chairman’s statement MOVING FORWARD INTO 2016 AND BEYOND The International Monetary Fund in its World Economic Outlook, forecasts that global growth will gradually increase to 3.4% in 2016 and 3.6% in 2017 from the current estimate of 3.1% in 2015. In the advanced economies, the modest and uneven recovery is expected to continue, while output gaps are expected to further narrow. The forecast for the emerging markets and developing economies while diverse, is still quite challenging. The slowdown and rebalancing of the Chinese economy, lower commodity prices, and strains in some large emerging market economies will continue to weigh on growth prospects between 2016 and 2017. The outlook for the global shipping sector for 2016 too is muted. Rating agency, Fitch Ratings, expects low-key global trade growth and the economic slowdown in emerging markets to intensify overcapacity, leading to weakening and erratic freight rates. However, performance is expected to differ across the segments, with drybulk and container shipping under pressure, while tanker and LNG shipping are expected to fare better. China’s slower growth and economic transition will pose particularly significant risks for the shipping sector due to its key role in global trade, accounting for twothirds of global iron ore imports and 20% of world coal imports. Shipping companies on the whole are expected to continue implementing defensive measures including costcontainment and rigorous capacity discipline. Their efforts will be helped by lower bunker prices and slow steaming to achieve profitability. Going forward into 2016, MISC expects the Petroleum shipping segment to continue enjoying the benefits of market strength and buoyant freight rates. Even as producers are expected to pump out oil, we will be in a strong position to capitalise on opportunities to move this oil. Despite the challenge of an oversupply of LNG vessels, the LNG shipping segment is expected to continue delivering a steadfast performance on the back of the portfolio of long-term contracts we have in place. We will position ourselves to pursue and expand our third party businesses even as we continue to support PETRONAS’ LNG requirements. However, the outlook and prospects for the upstream Oil & Gas industry is projected to remain poor with the prolonged weakness in oil price. Growth opportunities are expected to become scarcer as competition intensifies. The cutback in exploration and production activities will continue to weigh heavily on our Offshore as well as Marine & Heavy Engineering segments. To mitigate any business setbacks, the Offshore segment will set its sights on inorganic growth by aggressively exploring the addition of opportunistic assets into our fleet. On a positive note, the Marine and Heavy Engineering segment’s marine repair business is expected to perform steadily and to a limited extent, cushion the weak performance of its offshore construction business. Your Board of Directors is confident that from an operational perspective the Group wi l l sus t a i n i t s f i nanc i a l performance for 2016. We will continue to leverage on our strong balance sheet which will undoubtedly serve us well in our renewed pursuit of growth. We have come a long way from the time that we were simply surviving the down-cycle that had plagued the shipping sector since 2009. Today, as we move forward with a reinvigorated Vision, Mission and Tagline and our MISC2020 battle plan, we are in a position to face all challenges and capitalise on any opportunities out there. REDISCOVER I REBUILD I SUSTAIN 48
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