian Motorsports for 2002.
KPMG/The Edge Shareholder Value Award 2002 Sectoral
Winner - Industrial Market. The award measured economic
profit as a percentage of invested capital.
Highest Increase in Turnover Award among companies listed
on the Kuala Lumpur Stock Exchange for financial year 20022003.
Motor Vehicles and Transport Equipment Sector Leader Award
among the top 1,000 Malaysian companies.
Highest Increase in Net Profit Award among companies listed
on the Kuala Lumpur Stock Exchange for financial year 20022003.
2001
•
•
•
Certificate of Merit for 2001 NACRA Award.
Appreciation Award for sponsoring 'Le Tour de Langkawi'
2001 event.
Superbrand Award for Automotive Sector for 2001.
1999
•
Satria GTI - Wheels Magazine
Best Hot Hatch Buy Year 1999.
PROTON was also appreciated for its contributions to various
national causes and its support of community events by the
following organisations:
2006
• Certificate of Appreciation from the Badminton Association of
Malaysia for the Badminton Melayu Malaysia Piala DYMM
Sultan-Sultan ke-50 Tournament.
2005
• Certificate of Appreciation for the production of the Kelantan
Royal Project 2005 special documentary.
• Special Membership Certificate to commemorate the
Malaysian Industry-Government Group for High Technology's
10th Anniversary.
• Certificate of Appreciation in conjunction with QDay by the
Ministry of Cooperation and Entrepreneur Development.
• Certificate of Appreciation for the support of the Karnival Kulim
Hi-Tech Park.
• Support of the International CEOs Conference 2005 - Global
Issues and Challenges Facing Asian Corporations.
• Certificate of Appreciation for the National Anti-Drug
Campaign.
19
20
corporate information
Corporate Information
BOARD OF DIRECTORS
• Dato’ Mohammed Azlan Bin Hashim - Chairman
Appointed on 17 December 2004
• Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir
- Managing Director
Appointed on 1 January 2006
• Tuan Haji Abdul Jabbar Bin Abdul Majid
Appointed on 12 April 2004
• Encik Mohammad Zainal Bin Shaari
Appointed on 17 December 2004
• Tuan Haji Abdul Kadir Bin Md Kassim
Appointed on 10 March 2005
• Dato’ Ahmad Bin Haji Hashim
Appointed on 26 October 2005
• Dato’ Michael Lim Heen Peok
Appointed on 15 September 2006
• Dato’ Mohd Izzaddin Bin Idris
Appointed on 15 September 2006
• Encik Badrul Feisal Bin Abdul Rahim
(resigned with effect from 7 November 2006)
• Lt. Gen (R) Dato’ Seri Mohamad Daud
Bin Abu Bakar
• Datuk Kisai Bin Rahmat
(resigned with effect from 8 September 2006
by virtue of section 129 of the Companies
Act, 1965)
Appointed on 1 January 2006
(resigned with effect from 31 July 2006)
corporate information
BOARD EXECUTIVE COMMITTEE
AUDITORS
•
Dato’ Mohammed Azlan Bin Hashim - Chairman
PricewaterhouseCoopers
•
Dato' Haji Syed Zainal Abidin B Syed Mohamed Tahir
•
Dato' Michael Lim Heen Peok
(Chartered Accountants)
11th Floor Wisma Sime Darby, Jalan Raja Laut
•
Dato' Mohd Izzaddin Bin Idris
P.O.Box 10192, 50706 Kuala Lumpur
BOARD AUDIT COMMITTEE
•
•
•
•
Tuan Haji Abdul Jabbar Bin Abdul Majid - Chairman
Encik Mohammad Zainal Bin Shaari
Tuan Haji Abdul Kadir Bin Md Kassim
BOARD RISK MANAGEMENT
COMMITTEE
•
Tuan Haji Abdul Kadir Bin Md Kassim - Chairman
•
Datuk Tan Kim Leong
BOARD NOMINATION &
REMUNERATION COMMITTEE
•
•
•
•
Encik Ahmad Tajuddin Bin Abdul Carrim
Encik Md Ali Bin Md Dewal
BOARD DISCIPLINARY COMMITTEE
•
•
•
•
Tuan Haji Abdul Jabbar Bin Abdul Majid
Dato’ Ahmad Bin Haji Hashim
Tel
:
03 - 2693 1077
Fax
:
03 - 2693 0997
REGISTERED OFFICE
Hicom Industrial Estate
Batu Tiga, 40000 Shah Alam
Tel
:
03 - 8026 9741
Fax
:
03 - 8026 9744
REGISTRAR
Tenaga Koperat Sdn. Bhd.
20th Floor, Plaza Permata
Jalan Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur
Tel
:
03 - 4041 6522
Fax
:
03 - 4042 6352
STOCK EXCHANGE LISTING
Main Board of Bursa Malaysia Securities Berhad
COMPANY SECRETARY
Encik Mohd Nizamuddin Bin Mokhtar
(LS 006128)
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22
group operations
PROTON Holdings Berhad
ENGINEERING SERVICES
DIVISION
•
LOTUS ADVANCE TECHNOLOGIES
SDN. BHD. [100%]
u
Proton Engineering Research Technology
Sdn. Bhd. [100%]
n
Marco Acquisition Corporation (USA)
[100%]
u
Miyazu (Malaysia) Sdn. Bhd. [51%]
u
Lotus Group International
Limited [100%]
n
Group Lotus Plc. [100%]
n
Lotus Cars Ltd. [100%]
Lotus Engineering Ltd. [100%]
Lotus Engineering (M)
Sdn. Bhd. [100%]
n
Lotus Body Engineering Ltd. [100%]
n
Lotus Motorsport Ltd. [100%]
n
Lotus Holdings Inc. (USA) [100%]
Lotus Engineering Inc. [100%]
Lotus Cars USA Inc. [100%]
n
Lotus Pension Trustees Ltd. [100%]
n
Lotus Cars Foundation [100%]
n
Lotus Finance Ltd. [49.9%]
MANUFACTURING DIVISION
•
•
PROTON TANJUNG MALIM SDN. BHD. [100%]
PERUSAHAAN OTOMOBIL NASIONAL
SDN. BHD. [100%]
u
Proton Automobiles
China Ltd. (BVI) [100%]
n
Goldstar Proton Automobiles
Co. Ltd. [49%]
u
PT Proton Tracoma Motors
(Indonesia) [100%]
u
Vina Star Motors Corporation
(Vietnam) [25%]
group operations
MARKETING DIVISION
PROPERTY DIVISION
•
•
PROTON MARKETING SDN. BHD. [100%]
u
Proton Edar Sdn. Bhd. [100%]
n
Proton Edar Resources
Sdn. Bhd. [100%]
n
Proton Edar Ventures
Sdn. Bhd. [100%]
n
Proton Singapore Pte. Ltd. [100%]
n
PT Proton Edar Indonesia [95%]
n
Proton Commerce Sdn. Bhd. [50%]
n
Netstar Advanced Systems
Sdn. Bhd. [40%]
u
Proton Parts Centre Sdn. Bhd. [55%]
u
Proton Cars (UK) Ltd. [100%]
n
Smith & Sons Motors Ltd. [100%]
n
Proton Direct Ltd. [100%]
n
Proton Cars (Imports) Ltd. [100%]
n
Proton Cars Direct Ltd. [100%]
n
Proton Finance Ltd. [49.99%]
u
Proton Cars (Europe) Ltd. [55.56%]
u
Proton Cars Australia Pty. Ltd. [100%]
u
Proton Cars Benelux NV
SA (BELGIUM) [99%]
u
Auto Compound And Distribution Centre Sdn.
