FUTURE OUTLOOK We are expecting a mixed outlook for the global economy in 2015. Countries like the US and the UK are projected to enjoy robust growth during the year. However, not unlike 2014, Europe and Japan are expected to struggle while China grapples with domestic pressure points in its domestic economy. To top this off, geopolitical events are likely to dominate the news front, creating unnecessary distractions for a global economy looking for certainty. In addition, the after effects from the dramatic drop in the oil price since second half of 2014 have yet to be fully felt throughout the Oil & Gas industry globally, let alone its impact on energy exporting countries which had benefited from high oil prices in the past few year s. The economic adjustment towards a low oil price environment will be painful, to say the least. For the shipping industry, the outlook for petroleum shipping is positive as buoyant demand growth continues to support firm freight rates in the absence of aggressive vessel supply growth. Falling oil price has minimal impact on freight rates as rates are directly driven by supply and demand of oil, not oil price. The high global output of oil that has dragged oil prices down, while a bane to the Oil & Gas sector, is a major positive for tanker owners as the barrels produced continue to fuel demand for vessels. We will also enjoy the added benefit of much lower bunker prices compared to yesteryears. However, for LNG shipping, the sector will face challenges due to the oversupply of LNG vessels. While projects which had secured final investment decision (FID) are likely to proceed as planned, there will be many more projects in the pipeline that are likely to be deferred or even cancelled. This will greatly reduce the demand growth for vessels. Nevertheless, we are sheltered from the weakness in charter rates as most of MISC’s LNG vessels are secured against long-term contracts with fixed rates. Unfortunately, the low oil price environment will negatively impact our Offshore and Heavy Engineering business divisions. With the cutback in operating expenditure as well as capital investments, the Oil & Gas sector as a whole is bracing itself for a period of limited opportunities. Hence, under this lacklustre atmosphere, efforts have to be intensified to develop creative yet economical offshore product substitutes that are of value and interest to our customers, despite low energy prices. It has been a while since the Group can afford to pursue a growth agenda as our resources in the past few years h a v e b e e n d e d i c a t e d t owa r d s withstanding the economic pressures from a shipping industry in recession. I am very glad to say that we have put all these behind us. Moving forward, with our much improved financial means, it is imperative that we renew our focus on growth. I believe, r e g a r d l e s s o f a n y e c o n om i c c i r cums t ances , we need to put ourselves in a position to exploit any valuable growth opportunities. And ready, we shall be. We often forget that MISC is essentially a service provider in the global maritime and Oil & Gas sectors. This means our greatest asset is our people. More so than our vessels and hard assets. Without the commitment and faith of our employees, I do not believe we would have been able to display the resilience that has carried us through the past few difficult years. Hence, our commitment towards deve l op i ng our peop l e rema i ns steadfast as we continue to upgrade our skill sets and suite of capabilities. We will also continue to focus on talent management and succession planning as we build the right bench strength of MISC leaders for the future. I would like to take this opportunity to acknowledge and thank our former Chairman, YBhg. Datuk George Ratilal, for his advice and guidance to the management as we braved through the tough years together. In addition, the management and I would also like to record our appreciation to YBhg. Datuk Nasarudin Md Idris who retired as the President and CEO of MISC at the end of 2014. We will continue to build on the foundation that he has laid for us as he steered MISC through the difficult times. We are fortunate that both YBhg. Da tuk George and YBhg . Da tuk Nasarudin will continue to serve on the Board of Directors and we shall continue to benefit from their wisdom and experience. My gratitude also goes out to all other members of the Board of Directors. Your wise counsel has been invaluable to the management and provided us with the confidence to chart our path in the past year. MISC BERHAD - Annual Report 2014 p 78 PRESIDENT/ CEO’S REPORT
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