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RTMIECO CHIPBOARD BERHAD

ANNUAL REPORT 2010

MIECO CHIPBOARDBERHAD

The MIECO Story 04Group Corporate Structure 06

Corporate Information 07Board of Directors 08

Board of Directors’ Profile 10Letter to Our Shareholders 14

Surat kepada Pemegang Saham 20Review of Operations 26

Engaging with Our Communities in 2010 30Group Corporate Calendar 32

InSIDE COnTEnTS

34 Financial Highlights

36 Share Performance

38 Corporate Governance Statement

42 Audit Committee Report

45 Statement on Internal Control

47 Financial Statements

110 Analysis of Shareholdings

114 List of Properties

115 notice of Annual General Meeting

118 Statement Accompanying notice of Annual General Meeting

Form of Proxy

MIECO’S GROWTH HAS COME FROM ITS COMMITMEnT TO THREE OPERATInG FUnDAMEnTALS – A HIGH QUALITY PRODUCT, An EXCELLEnT DELIVERY PROCESS, AnD A STROnG FOCUS On CUSTOMER SERVICE

04 | THE MIECO STORY MIECO AnnUAL REPORT 2010

Thirty eight years after its inception,

MIECO has cemented its position as

a world leader in the manufacture of

particleboards with a special emphasis

on the production of high quality,

value-added wood based products.

MIECO’s growth has come from

its commitment to three operating

fundamentals- a high quality product,

an excellent delivery process, and a

strong focus on customer service.

MIECO attained the ISO 9002 Quality

Management System in 1998 and

subsequently upgraded to the ISO

9001:2000 in 2002. In 2004, MIECO

became the first company in the

Malaysian wood-panel industry to receive

the prestigious BS En ISO 14001:1996

Environmental Management System.

In line with this, MIECO attained the

certification for the OSHAS 18001:1999

in 2005. The BS En ISO 9001:2000 was

upgraded to ISO 9001:2008 in early 2010.

The integration of EMS ISO 14001:2004

and OHSAS 18001:2007 in the same year

proved MIECO’s commitment to being a

responsible manufacturer and employer

in the areas of environment, health and

safety.

MIECO has three factories located in

Semambu, Gebeng and Kechau Tui,

Pahang with a combined capacity of more

than 900,000 cubic meters per annum.

MIECO also has one of the single largest

particleboard lines in the Asia-Pacific

region, located at its latest plant in

Kechau Tui, which started production in

March 2005. The plant attained the BS

En ISO 9001:2000 Quality Management

Systems in June 2005. MIECO products

are marketed in more than 20 countries

around the world, and its global reach

now covers northern Asia, Southern Asia,

the Indian Subcontinents, the Middle

East as well as some parts of Africa and

Australasia.

Having started out as a dedicated

particleboard producer in 1976, MIECO

has now developed and expanded

into value-added products such as

MIECO Decorative MFC, Electron Beam

Foil Chipboard (EBFC), Polymer Faced

Chipboard (PFC), MIECO Worktops, MIECO

Direct Post Formed (DPF) Boards as well

as value added services and DIY Furniture

THEMIECO STORY

| 05THE MIECO STORYMIECO AnnUAL REPORT 2010

under the MIECO Livin’ Style brand name.

All MIECO products conform to

international standards such as European

Community BS En 312 Standard

applicable for both moisture-resistant

and non-moisture resistant boards with

Super E0 E0, E1 and E2 formaldehyde

emission levels. MIECO E1 products have

been further refined to meet the United

States’ CARB Phase 1 & 2 requirements

for conformance to low formaldehyde

emissions.

In light of its commitment to the

environment and to meet the needs and

expectations of customers, MIECO has

been certified the Japanese Industrial

Standards, JIS 5908 since April 2009,

evidence of MIECO’s product reliability

for the Japanese market. In addition,

MIECO has started to sell products

certified with California Air Resource

Board (“CARB”) Phase II since January

2011, demonstrating compliance of

MIECO’s composite wood products with

California Code of Regulations for the

US market. Since April 2009, MIECO

has offered customers and consumers

the option to choose products from

environmentally and socially responsible

and economically viable forestry through

our products certified for Programme for

the Endorsement of Forest Certification

(PEFC). MIECO’s melamine laminated

products have attained Singapore

Green Label Certification endorsed by

the Singapore Environment Council

certifying our products’ minimal impact

to overall environment, right from raw

materials to the manufacturing process,

composition, health impact and finally

the disposal of the product.

MIECO is also committed to the

development of its more than 800

employees, and to building long-lasting

mutually rewarding partnerships with

its customers and stakeholders around

the world. It is this commitment that

has made MIECO a true global Malaysian

champion.

MIECO IS ALSO COMMITTED TO THE DEVELOPMEnT OF ITS MORE THAn 800 EMPLOYEES, AnD TO BUILDInG LOnG-LASTInG MUTUALLY REWARDInG PARTnERSHIPS WITH ITS CUSTOMERS AnD STAKEHOLDER COMMUnITIES AROUnD THE WORLD. IT IS THIS COMMITMEnT THAT HAS MADE MIECO A TRUE GLOBAL MALAYSIAn CHAMPIOn.

GROUPCORPORATE STRUCTUREAS AT 25 APRIL 2011

Listed on Bursa Malaysia Securities Berhad

MIECOMANUFACTURING SDN BHD100%

MIECOMARKETINGSDN BHD100%

MIECO CHEMICALSSDN BHD100%

MIECO CHIPBOARDBERHAD

MIECO WOOD PRODUCTSSDN BHD100%

MIECOREFORESTATIONSDN BHD100%

TUDORCAPITALSDN BHD100%

MIECO WOODRESOURCESSDN BHD100%

CORPORATEInFORMATIOn

MIECO MARKETING (S) PTE LTD100%

ASPIREBENCHMARKSDN BHD100%

MIECO INTERNATIONAL(H.K.) LIMITED 100%

Board Of Directors

Dato’ Mohamed Moiz Bin J M Ali Moiznon-Independent non-Executive Chairman

Dato’ Yong Seng YeowManaging Director

Dato’ Jaganath Derek Steven Sabapathynon-Independent non-Executive Director

Lt. Gen. (R) Dato’ Seri Mohamed Daud Bin Abu BakarIndependent non-Executive Director

