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THURSDAY JULY 26, 2018 • THEEDGE FINANCIAL DAILY

20% oil royalty cannot D’nonce Technology looks to

diversify, names new CEO

be implemented yet BY JUSTIN LIM manufacturing which had been

negatively affected by low demand
KUALA LUMPUR: D’nonce Tech- from customers in the hard disk
nology Bhd, with a new chief ex- drive industry, the other two busi-

ecutive officer (CEO) come Sept 1, ness segments had generally been

has proposed to diversify its busi- contributing profit to the group
ness to include property develop- over the past three fi nancial years,”
ment and construction. said D’nonce.
Azmin: Law needs to be amended for payment based on net profi t In a filing with Bursa Malaysia It anticipates the new busi-

yesterday, the industrial packaging ness activities in property de-
company said it had entered into velopment and construction will
BY SANGEETHA AMARTHALINGAM Petronas’ Contribution to Federal & State Goverments of Malaysia an agreement for the exclusive contribute 25% or more of the

& CHESTER TAY rights to develop a 6,774 sq m piece group’s net profit or cause a di-
RM BIL 2013 2014 2015 2016 2017 of land in Seberang Perai Tengah, version of 25% or more of its net

KUALA LUMPUR: The new Export duty 1.1 1.2 0.6 0.4 0.6 Penang for RM10 million. assets. The proposals are expect-
government’s promise to raise Cash payments/Petroleum The deal with the two vendors ed to be completed by the fourth

the royalty paid to oil-produc- proceeds (oil royalty) 12 12.6 10.2 7.1 8.7 — Tan Than Kau and Tan Tiang quarter of 2018.

ing states to 20% will only be Taxes 33.3 32.5 15.9 13.4 17.4 Yang — was entered into via its In a separate Bursa filing,
implemented after the Petroleum wholly-owned subsidiary D’nonce D’nonce said its executive direc-
Development Act 1974 (PDA) is Dividend 27 29 26 16 16 Properties Sdn Bhd, providing tor Kuah Choon Ching will be re-
amended, said Economic Affairs Petronas’ total contribution to D’nonce an opportunity to diver- designated as the company’s CEO
Minister Datuk Seri Azmin Ali. federal and state government (RM bil) 73.4 75.3 52.7 36.9 42.7 sify its earnings base and establish effective Sept 1, replacing Law Kim

Azmin said the amendment is Source: Petronas annual reports its maiden property venture. Choon who resigned as its CEO
needed for the 20% royalty to be D’nonce will pay the vendors and group managing director to
calculated based on Petroliam Harapan’s 14th general] election as well as with the finance and RM5 million each in cash, to be fi - pursue personal interest.
Nasional Bhd’s (Petronas) net manifesto, we said there should international trade and indus- nanced by bank borrowings (60%) According to D’nonce’s annual
profit. be distributive justice, hence our try ministries to ensure the oil and internal funds (40%). report 2017, Law, 61, joined the
Currently, the oil royalty is paid suggestion for the 20% based on royalty allocations are fair and In April 2016, the land was ap- group’s board of directors on Oct
based on the gross value per bar- profit after tax and not gross pro- transparent. proved by Majlis Perbandaran 23, 2000. He was the group’s CEO
rel of production. duction. He added that his ministry Seberang Perai for the develop- since 2002 and was appointed
“If the [20%] royalty is paid “We did a cost structure analy- is also fine-tuning the payment ment of a 19-storey affordable group managing director (MD) on
based on gross value, there would sis on Petronas’ production with mechanism and would further apartment building of 281 units, Feb 1, 2008. He started his career
be huge implications on Petronas’ scant data but this plan (the 20% discuss with the state govern- and a block of seven-storey car working at a bank in 1977 before
financials,” Azmin said when re- royalty) cannot be expedited as it ments of Sabah and Sarawak, park. D’nonce said it is currently leaving in 1991 to join D’nonce
plying to questions on the topic goes against the PDA stating the which have an existing agree- evaluating the existing building Group.
in the Dewan Rakyat yesterday. current calculation is based on ment with Petronas, to reach a plan’s viability and the terms of Kuah, 33, joined D’nonce board
He added that there is no time gross value, and not net profit,” consensus on the matter. the original development order. on May 2. He is currently group MD

frame to implement the 20% roy- he explained. Besides Sabah and Sarawak, The group observed that rev- of CCK Petroleum Group.
alty. Azmin said his ministry is dis- the other oil-producing states are enue contribution from its three D’nonce returned to the black

“When we drew up [Pakatan cussing the issue with Petronas, Terengganu and Kelantan. operating segments — the supply in the third financial quarter end-
of packaging and other materials, ed May 31, 2018 (3QFY18), mainly
an integrated supply chain of prod- due to a RM1.6 million gain rec-
ucts and services, and contract ognised from the disposal of its
manufacturing — fl uctuated from investment property.
It recorded a net profit of
RM223.77 million in the fi nancial
Oil royalty in focus year ended Aug 31, 2015 (FY15) to RM526,000 in 3QFY18 compared to
RM176.02 million and RM192.24 a net loss of RM1.41 million a year
million in FY16 and FY17 respec- ago. Quarterly revenue, however,
tively. fell 1.73% to RM47.6 million from

