IV. RISK FACTORS IV. RISK FACTORS
Applicants for the Offer Shares should carefully consider the following risk factors (which may not be exhaustive) which may have an impact on the future financial perfonnance of the Group, in addition to all other infonoation contained elsewhere in this Prospectus before applying for the Offer Shares. I. NO PRIOR MARKET FOR OHB SHARES Prior to the Initial Public Offering, there was no public market for the OHB Shares. There can be no assurance that an active market for OHB Shares will develop upon the Listing or, if developed, that such market can be sustained. The Retail Price was detennined after taking into consideration the factors as set out in Section 5 of Part III of this Prospectus whilst the Institutional Price will be detennined by the bookbuilding process. The price at which the OHB Shares would trade on the Main Board of Bursa Securities after the Initial Public Offering may be influenced by a number of factors, including the liquidity of the market for the OHB Shares and the perception of the investors of the Group. There can be no assurance that the Final Retail Price or Institutional Price will correspond to the price at which the OHB Shares wi II trade on the Main Board of Bursa Securities either upon or subsequent to its Listing or that an active market for the OHB Shares will develop and continue upon or subsequent to its Listing. 2. BUSINESS RISKS The Group is principallY involved in the manufacruring and marketing of CR, GI and PPGI products. As such, the Group is subject to certain risks inherent in the iron and steel industry. These risks include changes in general economic conditions such as, but not limited to, general downrurn in the global and Malaysian economy, government regulations, inflation, changes in business conditions such as deterioration in prevailing market conditions, constraints in labour supply. increase in costs of labour and materials, introduction of new players into the market and dependence on imported supplies and raw materials. Although the Group seeks to mitigate these risks through, among others, maintaining good business relationships with its customers and supptiers, efficient cost control, product development to improve the quality and reduce the production costs of its products, investment in new machinery and equipment to increase production and integration, and development and introduction of other synergistic products into the Group’s product line, there is no assurance that any occurrence of these factors will not have a material adverse effect on the Group’s business. 3. COMPETITION The Group faces competition from various competitors, which include manufacturers and traders. For the CRC industry in Malaysia, the competitors of the Group are Mycron Steel Berhad, a manufacturer of CRCs and various traders which import CRCs into Malaysia. The Group will also face competition from Megasteel which is expected to start its own CRC production. With the entry of Megasteel into the CRC market, the competition in the CRe market in Malaysia is expected to intensify. The main competitors of the Group in respect of GI and PPGI products include BlueScope Steel (Malaysia) Sdn Bhd and Yung Kong Galvanising Industries Berhad. Despite the competition, the Directors of the Company believe that the Group is presently one ofthe leading manufacturers of CR, GJ and PPGI products in Malaysia. IV. RISK FACTORS (COi\/T’D) Although the Group seeks to mitigate the risk from its current and foreseeable competition by maintaining good business relationships with customers, further establishing its reputation within the iron and steel industry by distinguishing itself through quality products and competitive pricing of the Group’s products and professionalism in service to customers, production efficiency, market diversification by exporting to other geographical markets such as the South East Asian countries and maintaining experienced and skilled management and technical personnel, there can be no assurance that the Group will be able to maintain and/or expand its market share in its local and overseas market or proposed export markets. 4. CONTROL BY SUBSTANTIAL SHAREHOLDER Upon completion of the Initial Public Offering and Transfer, the substantial shareholder of OHB will be eSAP, holding 45% ofthe enlarged issued and paid-up share capital ofOHB. As disclosed in this Prospectus, CSAP is a wholly-owned subsidiary of CSC. It is therefore likely that esc (through eSAP), would be able to control the outcome of certain matters requiring the vote of the shareholders of OHB unless eSAP is required to abstain from voting by Jaw and/or the relevant authorities. 5. DEPENDANCE ON esc The OHB Group is dependant on CSC in various aspects as set out below: 5.1 Corporate objectives esc, being the ultimate largest shareholder of the OHB Group, will ensure that the business direction ofOHB is in congruent with the esc Group’s corporate objectives through the appointment of its employees such as the Group Managing Director, Directors and members of the senior management team of the OHB Group, However, without the business directive from esc and the employees of esc, the business of the OHB Group is still able to continue as the Group has Executive Directors and a group of experienced senior management personnel (non-employees of CSC) who have been with the Group for more than 6 years and are capable of setting corporate o~iectives and making business decisions for the Group. Please refer to Section 7 of this Part of the Prospectus for further details on dependence on key personnel.
