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Key Matters - 13th AGM
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SUMMARY OF KEY MATTERS DISCUSSED AT THE THIRTEENTH ANNUAL GENERAL MEETING (“13TH AGM”) OF CAN-ONE BERHAD (“CAN-ONE” OR “THE COMPANY”) HELD ON THURSDAY, 27 APRIL 2017

Pursuant to Paragraph 9.21(2)(b) of the Main Market Listing Requirements, a listed issuer must publish a summary of key matter matters discussed at the annual general meeting, as soon as practicable after the conclusion of the annual general meeting.

All ordinary resolutions that were tabled at the 13th AGM were duly approved by the Shareholders through poll voting. The Shareholders also received the Audited Financial Statements of the Company and of the Group, along with the Reports of the Directors and Auditors for the financial year ended 31 December 2016.

The results of the poll, which were announced by the Scrutineer, Asia Securities Sdn Bhd, are as follows:
13TH AGM Voted in favour Voted against Total votes casted
No. of shares % No. of shares % No. of shares %
ORDINARY BUSINESS
Ordinary Resolution 1
Declaration of a first and final single-tier dividend of 4 sen per share for the financial year ended 31 December 2016.
126,910,805 99.935 83,000 0.065 126,993,805 100.000
Ordinary Resolution 2
Re-election of Director, Dato’ Seri Subahan Bin Kamal who retires pursuant to Article 97 of the Articles of Association of the Company.
126,945,605 99.974 33,200 0.026 126,978,805 100.000
Ordinary Resolution 3
Re-election of Director, Marc Francis Yeoh Min Chang who retires pursuant to Article 97 of the Articles of Association of the Company.
126,969,805 100.000 0 0.000 126,969,805 100.000
Ordinary Resolution 4
Re-election of Director, Tan Beng Wah who retires pursuant to Article 97 of the Articles of Association of the Company.
126,959,605 99.983 21,200 0.017 126,980,805 100.000
Ordinary Resolution 5
Approval of the payment of Directors’ fees amounting to RM560,000 to Directors of the Company and its subsidiaries for the financial year ended 31 December 2016.
126,536,005 99.658 433,800 0.342 126,969,805 100.000
Ordinary Resolution 6
Approval of the payment of benefits of up to RM30,000 to the Non-Executive Directors of the Company and its subsidiaries for the financial year ending 31 December 2017.
126,497,105 99.619 483,700 0.381 126,980,805 100.000
Ordinary Resolution 7
Re-appointment of KPMG PLT (converted from conventional partnership, KPMG, on 27 December 2016) as Auditors of the Company and to authorise the Directors to fix their remuneration.
126,976,805 99.997 4,000 0.003 126,980,805 100.000
SPECIAL BUSINESS
Ordinary Resolution 8
Proposed authority to Directors to allot and issue shares pursuant to Sections 75 and 76 of the Companies Act, 2016.
126,505,205 99.635 464,000 0.365 126,969,205 100.000
Ordinary Resolution 9
Proposed renewal of authority for the Company to purchase its own shares.
81,836,524 100.000 0 0.000 81,836,524 100.000
Ordinary Resolution 10
Proposed renewal of mandate for the Company and its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature.
74,466,424 99.968 24,000 0.032 74,490,424 100.000
Ordinary Resolution 11
Proposed new mandate for the Company and its subsidiaries to enter into additional recurrent related party transactions of a revenue or trading nature.
74,470,424 99.973 20,000 0.027 74,490,424 100.000
The Shareholders raised questions during the 13th AGM, which were duly answered and clarified by the Group Chief Financial Officer. The salient questions raised by the Shareholders are as follows:
Q1 Under the geographical segment on page 92 of the Annual Report 2016, we noted that the Group’s revenue from Asia (excluding Malaysia) declined by 3.3% from RM199 million in FYE 2015 to RM192.5 million in FYE 2016.
(a) What were the reasons for the decline in contribution from Asia’s revenue and would the Group be expecting the Asia market to improve in financial year ended 31 December 2017 ("FYE 2017") ?
(b) Please share on the Group’s performance vis-à-vis its competitors in Asia. What would be the targets set by the Group, going forward ?
A1
  1. The geographical segment of revenue in page 92 refers to the geographical location of the customers rather than destination of the goods. The drop in demand from a trader in Singapore was the main contributing factor for the decline in revenue for FYE 2016. However, this was offset by increased sales to other customers.

    The Company is optimistic of the Asia market (excluding Malaysia) and anticipates a higher sales from this segment.