BY ADAM AZIZ O&G produced are divided into the form of wang ehsan (goodwill The group attributed the reve- RM48.44 million.
three core components. money) through the federal agency nue fluctuation to changes in de- For the cumulative nine

KUALA LUMPUR: In the run-up to From gross revenue, a portion — Federal Development Depart- mand for packaging solutions from months, it saw a net profit of
the 14th general election (GE14), is set aside for state and feder- ment under the Implementation end-customers mainly involved in RM1.25 million compared to a
the current ruling coalition Paka- al government royalties. Another Coordination Unit, Prime Minis- the electronic and electrical sector. net loss of RM1.5 million a year ago.
tan Harapan made a promise in portion is set aside for recovery ter’s Department — to Kelantan “From the perspective of seg- Revenue rose 3.05% to RM145.9
its election manifesto to raise oil of cost of production or “cost oil”, since 2010 and Terengganu since mental profit, save for contract million from RM141.57 million.

royalty for all oil-producing states while the balance — “profit oil” — 2000.
to 20% from 5% currently. is shared between Petronas and For 2018, the previous Barisan
In its Buku Harapan GE14 man- the PSC contractor. Petronas and Nasional administration had ex-
ifesto, Pakatan said: “Th e Pakatan the contractor are also subject to pected oil royalty contribution of Gadang 4Q profi t down;
Harapan government will increase petroleum income tax under the RM4.06 billion, according to the

petroleum royalty to Sabah and Petroleum Income Tax Act. finance ministry’s federal govern- company pays 3 sen dividend

Sarawak, as well as other oil-pro- The percentage cap of “cost oil”, ment 2018 income estimates.

ducing states, to 20% or equivalent and the “profit oil” split between Hence, based on a 5% royalty,
value, as one of the fairer steps to Petronas and its PSCs, may diff er the four aforementioned oil-pro- BY SULHI AZMAN lion in FY17, amid higher reve-
distribute income from petrole- depending on the type of PSC. ducing states should similarly re- nue of RM594.29 million, against

um resources. This will allow the However, the oil royalty mecha- ceive RM4.06 billion altogether. KUALA LUMPUR: Gadang Hold- RM553.87 million previously.

states to take on more develop- nism for state and federal govern- Assuming a rate of 20% based on ings Bhd posted a 21.7% drop in The group also proposed a fi rst

ment expenditure responsibilities ments is similar across the board. gross revenue, the oil royalty for net profit to RM23.27 million in the and final dividend of three sen per

at state level.” In short, 10% of gross revenue the four states could amount to fourth financial quarter ended May share for FY18, subject to share-
The oil royalty mechanism has is skimmed off the top and split RM16.24 billion altogether. 31, 2018 (4QFY18) from RM29.73 holders’ approval at the forthcom-

come into focus after Prime Min- equally at 5% each for federal and For the financial year ended million a year ago, on poorer con- ing annual general meeting.
ister Tun Dr Mahathir Mohamad state governments, according to Dec 31, 2017 (FY17), Petronas’ struction earnings, mitigated by Looking ahead, Gadang said its

clarified in Parliament last week documents produced by the Co- net profit more than doubled to stronger property profi ts. construction order book of RM1.51
that the proposed 20% “oil royalty” ordinating Committee for Geo- RM37.66 billion from RM17.2 Quarterly revenue rose 4.1% to billion is expected to provide good
will be based on Petronas’ profi t science Programmes in East and billion the year before. Full-year RM182.01 million, from RM174.85 income visibility and a stable earn-

from oil and gas (O&G) extracted, Southeast Asia. revenue rose for the first time in million in 4QFY17, on continuing ings stream in FY19.
instead of gross revenue. For 2018, Sabah has guided its three years to RM223.62 billion, progress of its construction pro- As for the property division,
This is in contrast to earlier 5% oil royalty to increase to RM1.32 up 14.64% from RM195.06 billion jects, including those related to Gadang said it will initiate more
practices for Sabah and Sarawak, billion from RM1.25 billion in 2017 in FY16. the refinery and petrochemical aggressive marketing programmes

which have always earned the 5% — the highest annual oil royalty it It paid a dividend of RM19 bil- integrated development project in given the overall weakness, which
oil royalty based on gross revenues has ever received from Petronas. lion to Putrajaya for FY17, up from Pengerang, Johor, second line of has impacted sales.
of O&G extracted there. Sarawak, in its 2018 Budget, had RM16 billion for FY16. Similar- the Klang Valley mass rapid transit, “With unbilled sales of some
Generally, production sharing expected RM1.58 billion to come ly, it paid the federal government Tun Razak Exchange and Cyber- RM100.8 million, and planned new
contracts (PSCs) between Petronas from the 5% oil royalty this year. RM3.81 billion in oil royalty for jaya Hospital. launches, the property division is
and participating oil companies It is said the federal govern- FY17, up 4.1% from RM3.66 bil- For the full FY18, Gadang’s net expected to maintain a satisfac-
dictate that gross revenues from ment has been giving oil royalty in lion for FY16. profit dropped 5% to RM95.12 tory performance in the coming
million, from RM100.12 mil- financial year,” it said.