CHAIRMAN’S STATEMENT Dear Shareholders, For and on behalf of the Board of Directors, I am pleased to present to you our Annual Report for the financial year ended 31 December 2013. 2013 was a year of records as the Group recorded its highest ever revenue figures on the back of record-breaking cargo throughput recorded at Lekir Bulk Terminal. Integrax’s share price recorded new highs as investors began to take a keen interest on the strength of the company and its future prospects and growth possibilities. Financial Performance Integrax continues to be a fundamentally strong company with a consistent revenue stream, attractive profitability and a solid balance sheet. Integrax’s revenue increased by 2.4% to reach a record-high of RM92.9 million in 2013 (RM90.7 million in 2012) on the back of yet another record-breaking year for cargo throughput of 7.66 million tonnes (7.02 million tonnes in 2012) at Lekir Bulk Terminal. However, due to the higher contractual rate of its cost of sales, higher depreciation charges and an increase in administrative expenses, profit from operations declined to RM36.8 million in 2013 (from RM39.6 million in 2012). Profit for the year declined marginally to RM47.5 million compared with RM47.7 million recorded in the previous year as the lower share of profit from our associate company Lumut Maritime Terminal Sdn Bhd offset the lower finance costs recorded in 2013. Our shareholders’ funds strengthened further to RM618.5 million, with a healthy cash position of RM151.3 million. The Net Assets of the Company stood at RM2.06 per share as at 31 December 2013 as compared with RM1.97 per share as of 31 December 2012. Operational Performance Dato’ Seri DiRaja Mohamad Tajol Rosli Lumut Port, which comprises of Lekir Bulk Terminal located at Pulau Lekir Satu, Manjung (“LBT”) and Lumut Maritime Terminal located at Kg Acheh, Sitiawan (“LMT”) recorded its best ever performance by handling a total of bin Mohd Ghazali 10.86 million tonnes in 013, an increase of 6.9% from 2012. Integrax owns 80% of LBT through its subsidiary Lekir INTEGRAX BERHAD CHAIRMAN Bulk Terminal Sdn Bhd (“LBTSB”) and 50% less 1 share in LMT through its associate company, Lumut Maritime Terminal Sdn Bhd (“LMTSB”). Lumut Port is managed by LMTSB and has continued to grow from strength to strength over the years to be amongst the most efficient ports in the country. 16 INTEGRAX BERHAD Annual Report 2013 CHAIRMAN’S STATEMENT (continued) LBT, our deepwater terminal which handles the unloading and delivery of coal to the Sultan Azlan Shah Power Station in Manjung, recorded its highest ever cargo throughput of 7.66 million tonnes, an increase of 9.1% from 2012. LBT recorded a higher profit after tax of RM32.8 million in 2013 (RM30.4 million in 2012) on the back of RM92.9 million revenue (RM90.7 million in 2012). LBT and LMT Cargo Throughput LMT achieved a cargo throughput of 3.20 million tonnes in 2013. Throughput at LMT consisted of dry bulk (limestone, coal, cement, clinker, pet coke and animal feed) which made up 71.8% of throughput and liquid bulk (palm oil and petroleum products) which made up 19.8% of throughput. LMT recorded a 4% decline in profit after tax to RM34.1 million compared with RM35.4 million recorded in 2012 on the back of a 11.3% decline in revenue. The decline in LMT’s revenue to RM87.3 million (from RM98.3 million in 2012) was due to lower industrial land sales during 2013. A Year of Progress In my report to shareholders last year, I had said that after the strengthening of the governance structure of the company in the previous year, 2013 would be a year of consolidation and planning. I am pleased to report that we have made considerable progress in developing our strategies going forward and these efforts are beginning to come to fruition. In February 2013, LBT recorded a significant event whereby we had successfully completed a ship-to-ship transfer operation of 90,000 tonnes of bauxite. This represents an additional service offering and source of revenue to the Group. Management is actively pursuing similar activities with companies with regional aspirations with a view of turning LBT into a major regional transhipment hub for dry bulk commodities. Cargo Throughput Analysis One of LBTSB’s obligations in the Jetty Terminal Usage Agreement No. 2 which was signed with TNB Janamanjung Sdn Bhd on 27th July 2012 (“JTUA No. 2”) is to provide a new additional grab ship unloader for the handling of coal for the Manjung 4 power plant which is scheduled to begin operations in the first quarter of 2015. On 13th March 2013, LBTSB entered into a construction contract with Mutiara Etnik Sdn Bhd as the Contractor and Jiangsu Hailong Heavy Machinery Co. Ltd as the Designated Sub-Contractor for the design, supply, erection, installation and hook-up, and the commissioning of a new grab ship unloader (“SUL 3”). I wish to highlight that both the Contractor and the Designated Sub-Contractor had signed the Code of Ethics document with LBTSB as a testament to the conduct of business between the three parties which covers the basic tenets of good corporate governance. INTEGRAX BERHAD Annual Report 2013 17 CHAIRMAN’S STATEMENT (continued) To satisfy the terms of the JTUA No. 2, LBTSB entered into a Facilities Agreement with Hong Leong Bank and Hong Leong Investment Bank Berhad on 28th March 2013 which comprises a term loan and revolving credit facility amounting to RM90 million. I am pleased to report that the construction of SUL 3 was completed on schedule and the SUL 3 set sail from China to Lumut on 1st January 2014 and arrived safely at LBT on 3rd February 2014. SUL 3, is reportedly one of the region’s largest coal unloader, and at the time of writing this report, is currently undergoing performance testing prior to commissioning. I would like to take this opportunity to congratulate