Bhd. [100%]
u
Proton Corporation Sdn. Bhd. [100%]
u
Lotus Cars Asia Pacific Sdn. Bhd. [100%]
PROTON HARTANAH SDN. BHD. [100%]
u
u
Proton Properties Sdn. Bhd. [100%]
Proton City Development Corporation Sdn.
Bhd. [40%]
FINANCIAL DIVISION
•
PROTON CAPITAL SDN. BHD. [100%]
INVESTEE & ASSOCIATE
COMPANIES
•
•
•
EXEDY (MALAYSIA) SDN. BHD. [45%]
PHN INDUSTRY SDN. BHD. [35%]
ALUMINIUM ALLOY INDUSTRIES
SDN. BHD. [19%]
•
MARUTECH ELASTOMER INDUSTRIES
SDN. BHD. [25%]
•
•
•
TECHNOMEIJI RUBBER SDN. BHD. [15%]
ARA BORGSTENA SDN. BHD. [6.67%]
PEPS-JV SDN. BHD. [10.50%]
OTHERS
•
YAYASAN PROTON
23
24
profile of directors
Dato' Mohammed Azlan Bin Hashim
Chairman / Non-Independent Non-Executive Director
Aged 50, Malaysian
Dato' Mohammed Azlan Bin Hashim was appointed as Director of the
Company on 17 December 2004 and subsequently Chairman of the
Board on 7 February 2005. He was nominated to the Board by
Khazanah Nasional Berhad. A Chartered Accountant by profession,
Dato' Azlan graduated with a Bachelor of Economics from Monash
University, Australia. He is a member of the Institute of Chartered
Accountants, Australia, Malaysian Institute of Accountants, Fellow
Member of Malaysian Institute of Directors, Fellow Member of the
Institute of Chartered Secretaries and Administrators and Hon. Member
of The Institute of Internal Auditors, Malaysia.
Dato' Azlan has extensive experience in the corporate sector including
financial services and investments. Among others, he has served as
Chief Executive / Executive Director of Bumiputra Merchant Bankers
Berhad, Group Managing Director of Amanah Capital Malaysia Berhad
and Executive Chairman of Bursa Malaysia Berhad (formerly known as
Kuala Lumpur Stock Exchange) Group. Dato' Azlan is a Board Member
of various government and non-government related organizations
including Labuan Offshore Financial Services Authority, Employees
Provident Fund, Khazanah Nasional Berhad, and Malaysian IndustryGovernment Group for High Technology. He was appointed Chairman
of Universiti Darul Iman Malaysia in 2006.
Dato' Azlan is also currently the Chairman of public listed entities, D&O
Ventures Berhad, Golden Pharos Berhad, PECD Berhad and a director
of Scomi Group Bhd. Within PROTON Holdings Berhad, Dato' Azlan
serves as Chairman of the Board Executive Committee, Board
Nomination & Remuneration Committee and the Board Disciplinary
Committee. Dato' Azlan also sits on the Boards of various subsidiaries
of PROTON.
Dato' Azlan has attended all Board of Directors' Meetings held during
the Financial Year. He has no conflict of interest with the Company and
does not have any family relationships with any director and/or major
shareholder of the Company. He has had no conviction for any
offences within the past ten (10) years.
Dato’ Haji Syed Zainal Abidin
B Syed Mohamed Tahir
Managing Director
Aged 45, Malaysian
Dato' Haji Syed Zainal Abidin B Syed Mohamed Tahir was appointed
Managing Director of PROTON on 1 January 2006. He also sits on the
Boards of various subsidiaries within the PROTON Group of
companies.
Dato' Haji Syed Zainal Abidin who graduated with a Bachelor of
Science in Engineering from the University of Maryland, USA, began
his career as a Project Engineer with Petronas Gas Sdn Bhd in 1987,
prior to joining Petroliam Nasional Berhad in 1992 as the Senior
Executive of Corporate Planning & International Business Development.
He then left to join HICOM Holdings Berhad in 1995, where he
assumed various senior positions in the company.
Dato' Haji Syed Zainal Abidin lent his expertise to PERODUA when he
was appointed Senior General Manager in 1999. Subsequently, he
was appointed Executive Director of PERODUA Auto Corporation Sdn
Bhd in 2002, and later promoted to Deputy Managing Director in
October 2005.
Dato' Haji Syed Zainal has attended all Board of Directors' Meetings
held during the Financial Year. He has no conflict of interest with the
Company and does not have any family relationships with any director
and/or major shareholder of the Company. He has had no conviction
for any offences within the past ten (10) years.
25
26
Tuan Haji Abdul Jabbar Bin Abdul Majid
Independent Non-Executive Director
Aged 62, Malaysian
Tuan Haji Abdul Jabbar Bin Abdul Majid was appointed as a Director
on 12 April 2004. He is a Fellow Member of the Institute of Chartered
Accountants, Australia, as well as a member of the Malaysian Institute
of Accountants. He is also a member of the Executive Council of the
Malaysian Institute of Certified Public Accountants (MICPA).
Tuan Haji Abdul Jabbar began his career in 1974 as Senior Manager
in the Internal Audit and Organisation Department of Bank Pertanian
Malaysia. In 1977, he joined KPMG Malaysia as Manager and was
admitted to partnership two years later. In 1993, he was promoted to
Deputy Senior Partner and was made Senior Partner in 1995, a
position he held until his retirement in 2000.
Tuan Haji Abdul Jabbar then joined Malaysia Derivatives Exchange
Berhad in 2001 and retired as Executive Chairman on 28 February
2004. He was a past president of MICPA. He was an Adjunct
Professor of the Faculty of Economics and Accounting of the
International Islamic University. He was a member of the Senate of the
Open University Malaysia Board.
Tuan Haji Abdul Jabbar is currently the Chairman of the Board Audit
Committee and a member of the Board Disciplinary Committee.
Besides PROTON, he also sits on the Boards of Tradewinds
Corporation Berhad (“Tradewinds”), Opcom Holdings Berhad and Bank
Muamalat Malaysia Berhad. Tuan Haji Abdul Jabbar is also the
Chairman of the respective Board Audit Committees of Tradewinds and
Bank Muamalat.
Tuan Haji Abdul Jabbar attended 14 out of 15 Board of Directors'
Meetings held during the Financial Year. He has no conflict of interest
with the Company and has no family relationships with any other
Director and/or major shareholder of the Company. He has had no
conviction for any offences within the past ten (10) years.