5.2 Supplies of raw materials OHB is also dependant on esc to an extent for the supply of HR and IB coils for its production. There is no certainty that continuous supply is guaranteed and the future perfonnance ofthe Group may be significantly affected in the absence ofthe HR and IB coils supply. Please refer to Section 12 of this Part of the Prospectus on the risks associated with source of supplies. To mitigate this the OHB Group will endeavour to purchase its raw materials required from suppliers other than esc, subject to the reasonableness of the price charged, quality of the raw materials as well as the service provided by the other suppliers. 5.3 R&D The OHB Group undertakes R&D on (among others) the chemical composition, physical properties, dimension, surface condition and production process of its products (‘application R&D’) and mainly relies on esc for its R&D in development of new products and product innovation. At present, the Group carries out its O\vn testing and development of its products to produce higher quality products and to increase efficiency in its manufacturing process. IV. RISK FACTORS (CONT’D) There can however be no assurance that, in the event esc ceases to be a substantial shareholder of OHB and ceases to supply the OHB Group with quality raw materials, R&D information and business dIrective, the business operations of the OHB Group would not be materially affected.
5.4 Pricing on supplies of raw materials esc, being a large corporation, reaps benefits from economies of scale in areas such as productlOD cost efficiency, discount on bulk purchases of its raw materials and R&D. Thus, ese is able to provide its main customers with competitive pricing on its products. The OHB Group benefits from this competitive pricing as the Group has been a main customer of eSc. In addition, ese, through its subsidiary. eSAP, holds a substantial equity interest in the OHB Group. The management of OHI3 believes that ese will continue to maintain this arrangement due to the following: (a) ese (through eSAP) re·mains a suhstantial shareholder of the OHB Group even after the Initial Public Oftoring and will continue to maintain a good trade relationship with the OHB Group;
(b) the discount provided by esc to the OHB Group represents the normal
discount extended to its main customers who have established long term trade relationships WIth CSC; and (c) the OHB Group has been in trade relationship with CSC since 1994. However, in the event ese does not extend the competitive pricing to the OHB Group or Ceases to be a substantial shareholder of OHB, there is no certainty that the performance of the OHB Group would not be materially affected. There is also no certainty that the OHB Group will be able to source its supplies of raw materials on
the same competitive pricing and terms. 6. REGULATORY CONSIDERAnONS The Government has imposed an increase in duties/tariffs on the imports of flat steel products such as HR, eR, GI and PPGI products. At the same time, companies wishing to import these products are required to have approved permits. ln granting the approved permits, the MITI may take into account, among others, the market dynamics in Malaysia and the region. Presently, raw materials imported by the OHB Group are exempted from import duties/tariffs under approved permits from the MIT!. As disclosed in Sections 7.3.1 (iv) and 7.3.2 (iv) of Part V of this Prospecnrs, the current approved pennits of the OHB Group will be expiring in December 2004. Whilst the Directors believe that the MITI wrll continue issuing the OHB Group with approved pennits and exemption from import duties/tariffs for their import of raw materials because the OHB Group is a major producer in the local steel industry and the Government’s policy towards trade liberalisation, there is no assurance that the MITT will continue to grant the OHB Group with such permits andlor exemptions. If such approved pennits are not granted, the OHB Group wonld have to obtain its supply of raw materials from the only local HR producer, Megasteel, which might be able to exert higher prices due to the demand. Further, if the OHB Group is not granted exemption from import duties/ tariffs, ORB would have to pay imporl duties/ tariffs on those raw materials and would then have to increase its selling prices or reduce its profit margin to compensate for the higher costs. There is no assurance that the aforesaid will not materially and adversely affect the Group’s operations and business. The Directors however believe that the ORB Group should be able to pass the increased costs on to the downstream players as the revocation of approved pennits andlor hIgher import duties/tariffs wrll make steel products in general more expensive in Malaysia. IV. RISK FACTORS (CONT’D) 7. DEPENDENCE ON KEY