Chairman's Statement

Dear Shareholders,

On behalf of the Board of Directors and the Management of UEM Builders Berhad (UEM Builders), it is my pleasure to present the Annual Report and Accounts for the year ended 31 December 2006.

It is an honour and a privilege for me to address all the stakeholders of UEM Builders for the first time, as your new Chairman. I would like to place on record my appreciation to you for the invitation to join the Board. I accept the trust and responsibilities, fully aware of the challenges it entails.

During the year ended 31 December 2006, the three core business divisions of UEM Builders recorded significant improvements in their operating and financial performance.

Another significant development in 2006 was the strategic initiatives launched to shape the Group's future. These initiatives are aimed at improving operational efficiency, strengthening internal control, and promoting greater consolidation within the Group. The rationale for these is to transform your Group into a stronger and more resilient entity. This is in keeping with our tagline – “We build your tomorrow”. In so doing, we will increase shareholders' value of the Group.


FINANCIAL PERFORMANCE
For the year ended 31 December 2006, UEM Builders recorded a revenue of RM1,796 million which is 32% higher than the restated revenue for 2005 of RM1,365 million.

All three core business divisions posted higher revenues for the year. The engineering and construction division increased its turnover to RM1,300 million, 44% higher than RM901 million achieved previously and accounted for 72% of Group turnover. The infrastructure and facilities management division recorded increased revenues of RM406 million, up 13% from RM360 million in 2005. Our toll concession division generated revenue of RM146 million, a small increase from the RM145 million registered in the previous year.

We recorded a profit before taxation of RM9 million, compared to a loss of RM211 million in 2005. Our profit would have been higher had it not been for our share of losses of RM98 million from our associate company, Costain Group Plc. If we exclude this share of losses, the Group would have made a profit before tax of RM107 million.

DIVIDEND
An interim tax-exempt dividend of RM14.5 million or 1.5 sen per ordinary share was declared in respect of 2006 (2005: RM9.5 million) and paid out on 7 February 2007. The Board does not recommend the payment of any final dividend.

OPERATIONAL HIGHLIGHTS
The construction sector in Malaysia registered a growth of 0.7% in 2006 after experiencing negative growth for the last two years. Against this backdrop, we succeeded in securing an order book in excess of RM2.4 billion. About 89% is made up of local projects with the balance from overseas.

2006 saw us completing several major projects. UEM Builders was entrusted by the Government to take over and complete the long delayed Electrified Double Tracking Project between Rawang and Ipoh in 2005 from the consortium originally awarded the contract. We successfully completed the project ahead of schedule in December 2006.

Other major projects completed include the Federal Reserve Unit Complex in Cheras, Malaysian Agro Exposition Park, Serdang (MAEPS, Phase 1) and MOF 2 buildings for the Ministry of Finance. The Prime Minister officiated the opening of MAEPS, which was a fast track project completed in nine months. The Penang Bridge toll plaza widening was completed and opened to traffic in November 2006. The Group also completed the dedicated trumpet interchange for Bandar Dato' Onn in Johor, the Pendang interchange and pavement rehabilitation works at the Kuala Lumpur to Karak highway.

Internationally, UEM Builders completed the 81-km main line Salwa International Highway, in time for the 2006 Asian Games in Doha, Qatar, despite the considerable challenges encountered. In India, where the Group has been involved in several highway projects, the Tumkur – Haveri, Package 2 project is nearing completion and will be handed over soon. Towards the end of 2006, we were awarded a RM65 million contract to widen and upgrade a 21.2 km highway in Mumbai. Currently, we are making preparation to enter the Indonesian market as that country embarks on major infrastructure spending to support its growing economy.

Domestically, we are continuing to make satisfactory progress on other projects that we have secured. These include the Johor State New Administration Building, extension of Institut Jantung Negara, widening of the Penang Bridge and the multipackage third lane extension projects for PLUS.

In infrastructure maintenance and facilities management, we are making headway expanding into the petrochemical, oil and gas and palm oil sectors. Last year, we signed a Memorandum of Understanding with the Malaysian Palm Oil Board for the development of a mobile filter press to process oil palm effluents.

The Group's toll concession operations vis-à-vis the Penang Bridge continued to be an important source of recurring revenue. We are currently widening the bridge by building a third lane to accommodate increasing traffic volume.

KEY INITIATIVES
To further improve our competitiveness, we took a holistic and critical look at the organisation by focusing our attention on 10 key areas identified as the pillars of the Company: operational efficiency; contract and costing; financial management; research & development; staff development; branding; business development; communication; cost reduction and investor relations.

We continued to strengthen our existing systems and processes and to enhance efficiency and controls. In order to transform UEM Builders into an 'Employee Driven Organisation', we emphasized the development of our staff through enhancement of knowledge, skills and capabilities. It is also our intention to empower every employee in the organization with a greater sense of ownership, accountability, and responsibility. I am proud to report that our employees have demonstrated their ability to rise to meet the challenges required to achieve our vision.

LOOKING AHEAD
Based on our track record of successfully completing projects of significant size and national importance to the country, the RM3.6 billion Penang Second Bridge was awarded to UEM Group Berhad and UEM Builders will be assisting to implement the project. Investments of RM47 billion have been targeted for the development of the Iskandar Development Region, where several major infrastructure and catalyst projects have been identified. We believe that with our significant resources and experience, we will play an important role in some of these projects.

The coming year promises to be a busy and eventful one. While executing the many projects that we have already secured, we will be aggressively bidding for new orders as new projects are launched and those previously put on hold are revived. In addition to that, we will continue to pursue selected projects in the international market. We will be cautious in bidding for these overseas contracts taking into account all the risk factors.

With the improvement in the construction scenario and the initiatives taken to enhance internal performance, we are optimistic of our outlook for the coming year.

APPRECIATION
The Board and I take this opportunity to thank my predecessor, Datuk Abu Hassan Kendut, who resigned from the Board on 31 March 2007. We wish him every success in his future undertakings. We also welcome En. Abd. Rahim bin Md. Noh, who joined the Board with me on 1 April 2007. He brings with him vast experience in the public and private sector. We look forward to benefiting from his experience. To my fellow Board members, I extend my appreciation for their wise counsel and invaluable insights.

Throughout the year, our management and staff have displayed exemplary commitment, professionalism and a great passion for success and excellence and are responding well to the challenges of a competitive global operating environment.

UEM Builders also has a great support group comprising our business partners, suppliers, sub-contractors, bankers and various government authorities. Our customers and shareholders deserve special mention for their support of all we are trying to achieve.

I thank all of you.



Dato' Ir. Abdul Rahim Abu Bakar
Chairman

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