Dato’ Dr Amarjit Singh A/L Santokh Singh Independent non-Executive Director

Mr Vijeyaratnam A/L V. Thamotharam Pillay Independent non-Executive Director

Mr Low Kim Sengnon-Independent non-Executive Director

Registered Office

Level 10 Menara BRDB285 Jalan Maarof, Bukit Bandaraya59000 Kuala Lumpur, MalaysiaTel : 603 - 2688 2888Fax : 603 - 2284 3988

Bursa Malaysia Stock Number

MIECO 5001

International SecuritiesIdentification Number (ISIN)

MIECO MYL5001OO002

Reuters Code

MIEC. KL

Secretary

Ho Swee Ling MAICSA no. 7009936

Registrars

Metra Management Sdn Bhd30.02, 30th Floor, Menara Multi-PurposeCapital Squareno. 8 Jalan Munshi Abdullah50100 Kuala Lumpur, MalaysiaTel : 603 - 2698 3232Fax : 603 - 2698 0313

Auditors

Messrs PricewaterhouseCoopers

Bankers

Alliance Bank Malaysia BerhadAmBank (M) BerhadOCBC Bank (Malaysia) BerhadMalayan Banking BerhadHSBC Bank Malaysia Berhad

BOARD OFDIRECTORS

DATO’ JAGANSABAPATHYnOn - InDEPEnDEnTnOn - EXECUTIVEDIRECTOR

DATO’ MOHAMED MOIZnOn - InDEPEnDEnTnOn - EXECUTIVECHAIRMAn

DATO’ S Y YONGMAnAGInGDIRECTOR

MR T VIJEYARATNAMInDEPEnDEnTnOn - EXECUTIVEDIRECTOR

DATO’ SERI MOHAMED DAUDInDEPEnDEnTnOn - EXECUTIVEDIRECTOR

DATO’ DR AMARJITInDEPEnDEnTnOn - EXECUTIVEDIRECTOR

MR KS LOWnOn - InDEPEnDEnTnOn - EXECUTIVEDIRECTOR

10 | BOARD OF DIRECTORS’ PROFILE MIECO AnnUAL REPORT 2010

BOARD OFDIRECTORS’ PROFILE

Dato’ Mohamed Moiz Bin J M Ali Moiz,non-Independent

non-Executive Chairman

Dato’ Mohamed Moiz Bin J M Ali Moiz,

a Malaysian, aged 50, was appointed to

the Board on 14 november 2000 and

as Chairman on 15 August 2002. He

graduated with a Bachelor of Science

Degree in Business Administration and

International Finance in 1985. He joined

Timbco Sdn Bhd, a company involved in

timber trading, processing and forestry

management, as Project Manager from

1985 to 1986. In 1987, he was appointed

as Chief Executive Officer of the Tradium

group of companies, which has interests

in property development, fashion

retailing, manufacturing, F & B and equity

investments. In 1999, he was appointed as

Chief Executive Officer of Effective Capital

Sdn Bhd, a company which successfully

undertook the migration of the CLOB

securities from the Central Depository

(Pte) Limited in June 2000.

Currently, Dato’ Mohamed Moiz also

sits on the boards of Bandar Raya

Developments Berhad (Chairman) and

several other private limited companies.

He is a member of the Executive

Committee of the Company.

Dato’ Mohamed Moiz is a deemed major

shareholder of the Company by virtue of

his interest in Ambang Sehati Sdn Bhd.

DATO’ YONG SENG YEOW,Managing Director

Dato’ Yong Seng Yeow, a Malaysian,

aged 58, was appointed as Executive

Director on 1 January 1994. He was

subsequently redesignated as Managing

Director on 1 January 2007. Dato’ Yong

has over 25 years of experience in sales

and marketing in building materials and

furniture industries.

Currently, Dato’ Yong also sits on the

boards of Century Logistics Holdings

Berhad and several subsidiaries in the

Mieco Chipboard Berhad Group. He is a

member of the Executive Committee of

the Company.

Dato’ JaganathDerek Steven Sabapathy,non-Independent

non-Executive Director

Dato’ Jagan Sabapathy, a Malaysian,

aged 54, was appointed to the Board

on 15 September 1999. He attended

Edinburgh University in the United

Kingdom and holds a Master of Arts

majoring in Corporate Finance and

International Trade. Upon graduation in

1981, he joined a leading London firm of

Chartered Accountants, Price Waterhouse,

where he articled and qualified as a

Chartered Accountant.

Dato’ Jagan returned to Malaysia in 1984

and joined KPMG Peat Marwick. He was

admitted a Partner of KPMG Malaysia and

a Director of Peat Marwick Consultants in

1990.

Whilst at KPMG Peat Marwick, he was

involved in a wide range of assignments

covering audit, investigations,

management consultancy and corporate

finance, in Malaysia, the ASEAn

countries, north America and Europe.

He sat on a variety of KPMG International

Committees including committees for

Mergers and Acquisitions, Privatisation

and Management Consultancy. He was

also an examiner for the professional

examinations of the Malaysian Association

of Certified Public Accountants.

He left the partnership in late 1994

and took up a senior appointment with

a Malaysian public listed plantation

company. At the end of 1995, he left

and led a group of Australian and British

investors to successfully privatise the

overseas operations of Tasmania’s Hydro

Electric Commission. He joined the boards

of Prime Utilities Berhad and Indah Water

Konsortium Sdn Bhd, Malaysia’s privatised

national wastewater utility in September

1997 as Managing Director, a position he

held to August 1999.

Currently, Dato’ Jagan also sits on the

boards of Bandar Raya Developments

Berhad (Chief Executive Officer) and

several subsidiaries in the Bandar Raya

Developments Berhad Group. He is a

member of the Executive Committee,

Remuneration Committee and nomination


| 11BOARD OF DIRECTORS’ PROFILEMIECO AnnUAL REPORT 2010

Mr VijeyaratnamA/L V. Thamotharam Pillay,Independent non-Executive Director

Mr Vijeyaratnam A/L V. Thamotharam

Pillay, a Malaysian, aged 59, was appointed

to the Board as non-Independent non-

Executive Director on 1 October 2007.

He was subsequently redesignated as

Independent non-Executive Director on

23 February 2010. He is a member of the

Audit Committee of the Company.