PERSONNEL The Group believes that its continuing success depends. to a significant extent, upon the abilities and continuing efforts of its existing Executive Directors and senior management. The loss of any of the key members of the Group’s Executive Directors and senior management could materially affect the Group’s petformance. The Directors of the Company also recognise the importance of the Group’s ability to attract and retain skilled personnel. [u this regard) the Group endeavours to groom the existing staff members to support the senior management and/or to shoulder further responsibilities and to provide suitable incentives such as bonuses, group performance incenti vesl medical coverage and a conducive working environment. FUlther, in conjunction with the offering of Offer Shares to Eligible Employees, the EES will be introduced to provide an additional incentive to motivate and retain the Eligible Employees. However, there can be no assurance that the above measures will always be successful in retaining key personnel or in ensuring a smooth transition should changes occur. 8. RISKS ASSOC[ATED WITH BANK BORROWINGS The Group finances its operations using internally generated funds and bank borrowings which are interest bearing. As such, any additional bank bon’owings andlor increase in interest rates may result in an increase in interest expense and affect the perfonnance of the Group. There can be no assurance that the interest rates will be maintained in the future and/or that any increase in the Group’s bank borrowings will not have a material effect on the performance ofthe Group. To date, the Group has not defaulted on any of its borrowings. 9. FOREIGN EXCHANGE RISKS The Group presently purchases certam of its raw materials, including, among others, HR coils, zinc, 1B coils and various chemical substances from, among others, Taiwan, Australia, Singapore, Korea and Canada. Such transactions are conducted in USD, hence the direct application of the usn currency exchange rate. At presen~ there are no fluctuations in the USD curreucy exchange rate as a result of tlie peggmg of the RM to USD at the official conversion rate of USDI.OO to RM3.80 (“Peg”). However, there can be no assurance that the Peg will be maintained in the future, and that if the Peg is removed or varied, it will not have a material effect on the perfonuance of the Group. At present, as the Company also sells its products in USD, it has a natural hedge in place in the event the Peg \S lifted. The Directors of the Company intend to mitigate its foreign exchange risks by increasing its production output and/or product range to be able to increase its export market share. However, there can be no assurance that the increase in its production and/or product range would be a success and/or would be effective in increasing its expolt market share. 10, RESTRICTIVE COVENANTS UNDER CREDIT AND FINANCE FACILITY AGREEMENTS The subsidiaries of ORB have entered into various credit and finance facility agreements with banks or financiers to finance their operations and business activities. These agreements contain, among others, covenants which may limit the ORB Group’s operating and financial flexibility. Any act by the OHB Group falling within the ambit or scope of such covenants will require the consent of the relevant banks or financiers. The management of the OHB Group has ob[ained the requisite consents from the affected banks or financiers for the implementation of the Disposal of 22.26% in Group Steel, Acquisitions, Initial Public Offering and Listing. The management of the relevant subsidiaries are fully aware of the terms and conditions of, as well as the covenants under the various credit and finance facility agreements and will endeavour to comply with all such terms. conditions and/or covenants. However, no aSSUrance can be given that the Group’s liquidity and/or operations will not be affected in the event any of the credit and finance facilities are withdrawn due to a breach of any of the terms, conditions and/or covenants. IV. RISK FACTORS (CONT’Dj II. FLUCTUATION IN SELLING PRICES The selling price of steel products is dependant on the demand and supply condition of steel in the market and the price of its raw materials which in the case of the OHB Group is generally HR coils. The price of HR coils is dependant on rrrnrket forces. Although the price for steel products is currently on an upward trend, there can be no assurance tbat the price of steel products would not decrease and that such decrease will not have a material effect on the financial performance of the Group. The management of the OHB Group believes that even if the price of steel products decreases, the Group is able to mitigate such risk by changing its product mix (either IB, CR, GI andlor PPG] products) andlor increase its production level to produce sufficient levels of 1B, CR, GI and PPGI products to meet the growing demand of the market. However, there is no assurance that the profitability of the Group will not be affected in the event the increase in sales volume (which is constrained by production capacity) is not sufficient to offset the impact of the price decrease. 