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Dear valued
shareholders,
In an operating landscape fraught with severe macro-
economic headwinds, Frontken Corporation Berhad
(“Frontken” or “the Group”) achieved an earnings before
interest, tax, depreciation and amortisation (“EBITDA”) of
RM51.7 million and profit after tax (“PAT”) of RM27.3 million
for the year ended 31 December 2016 (“FYE2016”). This
performance not only marks a significant jump in profit year-
on-year but also reflects the Group’s highest EBITDA and PAT
to date.
8
Frontken Corporation Berhad (651020-T)
ANNUAL REPORT
2016
Chairman’s
Message
Clearly, Frontken’s strategic focus
on delivering quality engineering
solutions to diverse industries, while at
the same, expanding our presence in
selected high-growth countries within
the Asia Pacific region, has and will
continue to bear fruits for our Group.
Simultaneously, we have also been
carefully cultivating and nurturing our
human capital to ensure that our talent
have the right skill-set and mindset to
take our Group to greater heights of
success.
On this positive note and on behalf
of the Board of Directors of Frontken,
I am pleased to present to you the
Annual Report and Audited Financial
Statements of the Group and its
subsidiary companies for FYE2016.
As part of this Annual Report, the
following Management Discussion
and Analysis (“MD&A”) provides our
shareholders with details of the Group’s
performance and business operations.
We trust that you will find our MD&A
both informative and insightful.
MANAGEMENT DISCUSSION
AND ANALYSIS
A Multinational Integrated Engineering
Solutions Group
Frontken is a leading provider of
surface treatments, chemical and
mechanical engineering solutions
in the region. Leveraging on more
than 20 years of industry experience,
Frontken has successfully expanded
its presence throughout Asia Pacific,
specifically in Malaysia, Taiwan,
Indonesia, Singapore, Thailand and
the Philippines.
The Group’s operations across these
countries offer technical expertise
and solutions to a diverse range of
industries including semiconductor,
oil and gas, power generation,
petrochemical and marine.
Frontken’s competitive advantage
is derived from its commitment
towards delivery excellence as well as
innovative research and development
(“R&D”). Embracing state-of-the-
art technologies and processes, the
Group’s highly skilled and motivated
professionals of some 1,100 strong are
fully capable of providing our broad
spectrum of clients with quality one-
stop solutions.
Operating Landscape
The global economy faced significant
headwinds in 2016. Economic growth
of advanced economies was in spurts-
and-starts while China’s economy grew
at a slower pace. Further aggravating
the situation were factors such as the
continued slump in commodity and oil
price, the Brexit referendum and the
result of the Presidential Elections in
the United States.
Against this backdrop, economies
within the Asia Pacific region were
impacted
to
varying
degrees.
Malaysia’s economy remained resilient,
with GDP growth at 4.2%, according
to Bank Negara Malaysia. Taiwan,
however, was more severely impacted
with 2016 GDP growth estimated at
only 1.5%, as stated by the Directorate
General of Budget, Accounting and
Statistics. Singapore also faired the
same with a GDP growth of only 1.8%
in 2016, as highlighted by its Ministry
of Trade and Industry.
From an industry perspective, the
persistent slump in oil and gas
price naturally affected the oil and
gas industry throughout the world.
Investments in exploration, production
and maintenance activities decreased
significantly and as a consequence, oil
and gas related companies throughout
the value chain suffered declining
performance. Frontken’s oil and gas
customers were not spared and this
had led to a tough financial year for
our operations that are focused in this
sector.
The semiconductor industry, however,
is growing from strength to strength.
SEMI, a global industry association,