He is a Fellow of the Institute of Chartered

Accountants in England and Wales and

a member of the Malaysian Institute

of Accountants. Mr Vijeyaratnam has

considerable experience covering areas

of auditing, financial planning, general

management and corporate advisory in

various business environments. He is

currently the Managing Director of his

own corporate advisory and consultancy

company.

Presently, Mr Vijeyaratnam also sits on

the boards of Bandar Raya Developments

Berhad, Multi-Purpose Holdings Berhad,

Eastern & Oriental Berhad and several other

private limited companies in Malaysia.

Lt. Gen. (R) Dato’ SeriMohamed Daud Bin Abu Bakar,Independent non-Executive Director

Lt. Gen. (R) Dato’ Seri Mohamed Daud

Bin Abu Bakar, a Malaysian, aged 75, was

appointed to the Board on 24 March 1997.

He graduated from the world-renowned

Royal Military Academy, Sandhurst,

United Kingdom in December 1956, the

Army Staff College, Camberley, United

Kingdom and the Royal College of Defence

Studies, United Kingdom and has served

the Malaysian Army with distinction for

36 years. During his military career, he

was appointed to various key command

and staff appointments both in the field

headquarters and in the Ministry of

Defence and has also served in various

military committees at national and

international levels.

Currently, Dato’ Seri Mohamed Daud also

sits on the boards of other private limited

companies. He is the Chairman of the Audit

Committee, a member of the Remuneration

Committee and nomination Committee of

the Company.

Dato’ Dr Amarjit SinghA/L Santokh Singh,Independent non-Executive Director

Dato’ Dr Amarjit Singh A/L Santokh Singh,

a Malaysian, aged 61, was appointed to

the Board on 3 April 1997. He graduated

as a Doctor with a degree in Bachelor of

Medicine and Bachelor of Surgery, from

Bombay University, India in 1973. He

also obtained post-graduate certificates

in Sports Medicine and Genito-Urinary

Medicine from the College of General

Practitioners of Malaysia in 1988 and 1989,

respectively. In addition, he is a Fellow

of the Royal Society of Health, United

Kingdom. In 1990 he established his own

practice in Kuala Lumpur.

He is a former national Cricket

Captain and Deputy President of the

Malaysian Cricket Association. He is

also the immediate past President of

the Malaysian Association of Sports

Medicine and has been the Chairman

of the Society of Sports Medicine of the

Malaysian Medical Association.

Dato’ Dr Amarjit is currently a member

of the Audit Committee, Remuneration

Committee and nomination Committee

of the Company.

Mr Low Kim Seng, non-Independent

non-Executive Director

Mr Low Kim Seng, a Malaysian,

aged 56, was appointed to the Board

on 25 April 1991. He is a member of

the Malaysian Institute of Accountants.

Mr Low qualified as a Management

Accountant in 1978 and has working

experience in accounting, corporate

finance and general management. He

worked with two Malaysian public listed

companies prior to joining Bandar Raya

Developments Berhad in 1989 and is

currently the Chief Financial Officer

of Bandar Raya Developments Berhad.

He is also a member of the Executive


notes:

1) Save as disclosed above, none of the Directors has any family relationship with any director and/or major shareholder of the Company.

2) none of the Directors has: • any conflict of interest with the Company. • any conviction for offences within the past ten years.

PRODUCT DEVELOPMEnT HAS ALWAYS BEEn A CORE STRATEGY FOR MIECO, AnD IT WAS nO DIFFEREnT In 2010. WE ROLLED OUT 6 nEW WOOD GRAIn DESIGnS UnDER THE 2010 MIECO DECORATIVE MFC. THESE HAVE BEEn WELL-RECEIVED In THE MARKET, AnD WE AnTICIPATE THEY WILL BE SIGnIFICAnT COnTRIBUTORS TO OUR BOTTOM LInE In 2011.

14 | LETTER TO OUR SHAREHOLDERS MIECO AnnUAL REPORT 2010

LETTER TO OURSHAREHOLDERS

Dear friends and shareholders of MIECO,

In 2010, our wood-based manufacturing business, for the first time in several years, saw some real recovery in demand. This was

indeed a heartening turn of events, coming on the back of several very challenging years. Market conditions in Asia started to

improve, although the United States and Europe, which form our biggest furniture markets, are still facing difficulties.

We made most of the opportunities that came our way in 2010, resulting in our second consecutive year of improved performance.

The tough times are by no means over but I do believe we have turned a corner.

It is therefore with a sense of hope and optimism that I present to you, on behalf of the Board of Directors, the Annual Report and

Audited Financial Statements for the MIECO Chipboard Group (“MIECO” or “The Group”) for the financial year ending 31 December

2010.

2010 : Managing costs and efficiencies

In 2010, MIECO recorded RM174.2 million in revenue, 6% down against RM185.7 million in 2009. This was attributable to lower

export sales volume as a result of a lower allocation for plain board, but mitigated by increased domestic demand with more sales

of value-added products.

MIECO’s profit before tax was RM1.65 million after accounting for finance cost, depreciation and maintenance of its plant in Kechau

Tui, Kuala Lipis which was not operational in 2010, compared to its previous year’s loss of RM16.5 million.

To manage costs, we continued in 2010 to operate only two plants, having temporarily stopped production in our Kuala Lipis plant

at the end of 2008 in the wake of the global financial crisis. We focused our efforts on improving efficiencies in our Gebeng and

Semambu plants and negotiating best rates for materials. However, the prices of raw materials, especially glue and wax, started to

increase in the 4th quarter of 2010 due to an increase in the price of crude oil, and we expect this upward trend to continue.


GLOBAL CHALLEnGESHIT HOME

At the same time, we continued our

efforts in R&D, with a focus on developing

environmentally-sensitive products which

are rapidly becoming the global market

preference. This is a key differentiator

for the MIECO brand, and one that we

will continue to focus on. We stepped up

efforts to meet international standards,

and achieved the E1 California Air

Resource Board (CARB) Phase 2 in 2010.

The improvement in our financial

performance has resulted in earnings per

share rising from a loss of 6.99 sen in

2009 to a gain of 0.77 sen in 2010.