12. SOURCE OF SUPPLIES The Group’s business depends, among others, on the supply of its raw materials, namely HR coils, 13 coils, zinc, paints and various chemical substances. As such, the Group’s business depends on the coutinued supply, cost and reliability of such supplies from their existing supplters, some of whom might supply most of a particular item. The Group sources most of its HR COIls from CSC (60%) and a local supplier, zinc from various suppliers from Canada, Australia and Korea, chemicals from Singapore and paints from Nippon and Becker. Although the Directors of the Company believe that the Group is able to find substinne suppliers easily in the event of a disruption in supplies, there can be no assurance that the non-availability of suppliers, disruption of supplies or increase in the cost of such supplies will not have a material effect on the performance of the Group. In addition, for DQ and DDQ CR products to be produced, the supply of quality low carbon and IF steel coils as raw materials would be necessary. IF steel coils are difficult to obtain in the open market as suppliers oflF steel coils are normally integrated steel producers who would retain such quality raw materials for internal use. As an associate company of esc (after the Initial Public Offering), the ORB Group benefits from the ability to obtain IF steel coils to enable it to produce IF steel CRCs. However, there can be no assurance that CSC would continue to be a substantial shareholder of OHB and that CSC would continue to provide the OHB Group with IF steel coils or sufficient levels of IF steel coils to enable it to continue and expand its production of DQ and DDQ CR products. 13. DEPENDENCE ON KEY CUSTOMERS, PARTICULAR PRODUCTS, MARKETS AND GEOGRAPHICAL LOCATION The Group’s business can be considered to be in the mid stream level of the iron and steel industry and benefits from the many players in the downstream market of the iron and steel industry. As such, its product line of I B, CR, GI and PPGI products can be considered as well diversified and meets the diverse requirements of its customers. As such, the Directors of the Company believe that there is no particular dependency on key customers and particular products. Although the Directors of the Company believe that the products it produces are catered to various markets with steady growth over the years and that the needs and requirements of its various markets and customers have been met in the past and are met presently, there can be no assurance tbat the stable demand of the OHB Group’s products will not change in the future and that such change would not have a material effect on the performance of the Group. In addition, the Group may at times export a substantial amount of its products to certain countries depending on demand and profitability to the Group. As such, there is a risk that the Group rrrny be overly dependent on a particular geographical location. However, the Directors shall endeavour to diversify its export regions to maximise its growth potential and profitability and reduce its dependency on any particular country. Nevertheless, there can be no assurance that the Group’s business will not be affected as a result of this over-dependency by any of the factors sel out in Section 19 oflhis Part of the Prospectus. IV. RISK FACTORS (CONT’D) 14. OUTBREAK OF FIRE AND ENERGY CRISIS The Group faces certain operational risks inherent in the iron and steel industry which includes, among others, outbreak of fire, and energy crisis such as shortage of electricity. The Group has taken various steps to reduce the risk associated Witll fire by installing proper firefighting systems at its plant and offices and conducting appropriate training for its employees in the use of such fire-fighting systems. The Directors of the Company believe that in the event of a fire, damage to its raw materials, finished products and heavy equipment and machinery within the Group’s plants would be minimal as a majority of the contents within the Group’s plants consist of steel materials which have a high temperature tolerance. The Group has however taken insurance coverage for all of its equipment and machinery to mitigate its financial losses in the event of an outbreak of fire. The Group has also installed backup diesel generators to mitigate the impact on the operations of its plants in the event of an energy crisis. However, the backup