SCC Holdings Berhad Annual Report 2019

10 SCC Holdings Berhad | Annual Report 2019 ANTICIPATED OR KNOWN RISKS Foreign currency exchange fluctuation The Group is exposed to currency exchange fluctuation as most of the Group's purchases are denominated in foreign currencies such as US Dollar. In order to minimise exposure to significant fluctuations in the RM to USD, the Group hedges through foreign exchange forward contracts, options and dual currency investment. Besides that, the risk is also mitigated through natural hedge between sales and purchases in USD, albeit to a limited extent. The Management will continue to closely monitor our foreign exchange exposure by keeping abreast of the economic and political situations of the countries that we deal with. Exposure to credit risk The Group's exposure to credit risk arises primarily from trade receivables. It is the Group's objective to seek continuous revenue growth while minimising losses from impairment and bad debts by assessing and approving credit terms on a case-by case basis after taking into account customer's payment track record, financial standing and length of business relationship and size of transaction. Our collections from customers are closely monitored on an on-going basis by the credit control committee. FUTURE PROSPECTS AND OUTLOOK The Ministry of Finance (MoF) has forecast a growth rate of 4.8% for Malaysia in 2020, spearhead by sound domestic spending of around 38.2% and export of 33.5%. The Economy Outlook 2020 also forecast that the service sector (which includes the wholesale and retail sub-sector) will be one of the main contributors to the nation’s growth backed by robust household spending. SCC had obtained new distributorship of fresh AHPD’s products and will be introduced to the market by second half of 2020 which shall contribute to the division’s long term prospect. Will the awareness of healthy and non- antibiotic livestock farming by both consumers and industries player, we are positively encourage to AHPD’s future prospect. The market is looking at the sustainability products and services with higher interest and as a company whose vision is to bring more green products and solution to the societies, we are heavily promoting cook and chill concepts and products to the markets to reduce food wastages and better time management. This will be a long term projects that while would not generate immediate returns, but it would bring better benefits to the Group for many years to come. However, despite the positive signal from our planned projects anddirection, uncertainties brought by the spread of COVID-19 to the world might impact our progresses and hurt our earnings for the first half of 2020. The recent political confusion and strengthen of US Dollars against Ringgit Malaysia only making the situation more muddy. The Board of Directors would exercise extra caution in conducting their duties during these periods and are optimistic of the Group’s long term prospect. management discussion and analysis (cont’d)