Dividend

Although the company made a small

profit in the current financial year, due

to the financial covenants of our existing

borrowings and our intention to preserve

cash to finance the recommencement

of Plant 3, the Directors are not in a

position to recommend the payment of

dividends for the financial year ended

31 December 2010. no dividend was

declared for the financial year ending

31 December 2009. It is the Board’s

intention to resume payment of dividends

as soon as circumstances permit.

2011 : Emerging stronger, better

Following a steady recovery in demand

for particleboard and related products,

the Group recommenced operations at its

Plant 3 in Kechau Tui, Pahang in January

this year, after temporarily suspending

operations during the global economic

turmoil in late 2008.

We expect to sort out all technical and

other issues at our Plant 3 in Kechau Tui

during the 1st quarter of 2011. We are

aggressively moving to reconsolidate our

WE STAYED FOCUSED On OUR STRATEGY OF InTRODUCInG VALUE-ADDED PRODUCTS THAT CEMEnT OUR DIFFEREnTIATIOn In THE MARKETPLACE, AnD ROLLED OUT 6 nEW WOOD GRAIn DESIGnS FOR OUR MILLEnnIUM COLLECTIOn, WITH EnCOURAGInG RESPOnSE.

| 17LETTER TO OUR SHAREHOLDERSMIECO AnnUAL REPORT 2010

raw material supply chain around the

Kuala Lipis area and we are hopeful to

achieve this during the 1st half of 2011.

The recommencement of Plant 3 will

enable Mieco to start getting back the

market share that we had lost during

the closure of the plant. 2011 will be a

challenging year for Plant 3 operations

but we are confident that we will be

showing more positive results from

2012 onwards.

In addition to the reopening of our

Plant 3 in Kecau Tui, for 2011 to meet

the more demanding expectations of

our global customers, we are focusing

on improving our overall product

standards and technical specifications.

We are currently working on at least 6

new colours and 2 surface designs, to

expand our capacity and meet increasing

demand.

We plan to increase our offering of new

colours, especially in the solid colour and

wood grain colour range, to meet current

demand. And we plan to capitalize on the

growing demand for innovative, stylish

furniture designs especially apparent

amongst younger customers and first-

time homeowners.

We will also continue to pioneer new

products, as we have in the past –

innovations like the DIY concept which

we introduced to the Malaysian market in

1979, the Electron Beam Foil Chipboard

(EBFC), the Direct Post-Formed board

(DPF) and the R3 Worktop.

With all the efforts that are being spent

on our business, we have to be cognizant

of the fact that in 2011, business

conditions remain challenging for the

Group, especially in the face of rising

raw material and energy costs. There has

been a sharp rise in the price of glue and

wax in recent months, and we expect this

to continue.

Wood prices, which were well below

budget in 2010, have started to rise,

due to the extended monsoon which is

making it difficult for wood to be sourced.

However, we expect prices to stabilize

when the weather improves in Q2.

Despite this, we are cautiously optimistic;

the slight improvement we saw in the

second half of 2010 is heartening.

We are working hard at ensuring that

we keep a tight rein on the cost of raw

materials, which we are getting much

better at doing, and upping the ante

on product development, especially

value-added and environmentally-

sensitive products, which has always

been our forte.

With the high prices of latex, making

it more difficult to source traditional

rubber wood supply, we continue to

explore the use of alternative raw

material sources and sustainable timber

waste as key raw material components,

which will reduce our dependency on

current sources. We will also continue

to implement process optimizations in

order to improve productivity as well

as implement new ways to control and

manage our reject rates.

As always, we will continue to nurture

and grow our relationships with our

Malaysian customers, who have been

loyal customers to MIECO and who

contribute more than half of our global

business.

Market outlook : Positive & promising

The outlook for the Malaysian economy

is positive. The national Property

Centre’s 2010 property report records

a new high for the Malaysian property

market in 2010, with volume and value

of transactions recording double-digit

growth of 11.4% and 32.6% respectively.


The residential property sector dominated

the local property market last year,

capturing 60.2% of total transactions

and 47.1% of value, and we expect this

trend to continue in 2011. This bodes

well for our domestic market, which

is increasingly important to us given

the dismal performance of the global

marketplace. An expected rise in domestic

consumption will give our business a

much-needed boost.

We believe that the fundamentals of

the country remain solid, supported

by various measures under the Tenth

Malaysia Plan and Prime Minister Dato

Seri najib’s Economic Transformation

Programme. Projects such as the Kuala

Lumpur International Financial District,

the Mass Rapid Transit for Greater KL and

the redevelopment of areas like Kampung

Baru and the Rubber Research Institute

in Sg Buloh are all expected to have

positive spillover effects.

We foresee the next 3 years to be a

period of strong growth, on the back of

increased public spending and a more

dynamic public sector. The five strategic

thrusts identified by the government;

Government Transformation, Conducive

Business Environment, Inclusive Socio-

Economic Development, First World

Talent Base and Enhanced Quality of

Life Environment will augur well for the

economy and is set to transform the

country into a high income nation.

We expect the emphasis on

environmentally-sensitive products to keep

growing, and in this, we are well-positioned

to take advantage of opportunities.

Globally, we expect Asia to drive growth,

as has been the case these past few years.

Additionally, we expect to see higher

demand from Japan, as the country moves

into a phase of rebuilding following the

devastation of the March 2011 earthquake

and tsunami. This will mitigate the

challenges being faced by the United

States and across Europe, especially

Greece, Iceland, Portugal and Spain.

We have been through some trying years

for Mieco, but through it all we have

kept faith in the belief that we have a

viable and sustainable business. now

we are seeing signs that the industry is

finding its feet again and we are confident

that MIECO is ready to take full advantage

of this.

| 19LETTER TO OUR SHAREHOLDERSMIECO AnnUAL REPORT 2010

The MIECO Team

Through all these challenges, the MIECO

team has been steadfast in their loyalty

and commitment to the business.

They have worked hard to contain

costs and look for more efficiencies.

As with our shareholders, our team

have had to endure difficult times but

have performed above and beyond

expectations throughout.

To our loyal customers, all around the

world and especially here in Malaysia –

Thank You. You have seen us through

tough times, and we thank you for that.

We will continue to work hard to produce

high quality, value-added products that

bring strong returns to your business

and brand.

