MISC Annual Report 2018

Dear Valued Shareholders, On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of MISC Berhad and its subsidiaries for the financial year ended 31 December 2018. 50 TH ANNIVERSARY 1968-2018 We mark our 50 th anniversary this year, and as MISC Group Chairman, I have the honour of surveying our progress since 1968. I am very proud of the growth we have achieved and the value we have created on our remarkable journey. Our accomplishments over the past five decades are rooted in the dedication and passion of our people at sea and shore, who uphold the highest standards of excellence in everything that we achieve, and are committed to consistently doing things better as we strive in moving energy to build a better world. INDUSTRY DEVELOPMENTS MISC Group, like other industry players, had to contend with challenging market conditions in 2018. There were continued headwinds across all shipping sectors as vessel oversupply persisted. It was one of the most difficult years in recent history for petroleum shipping, although Liquefied Natural Gas (LNG) shipping recovered from a lacklustre start to end the year on a stronger note, as demand for vessels picked up. There were also some positive developments in the upstream oil and gas industry which started to show signs of recovery. For the first time since the oil price crash of 2014, there was a return of confidence in new upstream investments. Many oil and gas majors increased capital expenditure and there were rising numbers of tenders for upstream projects. FINANCIAL PERFORMANCE Over 2018, MISC Group made progress in several key areas of our strategic MISC 2020 Journey, capitalising on our healthy balance sheet and the inputs of our talented workforce in consistently providing better solutions and services. For the first time since 2015, the Group secured over USD900 million worth of projects, in terms of capital expenditure, with most contracts in new and developing markets outside Malaysia. MISC also registered the strongest credit rating in the global maritime sector. In light of mixed industry trends last year, our financial performance for 2018 was commendable, but weaker than 2017. For the financial year ended 31 December 2018, the Group revenue was RM8,780.3 million down 12.8% from the previous year. The Group’s Profit Before Tax (PBT) was RM1,344.1 million, a drop of 32.9% over the previous year’s PBT of RM2,003.6 million. Group balance sheet remained healthy with reported registered cash, deposits and bank balances of RM5,755.6 million as at 31 December 2018, lower than 2017’s figure of RM5,900.7 million. Following an increase in total borrowings the Group’s net debt-to-equity ratio increased to 0.20 from 0.16 in 2017. The Group’s Earnings Per Share dropped to 29.4 sen in 2018 from 44.4 sen in the prior year. For the year ended 2018, profit attributable to the equity holders of MISC was lower by about 33.8% at RM1,311.5 million from RM1,981.5 million in 2017. Your Board of Directors remains committed to pursuing a balanced policy of generating meaningful dividend yield on a sustainable basis. In 2018, we were able to maintain our dividend at a comparable level to recent years, in spite of our weaker financial performance. In respect of the financial year ended 31 December 2018, a total of 30.0 sen per share of tax exempt dividend amounting to RM1,339.1 million was declared on a quarterly basis, consistent with the total dividend declared for the financial year of 2017. UPHOLDING RESPONSIBLE CORPORATE PRACTICES MISC’s Board of Directors is ultimately accountable and responsible for the affairs and business of MISC Group, and in order to discharge these responsibilities, we met regularly over the year. Two particular areas of focus were the evaluation of investment proposals in terms of rationale and risk assessment, and continuous improvement in best practice in corporate governance. We have a consistent commitment towards upholding and implementing the highest standards of corporate governance as well as robust risk management and internal control measures throughout the Group. IN APPRECIATION I would like to take this opportunity to thank all of our stakeholders for your support over the year. Firstly, I would like to convey my utmost gratitude to our business partners and customers for their trust and confidence in MISC Group’s ability to deliver and excel. My heartfelt appreciation also goes out to our loyal and diligent management team and all employees who work hard to navigate our course in such a demanding and volatile industry. To my colleagues on the Board, thank you for your continued wise guidance in helping us steer through rough waters and remain focused on our longer term ambitions. At this time, I would like to pay tribute to Datuk Manharlal Ratilal (Datuk George Ratilal), a Non-Independent Non-Executive Director of MISC Berhad, who resigned from the Board on 1 November 2018. Datuk George served for more than seven years and was Chairman of the Board from 2011 until 2015. I thank him for his far-reaching insights and significant contributions to the sustainable success of MISC. Please join me in welcoming Dato’ Rozalila Abdul Rahman, who joined the Board as an Independent Non-Executive Director, and Tengku Muhammad Taufik, who joined the Board as a Non-Independent Non-Executive Director, on 1 August 2018 and on 15 November 2018 respectively. We certainly look forward to their insights and contributions. Last but not least, I wish to extend my deep appreciation to our shareholders for your continued loyalty and faith in MISC over another challenging year. We ask for your ongoing support as we deepen our resolve to pursue our agenda of sustainable growth and expansion into new global markets. We believe that the commitment and dedication of our people, fuelled by their unwavering passion, leads to greater possibilities ahead. Together, we will continue using our agility and resilience to collaborate towards creating a thriving sustainable future for MISC. DATO’ AB. HALIM MOHYIDDIN Chairman 14 March 2019 CHAIRMAN’S STATEMENT of 30 sen per share Consistent Dividends 29.4 Earnings Per Share sen RM8.78 billion Revenue $ DATO’ AB. HALIM MOHYIDDIN Chairman 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 85 MISC BERHAD ANNUAL REPORT 2018 84