Encik Mohammad Zainal Bin Shaari
Non-Independent Non-Executive Director
Aged 44, Malaysian
Encik Mohammad Zainal bin Shaari was appointed as a Director on 17
December 2004. He is currently the Chief Operating Officer at
Khazanah Nasional Berhad (“Khazanah”). He spent 18 years in the
public accounting profession working in the United Kingdom, USA and
Malaysia. In 1997 he was made a partner in Price Waterhouse (now
PricewaterhouseCoopers). He left the public accounting profession in
2002, joining BinaFikir Sdn. Bhd. in 2003 as a principal and director. In
October 2004, he joined Khazanah.
Encik Mohammad Zainal is a member of the Board Audit Committee of
the Company.
He is a Fellow of the Institute of Chartered Accountants in England &
Wales and of the Association of Chartered Certified Accountants (UK),
as well as a member of the Malaysian Institute of Accountants and the
Malaysian Institute of Certified Public Accountants.
Encik Mohammad Zainal has attended all Board of Directors' Meetings
held during the Financial Year. He was nominated to the Board by
Khazanah Nasional Berhad and has no conflict of interest with the
Company and does not have any family relationships with any of the
directors and/or major shareholder of the Company. He has had no
27
28
Aged 67, Malaysian
Tuan Haji Abdul Kadir Bin Md Kassim was appointed to the Board of
PROTON Holdings Berhad on 10 March 2005. He serves as the
chairman of the Board Risk Management Committee. He is also a
member of the Board Audit Committee and Board Disciplinary
Committee of the Company.
Tuan Haji Abdul Kadir holds a Bachelor of Laws Degree from the
University of Singapore. He served in the Malaysian Administrative and
Diplomatic Service and in the Judicial and Legal Service between 1966
and 1973, holding various positions. He is currently the managing
partner of Messrs Kadir, Andri & Partners.
Tuan Haji Abdul Kadir is also the Chairman of Ho Hup Construction
Company Berhad and a director of UEM Group Berhad (formerly
known as United Engineers (Malaysia) Berhad), UEM World Berhad,
Suria Capital Holdings Berhad, TIME dotCom Berhad, Sino Hua-An
International Berhad and a few private companies, including being
Chairman of the Committee of Labuan International Financial
Exchange.
Tuan Haji Abdul Kadir has attended 13 out of 15 Board of Directors'
Meetings held during the Financial Year. He has no conflict of interest
with the Company and does not have any family relationships with any
Director and/or major shareholders of the Company. He has had no
Dato’ Ahmad Bin Haji Hashim
Director / Non-Independent Non-Executive Director
Aged 55, Malaysian
Dato' Ahmad Bin Haji Hashim was appointed Director of PROTON on
26 October 2005. He graduated from the University of Malaya with a
Bachelor of Economics (Hons) in 1974 and obtained his Masters in
Business Administration from City University, Washington State, USA in
1983. He has attended the Oxford Advanced Management
Programme, University of Oxford, United Kingdom in 2004 and also the
Leaders in Development: Managing Political and Economic Change,
at Harvard University, USA in 2006.
Dato' Ahmad began his illustrious career in 1974, as an Assistant
Secretary, Implementation and Coordination Unit in the Prime Minister's
Department and has served numerous Ministries including the Ministry
of Finance (MoF) between 1977 and 1984, holding various positions
before joining the Ministry of International Trade and Industry as the
Principal Assistant Secretary in 1985. In 1992, he joined the Foreign
Investment Committee, EPU, Prime Minister's Department as Principal
Assistant Secretary. In 1996, Dato’ Ahmad was appointed as Deputy
Secretary, Economic and International Division, Treasury, MoF. He was
later appointed as Secretary in the Loan Management and Financial
Policy Division, Treasury, MoF in 2000.
He served in the Ministry of Health as Deputy Secretary General
(Finance) in 2003 until he assumed his present position as the
Deputy Secretary General (Operations), Treasury, MoF in September
2005. Dato’ Ahmad has previously held directorships and
memberships in several organisations between 1999 to 2004, such
as Institut Jantung Negara, Islamic Development Bank in Jeddah,
Bank Simpanan Nasional, Lembaga Tabung Haji, Perbadanan
Labuan, Employees Provident Fund, Johor Corporation, Malaysian
Timber Industry Board, Klang Port Management Sdn Bhd and
Penang Regional Development Authority.
Throughout his illustrious career with the Malaysian civil service, Dato'
Ahmad has also represented Malaysia in the APEC Economic
Committee, APEC Finance Ministers/Leaders meetings, Islamic
Development Bank Board of Governors meetings, Commonwealth
Finance Ministers meetings, Asia-Europe (ASEM) Leaders meeting,
and WTO meetings among others.
Dato' Ahmad is also a Director of Telekom Malaysia Berhad and
Keretapi Tanah Melayu Berhad.
He has attended 13 out of 15 Board of Directors' Meetings held during
the Financial Year. He has no conflict of interest with the Company and
does not have any family relationships with any director and/or major
shareholder of the Company. He has had no conviction for any
29
30
Aged 59, Malaysian
Dato' Michael Lim was appointed to the Board on 15 September 2006.
He is also a Member of the PROTON Board Executive Committee,
Board Audit Committee and Board Nomination & Remuneration
Committee. He sits on the Boards of various companies within the
PROTON Group.
After graduating with a first class honours degree in Engineering from
the University of Strathclyde, in the United Kingdom, Dato' Michael Lim
began his career with the UMW Group in 1975, in various senior
managerial positions. In 1986 Dato' Michael Lim was appointed the
Managing Director / Chief Executive Officer of UMW Toyota Motor Sdn
Bhd, a joint venture company between UMW and Toyota Motor
Corporation of Japan. Dato' Michael Lim retired in 2004
Currently, Dato' Michael Lim is the Chairman of Furniweb Industrial
Products Bhd, an export oriented manufacturing company with plants
in Malaysia, Vietnam and Thailand. He also serves on the Board of
Alliance Bank Berhad.
Dato' Michael Lim has attended 8 out of 8 Board of Directors' Meetings
held during the Financial Year since his appointment on 15 September
2006. He has no conflict of interest with the Company and has no
family relationships with any other directors and/or major shareholders
of the Company. He has had no conviction for any offences within the
past ten (10) years.
Dato’ Mohd Izzaddin Bin Idris
Non-Independent Non-Executive Director
Aged 45, Malaysian
Dato' Mohd Izzaddin was appointed as a Director on 15 September
2006. He is also a Member of PROTON's Board Executive Committee
and is currently the Chief Financial Officer of Tenaga Nasional Berhad.
Dato' Mohd Izzaddin graduated with a Bachelor of Commerce Degree
(First Class Honours) from the University of New South Wales,
Australia. He is currently a member of CPA Australia and the Malaysian
Institute of Accountants.
He began his career with Malaysian International Merchant Bankers
Berhad in 1985 where he held various positions within Corporate
Banking, Corporate Advisory and Business Development until 1996.
During that term he was seconded for 3 years to a London-based
investment bank.