  2. Data analysis of the Group’s vis-à-vis its competitors in Asia is not available. The Group will continue to grow its performance OEM business by providing good quality products and services to customers at competitive pricing. The Group hopes to achieve double digit growth in revenue going forward.
Q2 In terms of operation, what are other improvements that the Group aspired to achieve in 2017 ?
A2 The Group will look into improving the productivity and containing cost in 2017. Another area is automation such as robotic arms and purchase of new high speed machineries.
Q3 In FYE 2016, the Group reported that it had invested in new property, plant and equipment totalling RM19.5 million ? What would be the capital expenditure to be utilised over the next few years? For manufacturing, what sort of capacity level needed to achieve a sustainable income growth ?
A3 In order to achieve sustainable growth, the Group would need to increase capacity every 3 to 5 years depending the demand and the economic conditions. The last plant expansion was in 2015 and the current capacity utilisation of the dairy plant is approximately 70%.

The planned capital expenditure over the next 3 to 5 years would be approximately RM150 million to RM200 million.
Q4(a) Trade Receivables:

We noted that the allowance for impairment loss stood at RM2.7 million at the end of FYE 2016. How confident is the Board that this amount can be recovered ? How much had been collected to-date ?
Q4(b) Key Audit Matter of the Group-Recoverability of Trade receivables:

As reported under the Key Audit Matters by the Auditors, KPMG PLT, the trade receivables represented 51% of the Group’s current assets as at 31 December 2016 and credit risk of customers remains a concern due to the current soft economic climate in Malaysia.

Please explain the measures taken to address these concerns.
A4(a) As at todate, the status is as follows:
  1. RM252,000 - Already collected;
  2. RM289,000 - Provided for as legal and doubtful debt; and
  3. RM485,000 - Provided for as legal bad debts.
Legal action has been taken to recover the doubtful debts and bad debts. Meantime, the management is still engaging and negotiating with the delinquent debtors to settle their debts.
A4(b) The management is aware of the credit risk associated with trade receivables and has taken the following measures to mitigate the risks:
  1. Enhance credit evaluation process i.e. those trade accounts with purchases of RM500,000 and above would require management’s review;
  2. Establish terms of sales, and subject credit limit and amount to be approved by the Executive Directors;
  3. Review trade receivables on a monthly basis and weekly review of the collections; and
  4. Review turnover days of trade debtors by limiting delivery of total orders at 70%.
In spite of the higher sales volume in FYE 2016, trade debts had decreased from RM291 million in FYE 2015 to RM261 million. Turnover days have also improved from 121 days to 103 days in FYE 2016. Nevertheless, due to the current stiff economic condition, the Company will be instituting further measures to mitigate the credit risk.
Q5 During the financial year, the Group recognised impairment losses of RM779,000 (2015: RM3,788,000) in respect of certain property, plant and equipment of the Group as these assets are not able to generate adequate profit in future. What is the Board’s plan with regards to these assets moving forward? Would the Board expect additional impairment losses for FYE 2017 ?
A5 Out of the RM779,000 impaired assets, RM656,000 of such assets have been sold this year for RM630,000. The management is actively looking for buyers for the remaining impaired machines.

As at current date, there is no further impairment. However, the management is required to identify and provide for impairment of fixed assets on an ongoing basis in compliance with the Malaysian Financial Reporting Standards ("MFRS").
Q6 As disclosed in the Statement on Corporate Governance on page 21 of the Annual Report 2016, we noted that the Non-Executive Directors were paid salaries and bonus which was 547% higher than the fees. The payment of salaries and bonus to the Non-Executive Directors is not a normal practice among the public listed companies. Could the Board explain the rationale for the payment of salaries and bonus ?
A6 The contract with a former Executive Director who has been re-designated as a non-executive director and oversees associate company, Kian Joo Can Factory Berhad, is still subsisting.
Q7 The Board is tabling Resolution 6 to seek shareholders’ approval for payment of benefits of up to RM30,000 to Non-Executive Directors of the Company and its subsidiaries for the FYE 2017.

However, the benefits payable to the Non-Executive Directors are much lower than what had been paid previously. In FYE 2016, the Non-Executive Directors were given the allowance, other remuneration, and benefits-in-kind amounting to RM224,000.

Does it mean that during FYE 2017, no other remuneration and any other benefits would be paid to the directors until a resolution is tabled at the Annual General Meeting in 2018 and shareholders’ approval obtained ? Please explain.
A7 Other than the benefits of up to RM30,000, no other benefits will be payable to Non-Executive Directors for FYE 2017.
Q8 The Company was commended for its good performance for FYE 2016. What is the market position of the Group including Kian Joo? What is the next step for the Company going forward ? Where was the RM150 million spent on ?
A8 If combined with Kian Joo group of companies, the Group currently commands 70% to 80% of the tin cans and aluminium cans market in Malaysia. Hence, the Group has to look to external markets. In the milk products segment, the Group’s capacity is number 1, with installed capacity of 250,000 tonnes per year, which is slightly bigger than F&N.

The RM150 million will be spent to create more stock keeping unit (SKU) i.e. acquiring more manufacturing line for the dairy division under F & B Nutrition Sdn. Bhd. (“F&B”) to cater for the increase in export markets. F&B is solely an OEM company and do not have any house brands to compete with customers.