generators are capable of sustaining only critical parts of the Group’s operations at anyone time and are not able to support the full operational scale of the Group. At present, the Group maintains sufficient stock to meet its customers’ demand in the event of any disruption in the production process. further to that, the Directors of the Company believe that the Company would be able to make up for down time by operating at a higher level should the need arise. Although there has not been any major disruption to the Group’s business operations as a result of an outbreak of fire or energy crisis, and the Directors of the Company have taken reasonable steps to mitigate the operational risk, there can be no assurance that there would not be any outbreak of fire or energy crisis at the Group’s plants and that any outbreak of fire or energy crisis would not have a material adverse effect on the Group’s business and financial performance. 15. INVESTMENT RISKS The Group may from time to time invest in new equipment or new ventures which it believes to be beneficial to the business of the Group or is synergistic with the Group’s current operations. Although the Board exercises prudence in its decision-making, there is always the potential risk that the returns from these investmeuts may have a louger payback period than expected or the investments may fail. As such, there can be no assurance that all its future investments will yield positive returns to the Group and would not have any adverse material etlect on the Group’s future financial performance. 16. ADEQUACY OF INSURANCE COVERAGE The Directors of the Company are aware and recognise the importance of having adequate insurance coverage for the Group’s assets and the consequences arising from inadequate insurance coverage which could potentially jeopardise the business operations and financial position of the Group. As a measure to mitigate the risk of inadequate insurance coverage, the Group continuously reviews and ensures that there is adequate insurance coverage for its properties and assets. Although the Group has taken the necessary measures to ensure that all its properties and assets are adequate! y insured, there can be no assurance that the insurance coverage taken by the Group would be adequate to compensate for the replacement cost of the assets or any consequeutialloss arising thereof, and that the Group will be able to obtain new insurance coverage in the event that a claim has been made on the existing insurance policies. 17. TRADEMARK, COPYRIGHTS AND PROTECTION OF INTELLECTUAL PROPERTY RIGHTS The Group currently uses certain trademarks for Omasteel and Group Steel. The logo and the name of Omasteel and Group Steel is not registered as a trademark witll the Registrar of Trademarks, Malaysia as the Directors of OHB believe that the prolection of its logo and tradename as a trademark would not provide substantial benefit to the business of the Group and that unlike a consumer based company, the Group’s business success is dependant on the quality of its products and its reputation within the close-knit iron and steel industry IV. RISK FACTORS (CONT’D) community. There can be no assurance [hat the situation will not change which would require the OHB Group to depend on its trademarks and that in the event it is unable to get its trademark registered in Malaysia or in other jurisdiction in which it substanlially operates, that there would not be any material adverse effect to the Group’s reputation and business. Nevertheless, the Group has taken sleps to protect the intellectual property rights of its new PPGI product. An application for the registration of the trademark “Ever Fresh” has been made by Group Steel at the Registrar ofTrademarks on 26 February 2002. The application has been approved and is currently pending registration. However, in the event it is able to eventually register its trademarks, present trademark laws provide only limited protection and generally (with some exceptions) have no extraterritorial coverage. As a result, there can be no assuranCe that the Group will be able to protect its trademark against unauthorised third party use or exploitation which could have a material adverse effect on the Group’s reputation and business. 18. RISKS ASSOCIATED WITH FUTURE PLANS The Group together with CSC will conduct feasibility studies in undertaking new projects and ventures. The successful implementation of the Group’s future plans is depet1dent on strategic planning with CSC, the approval from the relevant authorities and shareholders (if required) required for the said projects and ventures and its ability to meet other barriers or issues. Although the Group and CSC will exercise prudence and conduct feasibility studies prior to making any decision on the Group’s future plans, there can be no assurance [hat such future plans would always be successful and profitable and that its implementation might not be delayed and it will not have a material adverse effecl on the performance ofthe Group. 