Dato' Mohd Izzaddin moved on to Malaysian Resources Corporation
Berhad in 1996 where he was first appointed as the Group General
Manager, Business Development & Corporate Affairs and then the
Chief Operating Officer the subsequent year. Thereafter he served as
the Chief Financial Officer of Ranhill Berhad in 2001 and later as the
Senior Vice-President (Corporate Finance) of Southern Bank Berhad
before joining Tenaga Nasional Berhad in September 2004. Dato'
Mohd Izzaddin is a member of the Board of Directors of Kumpulan
Wang Persaraan (Diperbadankan).
Dato' Mohd Izzaddin has attended 6 out of 8 Board of Directors'
Meetings held during the Financial Year since his appointment on 15
September 2006. He has no conflict of interest with the Company and
has no family relationships with any of the directors and/or major
shareholders of the Company. He has had no conviction for any
31
32
senior management
Senior Management
1
from left to right
3
Tan Chun Weng
Head, Group Finance
Datuk Kamarulzaman Bin Darus
Director, Manufacturing
2
4
Abdul Wahab Mohamed Khalid
Head, Engineering
Dato’ Haji Syed Zainal Abidin B
Syed Mohamed Tahir
Managing Director
Key Personnel Abroad
from left to right
1
2
3
Michael J.Kimberley
Chief Executive Officer, Group Lotus Plc.
Brian Collier
Managing Director, Proton Cars (UK) Ltd.
John Startari
Managing Director, Proton Cars (Australia) Pty. Ltd.
senior management
5
8
Razif Bin Ahmad
Director, Procurement
Michelle Kythe Lim
Head, Group Legal
6
9
Mohd Nizamuddin Mokhtar
Head, Group Secretarial &
Compliance
Low Pheng
Head, Group Internal Audit
from left to right
1
2
3
Robert Braner
Chief Executive Officer, Lotus Cars, USA
Moses Tan
Managing Director, Proton Singapore Pte. Ltd.
Dwi Sasetia
Director, P.T Proton Edar Indonesia
7
Dato’ Tony Chan Kok Chuen
Head, Quality Management
33
PROTON in the United Kingdom
PROTON GEN.2
36
chairman’s statement
Chairman’s Statement
On behalf of the Board of Directors, I am pleased to present the Annual
Report and Audited Financial Statements of the PROTON Group for the
financial year ended March 31, 2007.
INDUSTRY OVERVIEW
As one of the most competitive automotive markets in this region,
the challenges the Malaysian automotive industry has faced is
second to none. With increasing raw material and manufacturing
costs, compounded by a severely overcrowded operating
environment, Malaysia has also had to contend with the situation of
contracting vehicle sales, after eight consecutive years of growth.
The Malaysian Automotive Association (MAA), in its initial forecast
for 2006, projected vehicle sales volume of 565,000 units.
However, given the adverse market circumstances and rapidly
contracting volumes, MAA revised its forecast downwards to
520,000 units. By end December 2006, actual vehicle sales
achieved only 490,768 units, well below the original forecast. Of
this volume, passenger cars accounted for 75% or 366,738 units.
This declining trend, which commenced in early 2006, is primarily
due to macro-economic factors that include escalation in fuel
prices, higher interest rates and stricter lending practices, leading
to an overall depressed consumer demand for vehicles. Within this
contracted industry volume, there was also a shift in consumer
1.
preferences towards people movers and passenger vehicles that
are perceived to be more economical in terms of fuel consumption
and maintenance.
This contraction and shifting consumer preference had an acute
impact on the PROTON Group, given its relatively limited and aging
product range. To make matters worse, this situation also adversely
affected the value of used cars, which in turn had a knock-on effect
on new car purchases.
From the indication of Malaysian vehicle sales performance in the
first half of calendar year 2007, the outlook for the local automotive
industry will continue to remain challenging, with estimated total
vehicle sales within the 460,000 units level and passenger vehicle1
sales of 415,000.
However, expectations of the medium to longer-term outlook
remain positive as income levels continue to rise and the value of
used cars begins to stabilise. Hence, despite moderating volumes
at present, automotive manufacturers continue to embark on new
product launches and aggressive sales and marketing initiatives to
remain in this sector.
The Malaysian Automobile Association changed its classification of passenger cars to passenger vehicles in 2007, which now includes multi-purpose vehicles and sports
utility vehicles.
Dato’ Mohammed Azlan Bin Hashim
Chairman
37
38
FINANCIAL PERFORMANCE
This weakened industry state of affairs and the cumulative impact
of various legacy issues had adversely affected PROTON during
the financial year under review. Domestic sales volume for the
period declined by 46.8% to 88,635 units in comparison to the
166,656 units recorded in the previous financial year. PROTON's
market share in Malaysia also declined to 29.7% during the
financial year compared to 39.1% in the previous year, due to
persistent competitive pressures within the automotive sector.
that PROTON's business in the United Kingdom, Australia, the
Middle East and Africa continues to record encouraging growth
patterns. This financial year 2007/2008 is expected to see
PROTON make further inroads in the export markets, both directly
and indirectly, particularly in ASEAN, Iran and China.
Export Volume in the Last Five Years
Exp
25,000
20,528
20,000
17,234
Such conditions and circumstances have led PROTON to a net
loss after tax of RM590 million on a turnover of RM4.9 billion, as
compared to the previous year's results of a net profit after tax of
RM46 million on a turnover of RM7.8 billion.
15,000
10,000
12,527
7,905
7,275
5,000
The Group's losses for this financial year were also accentuated by
various provisions, which included right-sizing costs incurred by a
foreign subsidiary, higher component and raw material costs as
well as the impact of legacy issues such as additional expenditure
recognised in respect of vendor claims for previous years' project
development costs and settlement of onerous contractual
obligations previously committed. In addition, accounting
adjustments to PROTON's deferred tax assets also adversely
impacted the financial results.
Whilst all these have contributed to the disappointing results for the
year under review, PROTON Group will be stronger and more
prepared for the competitive environment ahead.
On a positive note, PROTON's export markets have improved
considerably by 64% representing 20,528 units sold compared to
the previous financial year's figure of 12,527 units. I am glad to note
0
'02/03
'03/04
'04/05
'05/06
'06/07
DIVIDENDS
With the Group recording a loss for this fiscal period and as a
measure of prudence, the Board of Directors are not
recommending the declaration of any dividends for the financial
year ended March 31, 2007.
CORPORATE DEVELOPMENTS
PROTON is currently in the midst of a sea change, with the
objective of becoming a more resilient and efficient national
automotive company. We are cognizant that for this to happen, the
fundamentals must first be in place. As such, since the change in
management, PROTON has focussed on streamlining its non-core
businesses, reviewed its core competencies and taken greater
steps to arrest inefficiencies.
* Starting from January 2007, MAA has reclassified the category into two: Passenger Vehicles which include Passenger Cars, 4WD, Window-Van, MPV & SUV and Commercial
Vehicles which include Truck, Pick-up, Panel-Van & Bus.
With respect to management, given the organisational structure
changes, there will be a need for continued review and
enhancement.
Whilst appreciating the urgency for the changes, given the size and
reach of the Group, it will take time for progress to be seen.