To the MIECO Board of Directors, thank

you for your belief in the MIECO brand,

and your vision in steering it through

some turbulent times. I could not have

asked for a better, more committed team

to help us stay the course. And on behalf

of all of us, our deepest appreciation to

Datin Sri Bettina Khan, who retired from

the Board last year.

To you our shareholders, thank you for

your patience and continued belief in

MIECO. All of us in Mieco will continue

to strive to serve as best as we can

and hopefully are able to fulfill your

expectations.

Thank You

Dato’ Mohamed Moiz bin J M Ali Moiz

Chairman

MIECO Chipboard Berhad

27 April 2011

On BEHALF OF THE BOARD OF DIRECTORS OF MIECO, I WOULD LIKE TO EXTEnD OUR HEARTFELT THAnKS TO EACH AnD EVERY MEMBER OF THE MIECO FAMILY. YOU HAVE WORKED HARD, STAYED LOYAL AnD COMMITTED In THE FACE OF TOUGH TIMES AnD HAVE EMERGED A STROnGER, MORE CLOSELY-KnIT, MORE UnITED TEAM THAT I AM SURE WILL TAKE US FURTHER AnD HIGHER. WE LOOK FORWARD TO MUCH BETTER TIMES AHEAD, TOGETHER.

20 | SURAT KEPADA PEMEGAnG SAHAM MIECO AnnUAL REPORT 2010

SURAT KEPADA PEMEGAnG SAHAM

Para pemegang saham dan pemegang taruh masyarakat global MIECO yang dihormati,

Pada tahun 2010, syarikat kami yang berasaskan kayu, buat kali pertamanya sepanjang beberapa tahun ini, telah memperlihatkan

beberapa pemulihan permintaan yang nyata. Ini merupakan peristiwa yang menggembirakan kami setelah mengharungi beberapa

tahun yang mencabar. Keadaan pasaran di Asia mulai pulih, meskipun Amerika Syarikat dan Eropah, yang merupakan pasaran perabot

terbesar masih lagi menghadapi kesulitan.

Kami telah merebut sebahagian besar daripada peluang yang wujud dalam tahun 2010, di mana peningkatan prestasi syarikat telah

berlangsung sepanjang 2 tahun berturut-turut. Masa yang mencabar itu belum berlalu, akan tetapi kami percaya bahawa kami telah

melepasi laluan yang sukar.

Oleh itu, saya, dengan penuh harapan dan optimis, selaku wakil Lembaga Pengarah ingin membentangkan Laporan Tahunan dan

Penyata Kewangan Berodit bagi Kumpulan MIECO Chipboard (“MIECO” atau “Kumpulan”) untuk tahun kewangan yang berakhir pada

31 Disember 2010.

2010: Pengurusan kos dan kecekapan

Pada tahun 2010, MIECO telah mencatat RM174.2 juta hasil pendapatan, iaitu 6% menurun berbanding dengan RM185.7 juta pada

tahun 2009. Hal ini disebabkan oleh penurunan jualan eksport tetapi diatasi dengan peningkatan permintaan domestik serta

peningkatan penjualan produk-produk nilai tambah.

MIECO telah mencatat keuntungan sebelum cukai sebanyak RM1.65 juta setelah mengambil kira kos kewangan, susut nilai dan

penyelenggaraan bagi kilang di Kechau Tui, Kuala Lipis yang tidak beroperasi pada tahun 2010, berbanding dengan kerugian

sebanyak RM16.5 juta pada tahun sebelumnya.

| 21SURAT KEPADA PEMEGAnG SAHAMMIECO AnnUAL REPORT 2010

Untuk mengawal kos, pada tahun 2010

kami meneruskan operasi dua buah

kilang, selepas penutupan sementara

kilang kami di Kechau Tui pada tahun

2008. Kami menumpukan usaha kami

untuk meningkatkan kecekapan kilang

kami di Gebeng dan Semambu dan

membuat rundingan harga terbaik untuk

kesemua bahan mentah. namun, harga

bahan mentah khususnya pelekat, cecair

lilin mula meningkat pada suku ke-4

tahun 2010 akibat kenaikan harga minyak

mentah, di mana kami menjangkakan

trend ini akan berterusan.

Kami memberi tumpuan kepada

strategi kami iaitu memperkenalkan

produk-produk tambah nilai yang dapat

mengukuhkan keistimewaan kami

di dalam pasaran, dan melancarkan

sebanyak enam rekabentuk corak

kayu terbaru kami untuk siri Millenium

Collection yang mana terus mendapat

sambutan yang memberangsangkan.

Pada masa yang sama, kami masih

meneruskan usaha penyelidikan dan

pembangunan (R&D), dengan memberi

fokus kepada produk-produk mesra

alam yang makin menjadi pilihan

utama pasaran global. Ini adalah kunci

keistimewaan jenama MIECO yang tetap

kami fokuskan. Kami telah meningkatkan

usaha untuk memenuhi piawaian

antarabangsa dan mencapai California

Air Resources Board (CARB) Fasa 2 pada

tahun 2010.

PEnInGKATAn DALAM PRESTASI KEWAnGAn KAMI TELAH MEnGUBAH KEDUDUKAn PEROLEHAn SESAHAM DARI KERUGIAn 6.99 SEn SESAHAM BAGI TAHUn 2009 KE KEUnTUnGAn 0.77 SEn SESAHAM BAGI TAHUn 2010.

GELORA EKOnOMIYAnG MELAnDA


Dividen

Walaupun syarikat memperolehi

keuntungan yang kecil dalam tahun

kewangan, disebabkan oleh perjanjian

dan kontrak kewangan dan hasrat untuk

mengekalkan tunai bagi membiayai

pembukaan semula kilang ke-3, pihak

Pengarah tidak dapat menyarankan

bayaran dividen bagi tahun kewangan

yang berakhir pada 31 Disember 2010.

Bagi tahun 2009, tiada dividen juga

diisytiharkan. Ini ialah disebabkan

harapan pengarah untuk menyambungkan

semula pembayaran dividen

secepat mungkin sekiranya keadaan

membenarkan.

2011 : Kemunculan lebih bertenaga,

lebih baik

Kami memulakan operasi kilang ke-3 kami

di Kechau Tui, Pahang pada bulan Januari

tahun ini berikutan dengan peningkatan

permintaan pasaran untuk papan serpai

serta produk-produk berkaitan, setelah

penutupan sementara operasi akibat

kemelesetan ekonomi global pada akhir

tahun 2008.

