Bursa Announcements

Contents :

Over the past few years, the sales and production volume of our Nissan and Nissan Diesel vehicles enjoyed a steady increase with the introduction of new models and expansion of sales and after-sales service networks. (Please refer to the Malaysian Automotive Association registration statistics in theTable below.)

In 2005, an additional model, the Renault Kangoo will be added to our assembly plant for mass production.

The current single-shift production capacity of the existing assembly plant based on current product mix of approximately 30,000 units per annum could be further stepped up with the introduction of a second-shift work to serve the Group’s near term business needs.

However, going forward and in line with Nissan’s aspiration to increase its worldwide sales volume under its "180 plan" and beyond, the Group’s sales volume over the medium term of 3 to 5 years, barring any unforeseen circumstances, is also targeted to expand further. It is anticipated that the existing assembly plant will be unable to cope with the expected medium term production and sales requirements.

Investment to expand production capacity
The Board of Directors, after careful consideration, has therefore given approval for the Group to invest in a new assembly plant to be located in Serendah, at an estimated total project cost of RM125 million.

The new assembly plant will have an initial single-shift production capacity of 14,000 units per annum which may be doubled by additional shift work. The capacity can be further stepped up to 50,000 units per annum with additional future investment. It will be constructed on a piece of 43 acre leasehold land owned by the Group. The land, with the lease expiring in 2095, has a book value of RM8.47 million. It is targeted that the plant will be ready in 24 - 30 months.

The Board has further given approval for the existing plant located in Segambut, Kuala Lumpur, and related facilities to be upgraded at the estimated project cost of RM25 million to meet the near term production requirements of the Group.

Engineering, technical and product support
As in our usual course of business, the Group will continue to work closely with Nissan Motor Co., Ltd., Japan, on the engineering and technical aspects of the assembly plant design, construction and production processes and the introduction of new or replacement vehicle models.

Funding for the investment
The Group will increase its total external borrowings to fund its business requirements, including the funding for the new assembly plant as well as the upgrading of the existing plant.

Approvals for the investment

The Group has received the approval of the Ministry of International Trade and Industry (MITI) for the assembly of commercial vehicles in Serendah under a manufacturing licence issued in April 1998. We have also received the approval from MITI for the assembly of passenger vehicles in Serendah in September 2004 subject to the consent of the State Government/local authority, which is currently pending.

The investment is not subject to shareholders approval.

Financial impact of the investment
The increase in production capacity will allow the Group to capture any potential opportunities in the market to increase the Group’s sales volume of locally assembled vehicles over the medium term. If and when the sales volume of the Group does enjoy such an increase, and depending on the profitability of the vehicle models at that time, there may be an impact on the earnings of the Group over the medium term.

The cost of the property, plant and equipment in relation to the new assembly plant will be accounted for in accordance with the accounting policies of the Group and depreciated over its useful life once commercial production commences and adjusted for impairment losses, if any.

Interest expenses associated with increased external borrowings will similarly be accounted for in accordance with the relevant accounting standards and policies. Apart from this, the investment in the assembly plant is not expected to have any material impact on the earnings and net tangible assets of the Group during the construction phase over 2005 and 2006.

As at 30 September 2004, the Group has a shareholders’ fund of RM1.03 billion with property, plant & equipment at RM255million. For further details, please refer to the consolidated balance sheet of the Group announced on 18 November 2004.

Risk factors
The Group has not assumed any new risks with the above investment. The risk factors inherent in the motor distribution business faced by the Group currently, e.g., fluctuation in currency exchange rates, changes in government policies on motor industry, tariff rates, competitive activities and capacity utilisation etc. remain applicable. The scale of business risks will increase in proportion to the scale of business operations.

Board statement
The Board of Directors is of the opinion that the investment to expand production capacity is undertaken in the best interest of the Group. None of the directors have any personal interest in the investment.

Malaysian Automotive Association Registration Statistics (units)
	2002	2003	2004 Year to-date September	2004 Annualised
Nissan	14,657	15,845	15,822	21,096
Nissan Diesel	1,464	2,298	1,819	2,425
Total	16,121	18,143	17,641	23,521