However, PROTON will get stronger as its core needs are
addressed. In line with this new corporate direction, the Group has
undertaken a number of initiatives, both strategic and tactical,
during the financial year under review.
Recapitalisation Efforts
In line with PROTON's continued commitment towards developing
its export markets, the year under review saw the Group
undertaking a recapitalization exercise that has strengthened the
balance sheets of PROTON Cars UK Limited and PROTON Cars
Australia Limited.
Marketing Initiatives
During the year under review, mindful of the need to continually
renew its product portfolio, PROTON launched the Satria Neo and
introduced new face-lifted variants of the Savvy and Waja. These
new models and new variants feature enhancements designed to
offer the best value-for-money package to customers in terms of
specifications, safety and equipment level for vehicles in its
category.
The new model and face-lifted variants were also introduced to
PROTON's various export markets. On the regional front,
Singapore became the first overseas market to receive the Satria
Neo when it was officially launched in the island state three months
after its inaugural debut. This was followed by the introduction of
the sporty 3-door hatchback in South Africa after an overwhelming
response in the 2006 Auto Africa Motor Show. Not long after the
Satria Neo was introduced in both Australia and the United
Kingdom in February 2007.
Similarly, given the need to fully capitalise on the capabilities and
brand image of Lotus, the Group also undertook a financial
restructuring of Lotus Group International Limited during the year.
With the completion of these recapitalisation efforts, these foreign
subsidiaries are now on a better financial footing, not only giving
greater confidence to the buying public but also enabling them to
better serve their customers. The recapitalisation has also instilled
greater confidence among vendors and suppliers to these
subsidiaries, thereby ensuring continued operational effectiveness.
Financial institutions will also be more confident when dealing with
these subsidiaries, as a result of their improved balance sheet. All
these will help these subsidiaries grow and prosper in the markets
they serve, in the long run.
PROTON being given the thumbs-up at the Jakarta launch.
39
40
The year under review also signalled PROTON's aggressive
expansion into the Indonesian market with the introduction of two
models - the Gen.2 and Savvy, in March 2007. To seize the
significant market opportunities, PROTON also officially opened a
one-stop sales and after-sales services centre and two other
dealer showrooms in Jakarta. More recently, PROTON launched
two further models - the Waja and the Satria Neo, in July 2007.
With a four-car line-up in Indonesia, PROTON will soon expand its
presence to Indonesia's other major cities. With the distribution
infrastructure in place, Indonesia from hereon, will be an important
part of the overall PROTON export strategy.
very encouraging progress is Iran. Through its business partner
Zagross-Khodro, PROTON is involved in CKD operations as well
as CBU sales. PROTON has sold more than 5,600 CKD packs of
the Wira since its entry into the Iranian automotive market in 2002.
Although the numbers so far have been modest, the Group is
confident that this will improve with the introduction of the Gen.2
CKD operations in Iran later this year.
CKD operations in Iran
Launch of New Products
On 16 June 2006, PROTON launched the Satria Neo as a
successor to its popular Satria. With its unique combination of
good styling, performance and safety features, unparalleled in
many other cars within the same segment, this new product is
representative of PROTON's joint-efforts with Lotus Engineering.
Officiating the launch of the Waja and Satria Neo is the
President of Indonesia, Susilo Bambang Yudhoyono
Beyond the ASEAN region, PROTON has also made further
inroads into the Middle-East and North African markets (MENA)
during the period under review. One notable market that has seen
The period under review also saw the introduction of new variants
of the Waja, now known as Waja Premium, and a face-lifted Savvy.
These updates are in line with PROTON's commitment to provide
customers with products that are current in its styling and features.
However these are mere product enhancements whilst the Satria
Neo is a niche market segment product.
product portfolio will be launched in August 2007.
This new 4-door family sedan to be launched in mid-August 2007
will replace the long-standing Wira model. This new model has
been conceived and designed based on feedback and input from
the targeted markets. With this new model meeting the needs and
requirements of the general public, PROTON expects to regain
some of its previous significant market share.
Face-lifted Waja Campro
It is a well-accepted fact that PROTON's current product line-up
needs to be made more current to meet the evolving needs and
requirements of the broader segment of the buying public.
Recognising that in the automotive industry it takes 2-3 years to
conceive and develop a new model, the Company has been
working diligently to renew its product portfolio over the last two
years. The first of PROTON's new product line-up for its improved
Yet another 4-door value-for-money small sedan will be launched
early next year. This is expected to further supplement the
PROTON range of affordable and value-for-money passenger cars.
This new vehicle is expected to replace the aging Iswara.
With the launch of the new range of vehicle models, PROTON
must now focus on rebuilding its brand image in the market.
Within the PROTON Group, Lotus also launched several new
variants of its existing range of sports cars including the Lotus
Europa S.
New variant of Lotus Europa S
41
PERSONA.
Unveiled.
44
Dealer Consolidation
The addition of new models allows PROTON to renew its aging
product line-up. This however, must be supplemented by having a
lean, knowledgeable and focussed dealer network optimised to
deliver good service at point-of-sales and after-sales.
During the period under review, there were more than 250 vendors
supplying directly to PROTON. This rationalisation programme is
currently progressing as planned and the Group expects significant
consolidation by end 2007 and full achievement of targets by end
2008.
Launch of Mizayu Tooling Facility
To achieve this, as indicated previously, the Group is in the midst
of consolidating and optimising its domestic dealer network. This
will make the network more cost-effective, whilst at the same time
enabling improved customer satisfaction at point of sale as well as
after-sales service. I am pleased to report that the consolidation of
the domestic network is well underway with minimal disruption to
our customers. PROTON expects that the consolidation efforts will
meet its targeted optimal number of outlets by the end of 2008.
The launch of Miyazu Malaysia Sdn Bhd's (Miyazu Malaysia) new
tooling plant at PROTON City, Tanjung Malim, was a significant
milestone for the Group's manufacturing and engineering divisions.
Once fully implemented, PROTON is confident that the domestic
dealer network will be on a better financial footing and will be able
to serve its customers better.
Vendor Rationalisation
Official launch of the Miyazu tooling factory.
A renewed product line-up and optimised dealer network in itself
will not yield the desired results PROTON is looking for, unless
processes are also put in place or manufacturing operations are
significantly improved to ensure the components used meet the
quality expectations of the buying public.
A result of a multinational collaboration between PROTON Holdings
Bhd, Miyazu Seisakusho (Japan) and Sojitz Corporation, the
opening of this new tooling plant marks Malaysia's entry into the
highly specialized and technology-intensive industry of designing,
engineering and manufacturing of automotive tools.
In order to improve manufacturing operations and overall quality of
finished products, PROTON needs to restructure the current
relationship to enable better management of vendors and parts
supplied to PROTON. This will involve the rationalisation of some of
the vendors into a tier ystem, based on their respective capabilities,
capacity and commitment to the industry.
