MISC Annual Report 2018

MARKET REVIEW The year 2018 proved to be a challenging year for tanker owners as depressed tanker charter rates continued to persist due to tonnage oversupply in the Petroleum and Product Shipping market. Meanwhile, in the LNG market, buyers are increasingly seeking shorter and more flexible contracts which may lead to future supply challenges. Additionally, the upcoming regulatory requirements such as the Ballast Water Management Convention as well as the International Maritime Organisation (IMO) 2020 Sulphur Cap will require further investment that will place further burden on shipowners financially with respect to capital expenditure and higher operating costs. These unfavourable market conditions and new regulatory requirements have put increasing pressure on ship managers to optimise ship operating costs to enable owners to remain competitive. KEY DEVELOPMENTS 2018 Since our successful integration a year ago, Eaglestar has been leveraging upon common synergies, harnessing the resources and experience of both units to drive cost and management efficiencies, improve employee training and progression to better serve key vessel segments in various markets whilst exploring new technologies in developing green solutions. As a technical solutions provider to the fleets that we manage, we continuously explore new optimal solutions, leveraging upon our relationship with industry leaders in ensuring the best outcomes are in place and in compliance with all regulations. For the year under review, Eaglestar was recognised as the ‘Safety Conscious Employer/ Ship Operator of the Year’ at the IHS Markit Safety at Sea Awards 2018 in London. This prestigious award applauds the employer/ship operator’s commitment to high standards of safety and excellent working practices which sets them apart from other industry players. Additionally, Eaglestar was shortlisted as a finalist under three categories for the Safety at Sea awards, as a mark of recognition of our continuous effort to improve safety practices and standards across the shipping industry. Eaglestar also successfully maintained a high overall vessel availability rate of 99% for our LNG, petroleum and product fleets for the year. These rates surpassed industry benchmarks across all segments of the shipping sector. On top of this, Zero Lost Time Injury of over 880 days were recorded from 3 August 2016 up to the end of 2018. Complementing the Group’s innovative sustainability agenda in operating the newly delivered LNG Dual Fuel Propulsion Aframaxes, Eaglestar has invested in developing more than 50 employees in 2018 with the capabilities to manage this new technology. In another growing segment, continuous effort has been put in to build internal capabilities to support the expansion of our dynamic positioning shuttle tanker (DPST) fleet to meet future demands, creating value for the organisation as well as seafarers personal growth. To further enhance the capabilities of our employees, in collaboration with Akademi Laut Malaysia (ALAM), a structured multi-skilling program for deck and engineer officers was developed, laying the foundation for future officers to be capable of operating LNG, petroleum and product tankers. MOVING FORWARD While there appears to be signs of recovery, market conditions for shipowners continue to remain challenging in 2019, with depressed charter rates exerting pressure on ship operating costs. Against this challenging backdrop, we have set our sights on implementing strategies and initiatives focusing on the delivery of superior performance, cost optimisation and operational efficiency to ensure that we remain competitive whilst complying with all existing regulations. From these strong foundations, we are poised to provide a full suite of shipmanagement services to external customers who share our aspirations towards performance excellence, human capital development and sustainability. MANAGEMENT DISCUSSION & ANALYSIS INTEGRATED MARINE SERVICES RISKS & IMPACT KEY MITIGATION Non-compliance with new regulations, including ballast water management convention and IMO 2020 Sulphur Cap could result in possible penalties or legal action Management is implementing a full compliance plan to install required equipment and prepare ship crews to operate under the new regulations Major marine incident, fatality or serious injury involving any of our operations, resulting in loss of life, environmental damage, downtime or reputational damage Compliance with all relevant health and safety legislation and our own policies and processes which are monitored and overseen by the Group Health, Safety, Security and Environment Council HIGHLIGHTS OF THE YEAR OUR BUSINESS OUR LEADERSHIP OUR PERFORMANCE OUR COMMITMENT TO SUSTAINABILITY OUR GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 50 TH ANNUAL GENERAL MEETING 119 MISC BERHAD ANNUAL REPORT 2018 118