Note: "Profit or loss before interests, share of associates and taxation" is hereinafter referred to as "profit" or "loss"

STEEL
		2009 RM Million	2008 RM Million
	Revenue	3,791	6,532
	Profit/(Loss)	(490)	971

Product		Annual Rated Capacity (Million Metric Tons)
	HBI	0.9
	Billets/Molten Steel	3.1
	Steel Bars and Wire Rods	2.4

Our steel business, which is the core business of the Group, witnessed an exceptionally difficult year, and its performance was affected by the drastic slowdown in the world economy. International steel prices rose to a new high in July 2008 but plummeted by approximately 70% in November 2008. The operating environment for the steel industry has been gloomy since then with steel demand dropping drastically due to uncertainties on the duration of the recession. Various initiatives had been taken in this challenging time. Lowering production level and destocking were the two initiatives taken by our operations to bring inventories and operating levels to prevailing steel demand and to maintain a healthy liquidity position. In line with the deterioration in steel prices, our operations wrote down inventories by RM472 million during the financial year under review.

Hot Briquetted Iron ("HBI")

In 2008, our HBI plant in Labuan benefited from the steep increase in selling prices and strong demand for HBI. The situation in 2009 was in total contrast as the severe global economic downturn caused selling prices to tumble to new lows. Our HBI operation was adversely affected as most of the HBI were for the export market. The steep decline in the international scrap prices and sluggish demand resulted in our HBI operation recording a much lower revenue for the financial year under review. Nonetheless, our HBI operation posted a profit of RM174 million which was however, significantly lower as compared to a profit of RM419 million a year ago. With iron ore pellet being the feedstock for HBI, the 48.3% reduction in the annual iron ore pellets price concluded in June 2009 will augur well for our HBI operation.

Long Products (Billets, Molten Steel, Steel Bars & Wire Rods)

In the first half of the financial year, buying sentiments was weak due to the economic meltdown and also in anticipation of further price decline. However, the rate of decline began to ease towards the end of the financial year. Having operated under an uncertain economic cycle, our long products operations posted a combined revenue of RM3.21 billion, registering a contraction of 41% from RM5.42 billion in 2008.

TYRE
		2009 RM Million	2008 RM Million
	Revenue	330	103
	Loss	5	(26)

Location		Annual Rated Capacity (Million pieces)
	Malaysia	3.0
	China	0.3

Malaysia

Upon the successful completion of the acquisition of SCB, the Group consolidated 7 months’ performance of Silverstone Berhad ("Silverstone"), which undertakes our tyre manufacturing and distribution operations based in Taiping. Prices of natural rubber, the main raw material component, dropped substantially from RM10 per kg to RM5.21 per kg in January 2009. As a result, most tyre manufacturers were caught with stocks acquired at a high cost and were unable to off-load these stocks due to the falling demand. Silverstone was the exception as our prudent procurement practice had enabled us to benefit from the steep drop in rubber prices. Margins were considerably higher towards the last quarter of the financial year as a result of the lower raw material cost. Silverstone also carried out aggressive cost reduction and austerity drive programmes, which resulted in additional savings and reduced the raw material stock balance without any impact on the volume of production. With the stabilisation of international rubber prices and the recovery in the local economy as the Government’s stimulus packages take hold, we expect Silverstone to achieve another set of satisfactory results next year.

China

The massive stimulus packages implemented by the Chinese Government has to a large degree cushioned the impact of the steep drop in international demand for tyres. Incentives announced for the development of the construction industry, industrial activities and motor vehicle sector together with the iron ore and coal mining industry has spurred domestic consumption and economic growth. For the year under review, revenue of our tyre operations in China was marginally lower at RMB213 million as against RMB218 million last year. The satisfactory performance was achieved on the back of a 25% increase in domestic sales with further market penetration to territories of more remote provinces and gaining greater customer acceptance for consistent product quality and excellence. As China is expected to recover at a faster pace from the slowdown in its economic growth, the expected turnaround augurs well for the future of our tyre operations in China.

PROPERTY DEVELOPMENT
		2009 RM Million	2008 RM Million
	Revenue	30	16
	Profit	6	9

All 58 strata retail units in the M-Walk@Pelangi Avenue development project, located at Jalan Meru, Klang, had been fully sold-off during the financial year. Being the first of its kind in Klang, M-Walk@Pelangi Avenue was conceived as a purpose-designed shopping and eateries haven which enjoys dual business exposure. The joint-venture with the Eastern & Oriental Group, named St Mary Residences CBD, comprising a mixed integrated development project which includes 3 blocks of 28-storey serviced apartments, and retail, food and beverage theme outlets is located at the site of the former St Mary’s School in the Kuala Lumpur Central Business District. A soft launch was held for the East Tower which has 169 apartments and 6 penthouse units in June of this year. The official launch of the project is targeted by end of 2009 and it is expected to be completed by 2012. The project is anticipated to contribute positively to the Group’s earnings in the coming years.

BUILDING MATERIALS
		2009 RM Million	2008 RM Million
	Revenue	195	223
	Profit	1	4

Despite the Government’s various stimulus packages in pump-priming the economy, the construction sector recorded declining growth in the last three quarters. Consequently, our building materials distribution business, which is dependent on the construction and property sectors, also suffered a contraction in its revenue. The weak sentiments and the shrinking property sector have now compelled new and small distributors/traders of building materials to turn to ‘survival mode’ and compete aggressively to remain sustainable. Their actions have spread and eroded profit margins amongst the bigger and nationwide distributors, and sometimes, dragged manufacturers into undesirable price war situations. Prices of key building materials like steel bars fell more than 40% from its high of RM4,100 per tonne. It is anticipated that when building materials prices reduce, the benefit of lower prices in the construction supply chain could ultimately be transferred to the end-users. Subsequently, developers could pick-up and restart projects to help stimulate the construction industry. The stimulus packages announced by the Government are expected to kick-in and boost economic recovery. Given the tough challenges ahead, an effective dissemination of the status of these stimulus projects will bear a significant and meaningful impact on the construction sector, and hence, on the building materials distribution operations this Division is involved in.

AUTOMOTIVE LUBRICANTS
		2009 RM Million	2008 RM Million
	Revenue	59	64
	Profit	5	10

In a year in which businesses confronted extraordinary economic challenges, our automotive lubricants operations had performed moderately sustained by a strong customer network. Our customers’ confidence in us as business partners had enabled us to focus on areas of innovative marketing and distribution infrastructure that would benefit customers and our operations in the longer term. Some key areas that we continued to build on are directed towards extended learning for our dealers and workshops, to enable them to excel in the automotive service industry. We believe that by facilitating our partners with functional knowledge and expertise, whether through programmes or making available workshop equipment and useful diagnostic tools, their business strengths will be enhanced vis-a-vis their competitors, and in turn, our business partnerships with them will yield greater achievements together. During the year, we encountered severe decline in sales demand and rising price competition. Thus, we implemented various counter-measures to reinforce our business in all regions, and ward off competitors in the more volatile business areas. Although we were unable to pass-on low margin product costs to our customers, we depended on the other products to achieve profitability in our business. Internally, we focused on productivity across the production and distribution channel by directing resources to higher value opportunities. Through systematic scheduling, material planning and enabling small batch production, we strove to maximise throughput to produce a sustainable product range. Modern technologies and innovation in vehicles will drive the demand for our products. Improved engine technology, the invention of hybrid technology and fuel cell hydrogen application in vehicles are expected to lessen the demand for lubricant oil, either through extended drain interval or reduced consumption. In this regard, our automotive lubricants operations will seek opportunities for product expansion relevant to the progressive automotive industry.