The 3,600 square-metre plant on a 10.5-acre site, houses stateof-the art design, engineering, machining and finishing facilities,
which include computer-aided design and manufacturing
applications (CAD/CAM), double column milling machines,
coordinate-measuring machines, surface digitisers, and pressing
machines. These are all critical tools required to design, engineer
and produce the dies and moulds for the production of automobile
components, such as roof, bonnet/hood, fender, dashboard, door
panels, side panels, and other body panels.
In line with future growth of the tooling industry, Miyazu Malaysia will
reduce reliance on imports from the current 90% to 60% and
enhance human capital development and capability growth
throughout the local automotive industry. Given the vast potential of
this new line of business, PROTON has invested RM30 million into
this facility to date.
STRATEGIC INITIATIVES
It is imperative that PROTON keeps its focus firmly on the road
ahead. The Group must not only be flexible and adapt to the
constantly changing environment, but must also be committed to
carry out long-range initiatives aimed at further strengthening its
engineering and manufacturing foundations. With its expanded
product range, improved quality and value for money product
positioning, the PROTON brand will become increasingly attractive.
This is what will drive sustainable growth for PROTON and positive
returns for its shareholders.
Most certainly the road ahead will be paved with challenges, but
PROTON now has the benefit of experience and is rapidly
strengthening the foundation for its future growth.
However, PROTON cannot depend solely on the domestic market
to grow. As indicated in the previous year's report, to prosper and
thrive, PROTON has to expand its export potential further. Tangible
and sustainable growth in the international market will be the
mainstay for PROTON as it aims to expand its market share and
sales volume in the export markets. Whilst PROTON has already
gained a foothold in some markets, there is a need to explore new
emerging markets to tap into.
In line with PROTON's 10-year roadmap, the Group is committed
towards expanding its regional presence in terms of sales and
distribution, particularly in ASEAN, China, India, and the Middle
East. Already, its strategies to grow the brand beyond Malaysian
shores are beginning to show progress in terms of sales growth. It
must now also source components and identify manufacturing
facilities that will optimise costs and efficiency.
The Chinese automotive market in particular, remains a very
important market for many automotive manufacturers. PROTON,
like other automotive manufacturers, regards China as an important
market and one that it should participate in to be a competitive
automotive player in the long run. In July 2007, PROTON entered
into a business arrangement with Jinhua Youngman Automobile
Manufacturing Ltd (Jinhua Youngman) to supply 30,000 units of
Gen2 CBU cars over a period of 20 months. These cars will be
rebadged and sold in the Chinese automotive market under the
Europestar brand.
Although the numbers are modest compared to other automotive
manufacturers, this is a significant achievement for PROTON,
representing the largest single export order of PROTON cars since
its establishment in 1983.
There is also large growth potential in this arrangement with Jinhua
Youngman, both in terms of CBU units to be exported, licensing of
engine and platform, as well as expanded scope of opportunities
in engineering services and technical assistance. For the Malaysian
vendor community, this will also represent significant additional
volume for their manufactured components.
PROTON is also expanding its non-manufacturing business by
optimising revenue that can be obtained from its Group intellectual
property. An example of this strategy can already be seen in the
business arrangement entered into between PROTON and Jinhua
45
46
Youngman. This business arrangement not only enables PROTON
to indirectly enter the expanding Chinese automotive market, but
also enables its subsidiary, Lotus Group International Ltd, to gain a
strong foothold in the Chinese automotive engineering services
market.
PROTON is also mindful of the need to improve operational
efficiency, particularly with regard to improved capacity utilisation.
Towards this end, PROTON has identified contract manufacturing
for other OEMs interested to enter this region as a possible means
to supplement its own manufacturing volumes.
COLLABORATIONS AND ALLIANCE
The fast changing global automotive landscape demands that
players collaborate to gain further economies of scale and hasten
the speed of development. Those that choose to remain
independent must have the reach, resources and scale to secure
growth. Alternatively, participants can choose to build mutually
beneficial alliances.
PROTON as a company fully realises that it needs to keep up with
industry changes to meet the challenges of the present and the
future; in the areas of what it does, how it does and where it does
it. It is also recognised that although PROTON can substantially
proceed on its own, the company can utilise its limited resources
more efficiently via collaborations and alliances. Collaborations and
alliances can help PROTON achieve the desired end-state in a
faster, more cost-effective and more efficient manner.
By collaborating with suitable automotive industry participants,
PROTON can expect to reap the benefits from at least the
synergies in a more diverse product line-up being made available,
access to latest technology, economies of scale in procurement
and ongoing enhancements from their partners' research and
development. There should also be a significant reduction in
development time and cost, as well as human capital
development. Strategic alliances of this nature, appropriately
structured, will undoubtedly result in significant cost savings with
consequential improvements in both operational and financial
performance.
PROTON is committed to making a collaboration with suitable
partners succeed. At the same time, it is expected that the partners
will quickly and cost effectively assist PROTON in addressing the
issues facing the company at the moment, particularly with regard
to improving its product line-up across different price and market
segments, access to new markets, optimising PROTON's
manufacturing capacity utilisation rate, enhancing the company's
vendor base and refining its core technologies.
Notwithstanding this, the alliance to be entered into must be
flexible, balanced, mutually beneficial and specifically tailored to
meet the needs and requirements of PROTON and the local
automotive industry. It is without doubt that such an alliance will be
within the overall context of the nation's aspirations to develop the
local automotive industry and enable all Malaysians to continue to
be proud of a thriving and vibrant automotive industry that is owned
and managed by Malaysians, providing a variety of quality, cost
competitive products for Malaysia and the world.
PROSPECTS
The automotive industry in Malaysia is expected to grow as
consumer sentiments improve, spurred on by increasing
disposable income, both in the private and public sectors and the
introduction of new vehicle models designed for the Malaysian
market. There is also expected to be improving consumer
confidence spurred on by increasing disposable income and
arising from the implementation of the Ninth Malaysia Plan and
development of the new regional economic zones.
In order to be positioned to take advantage of the forecasted
improvement, PROTON will continue to focus on improving its
operational efficiency and cost competitiveness in the coming
financial year. More importantly, an automaker needs to be able to
build and sell cars that meet the requirements of the market. It has
been almost 2 years since PROTON made the promise to deliver
the “right car to the right market for the right price at the right time”.
It is therefore encouraging to note that PROTON will finally be able
to replace some of its aging products with more market tailored,
cost-effective replacement products in the course of the next
financial year 2007/2008, beginning with the next new product
launch in August 2007.
Efforts are also being made to rationalise component suppliers
and technology acquisitions, as well as to consolidate the sales
and after-sales networks that aim to strengthen the customerfocus services, delivering higher level of customer satisfaction. In
addition to these measures, PROTON will also be implementing
longer-term strategic operational plans that cover product
development, engine diversification and optimal facilities utilization
in the next few years.
What is important is for us to move with urgency, but nevertheless
to understand that there is no quick-fix to the issues and problems
faced by a full-fledged automobile manufacturer, the size and scale
of PROTON.
ACKNOWLEDGEMENTS
It is acknowledged that the recent financial year ended 31 March
2007 has been challenging and the financial results disappointing.