Pada suku tahun pertama tahun 2011,

kami berharap dapat menyelesaikan

kesemua masalah teknikal dan isu-isu lain

di kilang ke-3 kami di Kechau Tui. Kami

dengan agresifnya akan mengukuhkan

rangkaian pembekalan bahan mentah

di sekitar kawasan Kuala Lipis dan

berharap akan mencapai kejayaan dalam

pertengahan tahun 2011. Pembukaan

semula kilang ke-3 kami di Kechau Tui

akan membolehkan MIECO mendapat

semula pasaran yang pernah terlepas

semasa penutupan kilang tersebut. 2011

akan menjadi tahun yang mencabar bagi

operasi kilang ke-3 kami tetapi kami yakin

bahawa kami mampu untuk menunjukkan

keputusan positif pada tahun 2012 dan

seterusnya.

Selain pembukaan semula kilang ke-3

kami di Kechau Tui, untuk memenuhi

kehendak lebih ramai pelanggan

global kami bagi tahun 2011, kami

memberi tumpuan kepada peningkatan

keseluruhan piawaian produk dan

spesifikasi teknikal. Kami sedang dalam

proses menghasilkan 6 warna baru

dan 2 rekabentuk permukaan untuk

memperluaskan kapasiti kami bagi

memenuhi peningkatan permintaan.

Kami merancang untuk menawarkan

pelbagai warna baru, terutamanya

warna solid dan juga pelbagai pilihan

corak kayu demi memenuhi permintaan

pelanggan. Kami juga merancang untuk

memanfaatkan peningkatan permintaan

rekabentuk perabot yang berinovasi dan

bergaya di kalangan pelanggan berusia

muda dan pemilik rumah baru pertama.

Kami juga akan terus menjadi perintis

bagi produk baru - inovasi seperti konsep

DIY yang kami perkenalkan ke pasaran

Malaysia pada tahun 1979, Electron Beam

Foil Chipboard (EBFC), Direct Post-Formed

Board (DPF) dan R3 Worktop.


Dengan segala usaha yang sedang

kami gunakan pada perniagaan kami,

kami harus mengambil ikhtibar bahawa

dalam tahun 2011, keadaan perniagaan

masih lagi mencabar untuk Kumpulan,

terutamanya apabila menghadapi

kenaikan kos bahan mentah dan tenaga.

Terdapat peningkatan runcing dalam

harga pelekat dan cecair lilin beberapa

bulan terakhir ini yang mana kami

jangkakan akan berterusan.

Harga kayu, yang di bawah anggaran

bajet dalam tahun 2010, sudah mula

meningkat kerana musim tengkujuh

yang berpanjangan telah menyulitkan

pencarian sumber kayu. namun, kami

berharap harga beransur stabil apabila

cuaca bertambah baik pada suku ke-2.

Walaupun demikian, kami optimis

secara berjaga-jaga; pemulihan di suku

ke-2 2010 adalah menggalakkan. Kami

bekerja keras untuk memperketatkan

pergerakan kos bahan mentah di mana

kami telah mempunyai pengalaman

yang luas. Kami juga mempergiatkan

pembangunan produk terutamanya

produk tambah-nilai dan mesra alam

iaitu merupakan kekuatan kami.

Oleh kerana harga susu getah yang

tinggi telah menyukarkan pemperolehan

sumber kayu getah, kami terpaksa

mencari sumber bahan mentah alternatif

dan sisa kayu secara berterusan

sebagai komponen utama supaya

dapat mengurangkan pergantungan

kami kepada sumber sediada. Kami

juga akan terus melaksanakan proses

pengoptimuman untuk meningkatkan

produktiviti serta menerapkan cara-cara

baru untuk mengawal dan menguruskan

kadar penolakan.

Seperti biasa kami akan terus memupuk

dan memperluaskan hubungan kami

dengan pelanggan kami di Malaysia,

yang kuat dan setia kepada MIECO,

yang telah menyumbangkan separuh

daripada perniagaan global kami.


Prospek Pasaran : Yang Menjanjikan &

Positif

Sektor hartanah telah mendominasi

pasaran tempatan tahun lalu, merangkul

sebanyak 60.2% dari jumlah keseluruhan

transaksi dan 47.1% secara nilai, dan

kami berharap tren ini akan berterusan

pada tahun 2011. Hal ini menjadi petanda

baik untuk pasaran domestik, lebih-lebih

lagi di masa prestasi pasaran global

yang suram. Seperti yang dijangkakan,

kenaikan penggunaan domestik akan

memberikan dorongan yang amat

diperlukan kepada perniagaan kami.

Kami percaya bahawa dasar negara

tetap kukuh dengan sokongan daripada

pelbagai tindakan di bawah Rancangan

Malaysia Ke-10 dan program Transformasi

Ekonomi Perdana Menteri Datuk Seri

najib. Projek seperti Daerah Kewangan

Antarabangsa Kuala Lumpur, Mass

Rapid Transit untuk Greater KL dan

pembangunan semula kawasan-kawasan

seperti Kampung Baru, Penjara Pudu dan

Institut Penyelidikan Getah di Sungai

Buloh diharap akan mempunyai kesan

kelebihan yang positif.

Kami menganggarkan pertumbuhan yang

kukuh pada 3 tahun yang akan datang

ditambah oleh perbelanjaan orang ramai

dan sektor awam yang lebih dinamik.

Kami berharap penekanan kepada produk

mesra alam akan terus berkembang di

mana kami berada dalam kedudukan

yang baik untuk mengambil kesempatan

terhadap peluang yang ada.

Secara global, kami berharap Asia dapat

memberi dorongan kepada pertumbuhan,

seperti yang telah terjadi kebelakangan

ini. Selain itu, kami menjangkakan

permintaan yang lebih tinggi dari negara

Jepun, di mana negara Jepun sedang

bergerak ke fasa pembangunan semula

selepas kemusnahan akibat gempa

bumi pada bulan Mac 2011. Ini selaku

langkah berjaga-jaga terhadap cabaran

yang dihadapi oleh Amerika Syarikat

dan seluruh Eropah, terutamanya

Greek, Iceland, Portugal, Sepanyol dan

sebagainya.