19, POLITICAL AND ECONOMIC CONSIDERATIONS Given the natnre of the industry in which the Group operates, its operations are closely linked to the political, economic and regulatory conditions in Malaysia, China, EU and USA where the majority of lhe major iron and steel industry players are located, and any other countries which the Group exports 10. My adverse developments or uucertainties in the political, economic and regulatory conditions in Malaysia, Chma, EU and USA and any other countries 10 which lhe Group exports to or proposes to export to may materially and adversely affect the perfonnance of the Group. These include, but are not limited to, risk of war, riots, expropriation, natlonalisation. renegotiation or nullification of existing contracts and arrangements, global economic downturn and unfavourable changes in governmental policy such as changes in Interest rates, inflation rate and methods of taxation, imposition of tariffs and duties and any other governmental policies, currency exchange conh’ols and changes in regulations or other legal, administrative, political, economic or social developments. There can be no assurance that any change to these factors will not have a material adverse effect on the Group’s business and perfonTlance. 20. PROFIT ESTIMATE AND FORECAST This Prospectus contains the consolidated profit estimate and forecast of the Group for the financial years ending 30 November 2004 and 2005 respectively that were prepared based on assumptions that are subject to uncertainties and contingencies which the Directors of the Company believe 10 be reasonable. Owing to the inherent uncertainties underlying the consolidated profit estimate and forecast and given that events and circumstances may not occur as expected, there can be no assurance tha[ the consolidated profit estimate and forecast contained in this Prospectus will be realised and actual results may be materially different from the consolidated profil estimate and forecast. [nvestors are deemed to have read and understood the assumptions aud uncertainties underlying the consolidated profit eSlimate and forecast contained herein. IV. RISK FACTORS (CONT’D) 21. FORWARD LOOKING STATEMENTS
Certain statements in this Prospectus are based on historical data which may not be reflective of the future results and others are forward looking in nature which are subject to uncertainties and contingencies. All forward looking statements are based on estimates and assumptions made by the Directors of the Company and although believed to be reasonable, are subject to known and unknown risks. uncertainties and other factors which may cause the actual results, perfonnance or achievements to diner materially from the future results, performance or achievements expressed or implied in such forward looking statements. Such factors include~ among others, general economic and business conditions, competition, the impact of new laws, regulations or tariffs and duties affecting the Group and the industry, changes in interest rates and changes in foreign exchange rates. In light of these uncertainties, the inclusion of forward-looking statements in this Prospectus should not be regarded that the plans and objectives of the Group will be achieved. 22. DELAY IN OR FAILURE OF THE LISTING The Listing exercise is exposed to the risk that it may be delayed Ot failed should the
following events occur: (i) the Underwriter exercising its rights pursuant to the Underwtiting Agreement and discharges itselffrom its obligations thereunder;
(ii) the Company is unable to meet the public spread requirement, that is, at least 25% of the issued and paid-up share capital of the Company must be held by a minimum number of 1,000 public shareholders holding not less than 100 OHB Shares each, upon completion of the Initial Public Offering and at the point of Listing; or
(iii) the pennission of Bursa Securities to deal in and for the lisling of and quotation for the entire issued and fully paid-up share capital of the Company, including the OtTer Shares, which are the subject of this Prospectus, on the Main Board of Bursa Securities is not granted within the prescribed timeframe as mentioned in Section I of Part TIl of this Prospectus. Althongh the Directors orthe Company will use their best endeavouts to ensure d,e timeliness and success of the Initial Public Offering and Listing, no assurance can be given that the Company will be successfully listed on the Main Board of Bursa Securities. 