On behalf of the Board of Directors, I had already stated that
additional commitment and effort is necessary for the Management
of PROTON to implement significant changes to achieve a faster
pace of improvement. Just as important, is that greater cooperation
is also required from other industry participants in the value chain,
including component vendors and sales dealers, which is essential
to ensure timely success.
PROTON will of course continue to support efforts at the
shareholder and Government levels to further strengthen the
Group. We are confident that by working closely with all relevant
parties and in consultation with the Government, PROTON and the
broader national automotive industry will be further strengthened
and will add significant value to the overall national economy.
My sincerest appreciation to the Board of Directors for their
unwavering commitment and contributions to see through
PROTON's various initiatives. My thanks to the management and
staff for continuing to persevere. We continue to see a team of loyal
stalwarts that is willing to overcome what may at times seem to be
insurmountable.
PROTON Group and the automotive industry could not have
progressed if not for the unwavering and stoic support of the Rt.
Hon. Prime Minister, Y.A.B. Dato' Seri Abdullah Haji Ahmad Badawi
and the Malaysian Government through its various ministries and
agencies. We therefore express our utmost gratitude and sincerest
appreciation to YAB Dato' Seri and the Government.
And most certainly our shareholders deserve much praise for
continuing to remain with us at a time where challenges are at its
height. I thank you for this support and it is your continued faith in
PROTON that will drive the Group to travel past this period of
turbulence to the opportunities that lie ahead.
Thank you.
Dato' Mohammed Azlan Bin Hashim
Chairman
47
48
managing director’s review
Dato’ Haji Syed Zainal Abidin
B Syed Mohamed Tahir
Managing Director
Managing Director’s Review
How we must adapt and build on our strengths
PROTON is at a turning point. Upon a challenging backdrop of depressed
consumer demand, a regional slump in car sales, an intensely over saturated
market and an ever-intensifying competition, we must turn around this brand
which is the pride of the country's automotive sector to ensure the years
ahead will bring improved results despite these challenges.
OVERVIEW
We can regain our position as a leading profitable automotive
Group offering quality and wide-ranging products and services. To
do this, we have to set short-range objectives and targets with a
view towards achieving long-term goals.
THE 11 FOCUS AREAS:
•
Enhancing PROTON's product portfolio
•
Improving sales and distribution
These efforts require a culture change and a re-think of our current
operations and processes. I, for one, am not keen on short-term
goals. We must affect long-term solutions that may involve some
fundamental change to ensure permanent and sustainable growth
for PROTON.
•
Optimising export capabilities
•
Reducing the cost of materials
•
Reducing overhead costs
•
Improving manufacturing efficiency
•
Optimising working capital
We have implemented the seven key thrusts and initiatives laid out
in the previous annual report. Whilst the results of some of these
initiatives have borne fruit, most elements of the key thrusts are ongoing exercises harvesting long-term results. For the period under
review, these key thrusts and initiatives have been further
enhanced towards achieving long-term results, which are now
targeted at achieving eleven focus areas, with the objective of
improving our business efficiency and viability.
•
Liquidating non-core assets
•
Improving quality
•
Enhancing vendor management
•
Developing human capital and organisational
effectiveness
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We have implemented aspects of these initiatives and programs for
the year under review and we expect to bring results to these
efforts in the coming financial years.
In particular, I have outlined for the immediate term, four key areas
for improvement that should drive greater efficiency and bring
about a culture of change that is very much needed in PROTON.
These areas are product, quality, cost efficiency and distribution
network.
Product
To achieve this, we are concentrating on robust product planning
and intense market study. We must hold firm to the philosophy of
introducing the right car, for the right market, at the right price and
at the right time.
Notably, this philosophy has begun to bear fruit as evidenced by
the year-on-year growth in our export segment.
For the coming financial year, we expect to see PROTON
introducing new models and variants with a view to wrench back
market share in this highly competitive domestic market, whilst
strengthening our product offering in the international market.
We need to inject more speed into introducing new products and
variants to the market.
As promised, during the year under review, PROTON had
successfully introduced the all-new Satria Neo which was well
received, thanks to the model's enhanced quality and attractive
contemporary design.
Close on the wheels of Satria Neo, we also introduced new
variants of our Waja & Savvy models which gained stylish facelifts
as well as quality and performance enhancements.
Despite the challenging operating environment in our domestic
automotive industry, the impact of introducing new and improved
PROTON cars have demonstrated that it is crucial for us to
consistently and rapidly deliver quality and wide-ranging vehicles
that the market desires.
Face-lifted Savvy
To facilitate our ability to develop the right car at the right price, we
also aim to focus more on expanding our research and
development (R&D) capabilities in the coming years. In addition to
investing in the appropriate infrastructure and technologies,
PROTON is cognisant of the fact that our human resources in
terms of skill-set and a knowledgeable R&D team must also be
developed and enhanced concurrently.
MD with the A1 team
Quality
During the financial year under review, PROTON had carried out a
series of quality improvement programmes and training initiatives
aimed at addressing the need to deliver products and services that
meet if not surpass customers' expectations.
Our focus on enhancing quality must begin from the
conceptualisation stage of a car right up to its after-sales service
experience. This can be achieved by incorporating lessons learnt
from the past, encouraging high standards, striving for innovation,
as well as implementing quality systems from the very onset of the
manufacturing process of our products.
It is imperative that the spirit of true partnership is solidified with our
vendors and suppliers to ensure that the parts and components
we receive for our products are of the highest standards and
quality. Subsequently, our manufacturing process must also be
closely monitored and continuously improved in order to deliver the
final product that is truly up to the mark.
I cannot stress enough that PROTON must embrace a system and
culture that is centred on quality. Hence, we have taken an
integrated approach that includes effective compliance
procedures, quality standards and audits as well as instilling the
significance of quality management among employees across the
board. To support this objective as well as develop organisational
effectiveness, we have also executed various human capital
capability initiatives during the period under review. These initiatives
sought to develop leadership competencies, create a talent pool
and put into motion a succession-planning programme to better
equip the workforce with the right skills to compete globally.
In the coming financial year, we shall continue to put in place
structured quality control programmes while improving the service
levels at our service centres, which is the 'front office' of our brand.
We are aware that our after-sales service and quality assurance
must be second to none in order to offer our customers a
seamless experience. The recent launch of the PROTON i.CARE
customer service programme with the theme You Can Count On
Us, underscores PROTON's commitment to improve every quality
aspect of our business. It includes among others a hotline, 24-hour
breakdown services, improved after-sales service centres and 25
mobile service teams that will provide free inspections and quick
services for our customers.
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Cost Efficiency
It would be highly ineffective if we were to generate satisfactory
revenue without putting in the same level of effort to contain our
costs. Given the size and reach of PROTON, we have initiated and
will continue to undertake necessary 'cost down' initiatives and
measures to increase plant utilisation and maximise economies of
scale.
Among the identified measures undertaken to improve cost
efficiency include the rationalisation and consolidation of vendors.