Kami telah mengharungi beberapa tahun

percubaan untuk MIECO, tetapi melalui

jangka masa tersebut, kami percaya

bahawa kami memiliki perniagaan yang

berbaloi serta kekal usia. Sekarang, kami

melihat tanda-tanda bahawa industri kami

sudah kembali bertapak dan kami yakin

bahawa MIECO bersedia untuk merebut

peluang dengan sepenuhnya.

Warga MIECO

Setelah mengharungi segala cabaran

ini, warga MIECO masih menunjukkan

kesetiaan dan komitmen terhadap

PROSPEK EKOnOMI MALAYSIA ADALAH POSITIF. LAPORAn HARTAnAH DARI nATIOnAL PROPERTY CEnTRE’S 2010 TELAH MEnCATAT TAHAP BARU PASARAn HARTAnAH DI MALAYSIA PADA TAHUn 2010, DEnGAn JUMLAH DAn nILAI TRAnSAKSI MASInG-MASInG MEnCATAT PERTUMBUHAn DUA DIGIT SEBAnYAK 11.4% DAn 32.6%.


perniagaan ini. Mereka telah bekerja

keras untuk mengekalkan kos dan

mencari kecekapan. Seperti yang

dilakukan oleh para pemegang saham

kami, pasukan kami harus juga bertahan

menghadapi masa sukar, serta bertindak

di luar jangkaan.

Atas nama Lembaga Pengarah MIECO,

saya ingin menghulurkan ucapan terima

kasih dengan tulus ikhlas kepada setiap

ahli keluarga MIECO. Anda telah bekerja

keras, tetap setia dan komited dalam

menghadapi masa sukar dan telah

muncul lebih kuat, lebih erat dan lebih

bersatu. Saya yakin ianya akan membawa

kita lebih jauh. Saya berharap kita dapat

bersama-sama menuju ke hadapan.

Untuk pelanggan setia kami di seluruh

dunia dan khususnya di Malaysia -

Terima Kasih. Anda telah melihat kami

melalui masa yang sukar, dan kami

berterima kasih untuk itu. Kami akan

terus bekerja keras untuk menghasilkan

produk berkualiti tinggi, produk nilai

tambah yang akan memberi pulangan

hebat kepada perniagaan dan jenama

anda.

Untuk Lembaga Pengarah MIECO, terima

kasih atas kepercayaan anda pada

jenama MIECO, dan visi anda dalam

memandu syarikat ini melalui pahit

getir. Anda adalah pasukan yang terbaik,

lebih komited untuk membantu kami

tetap berada di landasan. Kami juga

ingin mengambil kesempatan ini untuk

mengucapkan terima kasih kepada

Datin Sri Maria Bettina Khan yang bersara

daripada Lembaga Pengarah.

Untuk anda pemegang saham kami,

terima kasih di atas kesabaran anda dan

keyakinan yang berterusan terhadap

MIECO. Kami semua dari MIECO akan

terus berusaha keras untuk memberikan

perkhidmatan sebaik mungkin dan

semoga kami mampu memenuhi harapan

anda semua.

Terima Kasih

Dato’ Mohamed Moiz bin Ali M J Moiz

MIECO Chipboard Berhad

27 April 2011

26 | REVIEW OF OPERATIOnSMIECO AnnUAL REPORT 2010

2010 was a year of recovery for MIECO,

after a challenging year in 2009.

2010 generated positive results, giving us

the confidence that we can finally expect

to see the business enjoy a turn for the

better.

Our financial results: The start of a

turnaround

For the year ending December 2010,

MIECO recorded revenue of RM174.2

million, down 6% against the RM185.7

million we achieved in 2009. This was

attributable to lower export sales volume

but mitigated by increased domestic

demand with more sales of value-added

products.

MIECO’s profit before tax increased

to RM1.65 million after accounting

for finance cost, depreciation and

maintenance of its plant in Kuala Lipis

which was not operational in 2010,

compared to its previous year’s loss of

RM16.5 million.

Business activities

As part of our cost containment strategy,

we continued to operate only two plants

in 2010, keeping Plant 3, in Kechau Tui,

Pahang, closed.

We focused on improving efficiencies

and production quality at the two plants.

Among the initiatives we implemented

there were; improving plain board

production volume, improving product

standards to meet international

requirements such as the E1 CARB

Phase 2, reducing machine downtime and

FOR 2010, WE FOCUSED On 3 CORE STRATEGIES FOR SUSTAInInG OUR BUSInESS – MAnAGInG COSTS AnD IMPROVInG EFFICIEnCIES, STEPPInG UP PRODUCT DEVELOPMEnT AnD PROTECTInG OUR DOMESTIC CUSTOMER BASE, WHICH COnTInUES TO BE OUR LIFELInE.

REVIEW OF OPERATIOnS

| 27REVIEW OF OPERATIOnSMIECO AnnUAL REPORT 2010

reducing production reject rate.

Based on the market turnaround in the

second half of 2010, we anticipated

having to reopen our plant at Kechau

Tui in Pahang, and spent time and effort

ensuring the plant was up and ready. We

reopened the plant in January 2011 and

are pleased to report that it is running

smoothly. With the resumption of Plant

3, MIECO will see an increase in its plain

board capacity and this will enable us to

produce more value-added products.

6 new wood grain designs under the

2010 MIECO Decorative MFC comprising

Montana Cherry, Olive Ash, Vermont Ash,

Linea, Tiziano Pine and Zena Pine. These

have been well-received in the market,

and we anticipate they will be significant

contributors to our bottom line in 2011.

We are currently working on at least 6

new additional designs which we will roll

out in 2011. Our target is to increase our

range of designs as we expect there to be

increasing demand for this value-added

product.

We stepped up efforts to meet

international standards, and achieved the

E1 California Air Resource Board (CARB)

Phase 2 in 2010. In January 2011, we

started to produce products with this

certification, demonstrating compliance

of MIECO’s composite wood products

with California Code of Regulations for

the US market.

We also attained, for MIECO’s melamine

laminated products, the Singapore Green

Label Certification endorsed by the

Singapore Environment Council certifying

our products’ minimal impact to overall

environment, right from our raw

materials to the manufacturing process,

composition, health impact and finally

the disposal of the product.