23_ ENVIRONMENTAL RISKS The OHB Group’s ptoduction process involves the dischatge of treated water, schedule waste and gaseous waste. However, various forms of environmental friendly steps have been taken by the Group to minimise the effects of the discharge mentioned above. For the schedule waste, the Group has arrangements with contractors approved by the DOE, for example Kualiti Alam Sdn Bhd, Associated Pan Malaysia Cement Sdn Bhd (a member of the Laf.rge Malayan Cement Berltad group of companies) and othet licensed contractors for the disposal of substances and materials under a scheduled waste transportation and treatment progranune. Other environmental measures taken towards treated water, water gas (chil1U1ey emission) and factory air quality are pursuant to a monitoring programme by an accredhed laboratory as part of the Group’s Post Environment Impact Assessment activities. In addition, the Group has appointed Perunding Utama Sdn Bhd as theit environmental consultant to advise on the environmental monitoring report to be submitted to the DOE for the monitoring and effective enviromnental management of the Group’s factories. This is in line with the increasing awareness for environmental conservation. Howevet, in a letter dated 12 March 2002 and II July 2003 issued to Omasteel from the DOE, Omasteel is said to have breached the Third Schedule (Parameter Limits of Effluent of Standards A and B) under Standard B of the Environmental Quality (Sewage and Industrial Eftluents) Regnlations 1979 by exceeding the prescribed concentration amount of 100 IV. RISK FACTORS rCONT’D) milligrams per litre (“mg!l”) of chemical oxygen demand (“COD”). If found 10 be in breach, Seclion 31 (3) of the Environmental Quality Act 1974 provides that the person shall be liable to a tine not exceeding RM25,OOO or to imprisonment for a period not exceeding lwo years or to both and to a further fine not exceeding RMI,OOO a day for every day thaI the offence is continued after service of the notice of such breach. Omasteel had in its letters to the DOE dated 5 April 2002 and 28 July 2003 responded that the results from Omasteel’s internal testing including external testing by a third party, ES Laboratories (M) Sdn Bhd showed tllat the COD content in the past and presenl had been cnnsistently below 100 mgt!. Ornasteel had further explained that Omasteel uses a treaUllem method which results in a product containing high chloride which could adversely affect the test readings if mercury sulphate is not used in treating the COD release prior to taking the readings. The DOE had responded in a letler dated 3I July 2004 requesting fOT a meeting with Omasteel to discuss the dispute in treatment method. Pursuant to such meeting held on 6 August 2004, the DOE had in its letler daled 9 August 2004 requested for a test report in respect of the faclory effiuents of chloride from an accredited laooratory within a period of one week from 9 August 2004. Omasteel had in its leiter dated 27 August 2004 responded, providing such analysis report on chloride from Applied Chemie Sdn Bhd (formerly known as Applied Chemie Consultancy (M) Sdn Bhd) (“ACSB”) accompanied with an explanation that the one week’s deadline was not met as a result of Omasteel having received the Ie tier from the DOE dated 9 August 2004 on 18 August 2004 and Omasteel having had to collect various samples over a period of a few days for the testing by ACSB. Further to such correspondence from Omasteel, lhere has been no response from the DOE. Further, the “‘Environmental Monitoring Report” covering the period from January to December 2003 prepared by Perunding Utama Sdn Bhd showed that the quality of water discharged from the Group’s factories fully complied with the DOE’s requirements. The “Environmental Monitoring Report” was duly submitted by Perunding Utama Sdn Bhd to the DOE on 26 March 2004. The Group will continue to ensure compliance with requirements of the governmental environmental enforcement and regulatory agencies. However, there can be no assurance that there would not be any future environmental issues, which could materially and adversely affect the Group’s operations. 24. APPROXIMATE GAP BETWEEN THE PRICE DETERMINATION DATE AND TRADING OF OHB SHARES The OHB Shares offered in this Prospectus will not commence trading on Bursa Securities until approximately 15 Market Days after lhe Price Determination Date. Investors will not be able to sell or otherwtse deal 10 the OHB Shares (except by way of book entry transfers to other CDS accounts in circumstances which do not involve a change in beneficial ownership) prior to the cOlTunencement of trading on Bursa Securities. As such no assurances can be given that there will be no changes in the global, regional and/or the Malaysian market conditions which may affect tbe price of OHB Shares during this period. 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