The implementation process involves the rationalisation of non-
Merdeka Millennium Endurance Race at Sepang
performing vendors via a specialisation and tier system that entails
a strict monitoring and competency enhancement programme, as
well as the consolidation of specialised vendors via mergers and
acquisition, equity participation and new joint ventures. These
rightsizing processes aim to introduce a meritocratic system that
helps to increase productivity and minimise production delays and
downtime. It is envisaged that with a smaller vendor base,
PROTON shall be able to better accelerate development and better
manage the vendor network and thus enhance our quality,
capabilities and costs.
Towards this end, PROTON must also continue to strive towards
reducing our bill of material (BOM) costs or the major cost of
producing a car. This can be achieved via a strict regime of Value
Analysis/Value Engineering (VAVE), which involves re-evaluating
and making the necessary adjustments to parts and components
to maximise cost effectiveness without compromising quality.
Whilst the local distribution network is being aligned, we also need
to break away from our traditional reliance on the domestic market
by adopting an aggressive export strategy. PROTON is set to focus
on expanding existing markets like South Africa and the Middle
East (especially Iran) and develop new high-growth markets in
Indonesia, China and India.
We also aim to reduce our BOM costs via high commonisation of
parts and components to achieve economies of scale in mitigating
high raw materials cost, which will continue to escalate. With a
certain level of success to date, the commonisation of parts and
components in our new models have already shown very positive
and encouraging results and we hope that this effort, which is
widely practised by larger car makers, will be successfully and
wholly implemented, without compromising style and uniqueness.
The main thrusts of the export strategy are to grow existing
businesses via market share enhancements, grow profits by
improving export margins through the rationalisation of product mix
and prices, strengthen the PROTON brand further through targeted
regional advertising to increase our brand equity, as well as
upgrade and enhance our after-sales facilities, competencies and
service levels at all PROTON networks overseas.
Distribution Network
Currently, a saturated market and declining sales compounded by
an over-expanded domestic sales network have threatened the
very survival of our dealers.
Nevertheless, during the year under review, PROTON has
aggressively sought to rationalise its dealer network with a twophased programme to address under-performance and
redundancies. With the successful rationalisation of our dealership
network, we expect to develop a more efficient and cost effective
network that can positively impact the Group's bottom-line in the
near future.
GEN.2
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MOVING FORWARD
The road ahead will be no less difficult for PROTON. We are
already making positive headway in addressing and overcoming
short-term challenges in order to remain a viable and relevant
participant in the domestic automotive industry.
markets. This is indeed important to PROTON as we must continue
to strive to break away from our reliance on the domestic market
and expand our reach further to tap global opportunities via a
dynamic export strategy that is poised on expanding existing
businesses and developing new markets, as well as increasing
export margins and growing the PROTON brand worldwide.
Nevertheless, from a long-term corporate perspective and in line
with industry trends that not only affect PROTON but also other
global industry participants, forming a strategic alliance with the
right partner is naturally and clearly the path to follow.
PROTON aims to deliver on its business objectives on a
sustainable basis. We are committed to doing our best in exploring
and implementing a new and integrated approach to achieve our
set targets.
In terms of the four core areas identified, a strategic partnership will
firstly enable PROTON to significantly reduce the time required to
introduce new products from the current 24 months to 18 months
or even less.
In terms of quality, we are confident that with our core strengths
and the right partner, we will also improve the structure of our
quality improvement plans at all levels via adoption of international
standards and benchmarking. Our training and design
collaboration with an established car manufacturer by means of a
strategic alliance will ensure greater design quality for our products.
We also expect to improve vendor efficiency and competitiveness
by gaining critical mass through worldwide marketing, thus
enhancing economies of scale. By having access to higher
technology by way of technology transfer and sharing of skills, our
vendors would be able to ensure reliability and consistency of their
products, and therefore significantly increase our cost efficiency.
Finally, a comprehensive strategic alliance would also provide
PROTON with a launch pad to gain access into international
Chief Minister of Perak,
YAB Dato' Sri Di-Raja (Dr.)
Mohamad Tajol Rosli Mohd
Ghazali, officiating the launch
of the Miyazu tooling plant.
More so, as a national carmaker, we are essentially the country's
flag bearer. Hence, it is imperative that PROTON works hand-inhand with the Malaysian Government in realising both the nation's
short-term and long-term strategic plans encapsulated in the 9th
Malaysia Plan, 3rd Industrial Master Plan as well as the National
Automotive Policy.
On a corporate perspective, PROTON is steadfast in charting a
course to realise its maximum potential and thus provide improved
value for our vendors, shareholders, stakeholders and our nation
as a whole.
Towards this end, I present to you our Operations Review on the
various key facets of PROTON. I trust you will find the information
comprehensive and insightful.
Thank you.
Dato' Haji Syed Zainal Abidin B Syed Mohamed Tahir
Managing Director
55
PROTON in Indonesia
PROTON SAVVY
58
operations review
Engineering Services
Being a national automaker that has clearly set its sights on the highly
competitive global automotive sector, PROTON is steadfastly committed
to continuously enhancing the Group’s engineering capabilities.
In addition to our ability to develop new car models from the
ground up, it is important that we have the technology and skills to
be able to manufacture cars of high standard and quality, effectively
and efficiently.
Hence, the capability of employing state-of-the-art technology
directly to current and future product development was at the
forefront during the year under review.
In terms of testing and gauging a vehicle's durability, our
Homologation & Testing team was able to take full advantage of its
new Mileage Accumulation Chassis Dynamometer laboratory to
conduct fully automated mileage accumulation tests on PROTON's
current and future models being developed. The result of this work
will be seen on new models that will be released during the financial
year 2007-2008.
operations review
This system is able to run 24/7 with a computer controlled
robot 'driving' the vehicle on a set of rollers. It can be utilized
to verify the 100,000 kilometre European On-Board Diagnostic
(EOBD) test required to ensure lifecycle performance of a car's
emission system. The system also ascertains Powertrain
endurance cycles required to quickly accumulate the mileage
needed, in addition to verifying engine and transmission
durability and reliability. Through this system which is part of
PROTON's ongoing product development and improvement
process, the routine of putting the car through its first thousand
kilometres or so is completed in hours instead of days.
PROTON was also able to utilize its new Engine Dynamometer
capability to conduct a variety of engine tests on its vehicles across
The new Miyazu tooling factory in
Tanjung Malim
the globe. The dynamometer was integral in the preparation of
Satria Neo’s and GEN.2’s drivability and performance tests in South
Africa, Savvy’s left-hand drive validation test in Egypt as well as
engine performance testing for the 2006 PROTON Rally Team.
PROTON's joint venture with Miyazu Seisakusho Company Ltd
Japan and Sojitz Corporation Japan, Miyazu Malaysia Sdn Bhd
(“MMSB”) went through an eventful year. In addition to the JV's
ongoing support providing tools, jigs and dies to PROTON, MMSB
has also been supplying dies and jigs to Perodua and Toyota's
Malaysian operations. MMSB has been at the forefront of
PROTON's new product development as a supplier of tools, jigs,
dies for body parts and moulds for plastic parts, but the company
hasn't stopped there. Miyazu is a supplier of pressed-steel
components to PROTON and offers stamping services to ASEAN
OEMs as well.
59

Proton

Transcription

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