We focused our marketing efforts on

the domestic market, which has steadily

grown and now contributes more than

50% of our business. Our Malaysian

We also worked hard to negotiate the

best rates for raw materials, taking

advantage of a depressed market in the

first half of 2010, and managed to secure

good contracts for the supply of critical

raw materials that will see us through

2011.

Product development has always been

a core strategy for MIECO, and it was

no different in 2010. We rolled out

28 | REVIEW OF OPERATIOnSMIECO AnnUAL REPORT 2010

customers have proven to be loyal and

respond well to our new products; we

spent time nurturing and growing these

relationships.

And we continued to explore the use of

rubber wood as a sustainable raw material

alternative. Results are positive and we

are optimistic that we will have a suitable,

cost-efficient raw material alternative in

the not-too-distant future.

All these measures not only helped us

minimize losses, but gave us a strong

differentiation factor in the international

marketplace, helping position us

strongly amongst players in the global

particleboard industry.

People : A year of great teamwork

In 2010, we invested time and effort in

developing the skills and knowledge of

our team, taking advantage of a slower

operating environment to improve our

talent pool. Our employees spent a total

of 602 hours in training in 2010, against

the original plan of 427 hours.

In ADDITIOn TO THAT, WE HAD 137 EMPLOYEES ATTEnD MOTIVATIOnAL AnD TEAM DEVELOPMEnT PROGRAMMES, WHICH TOGETHER HELPED InCREASE EFFICIEnCY, TEAMWORK AnD PRODUCTIVITY.

| 29REVIEW OF OPERATIOnSMIECO AnnUAL REPORT 2010

We believe that working together is

an important part of MIECO’s success;

as was clearly demonstrated in our

performance in 2010. We are working

hard to ensure this is carried through

across the company, and especially at

Plant 3, as we recommence operations

there this year.

Community : Supporting the

communities we operate in

MIECO continued to have close ties

with the communities it operated

in, organizing events to build and

strengthen relationships, whilst being

supportive of their needs.

Part of our efforts in 2010 included

several familiarization sessions for the

communities, where we invited students

and lecturers from nearby institutions

of learning to visit our plants and

understand our production process.

Led by our well- trained staff, they were

exposed to the step by step production

of particleboards.

We also stayed in close touch with the

local community, inviting representatives

from the Department of Environment,

the Police department and Taman Balok

Makmur Residents Committee members

to attend our ‘Majlis Berbuka Puasa’

(breaking of fast) event.

We continue to engage with and aid our

communities despite market challenges;

they have been loyal supporters of

our business, and we enjoy a strong,

mutually-rewarding relationship with

them. We are committed to giving them

our best, acting responsibly and keeping

their interests at heart.

All in, 2010 was a lean year for the

business, but we used the time to

improve MIECO’s overall operational,

product development and purchasing

model, which will help us lay a strong

foundation for the turnaround we

anticipate to happen in 2011, and

help MIECO regain its position as one

of the world’s leading wood-based

manufacturing brands.

30 | EnGAGInG WITH OUR COMMUnITIES In 2010MIECO AnnUAL REPORT 2010

to develop the communities confidence in

approaching MIECO, testament to strong

relationships.

In its efforts to foster stronger ties with

the government-related bodies in its area

of operation, members of the Department

of Environment, Police and Taman Balok

Makmur Residents Committee were invited

to attend ‘Majlis Berbuka Puasa’. The well-

received event was attended by Dato’ Yong

Seng Yeow as well as the staff from the

Gebeng and Semambu plants.

Within the company, employee engagement

programmes to create interaction between

the plants were carried out successfully.

There was strong participation, an

indication of the effect of previous

programmes we have had, and this year

brought further encouragement.

In Pantai Balok, a fishing competition and

telematch was held for the members and

children of Kelab Sukan dan Sosial Mieco

(KSSM). A friendly football match was held

between MIECO KSSM and Beserah Selatan

Football Club which KSSM won. Sepak

takraw and badminton matches were held

between members and there was a KSSM

organised trip to Tioman Island.

MIECO has always placed strong emphasis

on education and 2010 saw several

initiatives in this vein. Groups of students

and lecturers from the International Islamic

University of Malaysia, Universiti Teknologi

Mara, Jengka and Universiti Putra Malaysia

were taken on tours of the plants and

educated on the machinery and processes

used in MIECO’s production.

The visits from universities were also

structured to give participants a greater

understanding of the possible hazards and

dangers involved in chipboard production,

and the respective safety systems MIECO

has in place.

Taking steps for greater involvement on the

educational front, 22 students from UTM,

USM, ADTEC, UPM, UUM, Polisas, UMP and

Politeknik Hulu Terengganu were received

to undertake their 6 months practical

training.

Donations were made to the community for

a variety of causes that included new ceiling

fans for Sekolah Agama Rendah and the

blister board needed for Rejimen Ke 1, Kor

Armor Di Raja, Kem Batu 10 to construct

the platform for their family day. These

donations represent MIECO’s aim to support

different groups within the community and

Corporate Social Activities for 2010.

Jan – Dec 2010

Received 22 students for Industrial Practical

training for a period of 2 – 6 months.

• Students were from UTM, USM, ADTEC,

UPM, UUM, Polisas, UMP and Politeknik

Hulu Terengganu.

21 Jan 2010

Plant Visit by 3 Lecturers and 20 students

from Int’l Islamic University of Malaysia.

• to expose them on machine used in

MIECO production, hazard while working

with machines and how to control and

avoid an accident from happening.

31 Jan 2010

Launching of general meeting

‘Jawatankuasa Majlis Muafakat – SAR / KAFA

Masjid Darul Husna, Taman Balok Makmur.

• Donation of 4 units ceiling fans for

Sekolah Agama Rendah / Kelas Agama

Fardhu Ain Darul Husna.

THROUGHOUT 2010, MIECO COnTInUED EnGAGInG WITH AnD SUPPORTInG ITS COMMUnITIES In PAHAnG. EFFORTS WERE FOCUSED HERE TO STREnGTHEn RELATIOnSHIPS WITH THE IMMEDIATE COMMUnITIES.

EnGAGInG WITH OUR COMMUnITIES In 2010

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