the Management, under the technical advice of our Deputy Chairman, Encik Amin Halim Rasip, and the contractors for the successful completion and safe delivery of the SUL 3 to LBT. The concerted efforts to engage with shareholders and stakeholders of the Group are also showing signs of success. The Investor Relations programme and media awareness initiatives spearheaded by our Executive Director, Encik Azman Shah Mohd Yusof, have led to the initiation of research coverage on the Group by RHB Investment Bank Berhad and Kenanga Investment Bank Berhad. On 30th July 2013, Integrax was chosen by RHB Investment Bank Berhad as one of the Top Malaysian Small Companies 30 Jewels. The share price of Integrax has responded well to the growing interest of investors in the company, with record highs being achieved in 2013, with the highest share price being RM2.16 recorded on 20th November 2013. Value Chain Integration Partner As I had alluded in last year’s report, Integrax is positioning itself as a “Value Chain Integration Partner” and our growth strategy involves expanding our port facilities and integrating our operations along the value chains of the many raw materials which flow through our terminals and which pass through the Straits of Melaka. By espousing the concept of “Smart Partnership”, we hope to provide value added services to our current and future customers by studying the value chains of potential commodities and providing integration solutions on a “win-win basis”. We intend to add value to the coal-handling services provided to our valued customer, Tenaga Nasional Berhad through value chain integration initiatives, as well as developing new business relationships with potential customers. Lumut Port has the potential to be a regional hub for commodities such as coal, iron ore, limestone and fertiliser due to its strategic location and scalable facilities and infrastructure. It is to this end that Integrax had mooted the idea of the Lithuania-Perak Biomass Initiative whereby Integrax signed a Memorandum of Understanding (“MOU”) with local biomass pellet producer, Global Green Synergy Sdn Bhd (“GGS”) and Lithuanian industrial group, Nordic Industries UAB (“Nordic”) during the official visit of the Perak Chief Minister, Dato’ Seri DiRaja Dr. Zambry Abdul Kadir, to Lithuania in December 2013. 18 INTEGRAX BERHAD Annual Report 2013 CHAIRMAN’S STATEMENT (continued) The Lithuania-Perak Biomass Initiative is in line with the Malaysian Government’s National Biomass Policy 2020 where Malaysia has become a leading biomass products manufacturer and supplier to the global market which is estimated to grow to 20 milion tonnes by 2020. Under this initiative, the objective is to market and promote Malaysian biomass pellets to Europe whilst establishing Perak as a biomass production and research and development hub for Malaysia with Lumut Port as the biomass logistics hub. We also hope that this initiative would lead to Port of Klaipeda and Lumut Port becoming the new gateways to the European and Asian markets respectively. Integrax has continued to engage with the Perak State Government as we believe that we have a long-term role to play to contribute in the sustainable development of the state economy, especially in the Lumut/Manjung area which is one of the fastest growing districts in Malaysia. Integrax has also been requested to participate in meetings between the State Government and trade delegations and economic missions from other countries. In our efforts to build a business network with international players, Integrax has made courtesy calls and technical visits to the Sabah Port Authority and the Port of Rotterdam authority to learn more about the operations and best practices of other established international ports, as well as to explore possible strategic collaboration in the future. It is hoped that will all these efforts, Management’s internal target of “Vision 20:2020” which is to achieve cargo throughput of 20 million tonnes by the year 2020, will be realised. The team is hard at work trying to achieve this target, and together with the guidance of the Board of Directors, the cooperation of our stakeholders, the trust of our customers and the close partnership with the Perak State Government, we are confident that this vision will come true. Acknowledgment I would like to record my sincere gratitude and appreciation to the directors, management and staff who have worked tirelessly and diligently throughout the year to further strengthen the group’s position and formulate and implement the strategic plans for our future growth. I would like to thank my fellow Board members who have without fail, provided guidance and insight to the Management team to resolve issues and formulate plans and advising on corporate governance matters which will prove invaluable as Integrax continues to grow from strength to strength. Overall, the achievements of the Company would not have been possible without the strong working relationship which we have with the Perak State Government under the leadership of the Chief Minister, Dato’ Seri DiRaja Dr. Zambry Abdul Kadir, especially Perbadanan Kemajuan Negeri Perak and its subsidiaries, as well as the Majlis Perbandaran Manjung, Jabatan Kastam, Jabatan Laut, Unit Perancang Ekonomi and Pejabat Tanah dan Galian. I wish to thank the Management team and staff of Integrax for their hard work, loyalty and dedication throughout the year, and I hope that they will continue to strive to achieve the targets set by the Board of Directors. To the shareholders of Integrax, I would like to record my gratitude to you for your unwavering support and encouragement, and hope that you will continue to remain with us in our journey of growth and Godwilling, continuous success….. Tajol Rosli Chairman 16 May 2014 INTEGRAX BERHAD Annual Report 2013 19