MISC Annual Report 2019

WAN MASHITAH WAN ABDULLAH SANI Managing Director/CEO, Malaysia Marine and Heavy Engineering Holdings Berhad We will remain resilient in strengthening our core business and shall continue expanding strategically into new opportunities 2019 was a breakthrough year for MHB as we managed to swing back to profit in the fourth quarter of 2019 after seven quarters in the red. Our success was attributed mainly to the hard work and dedication of our people and the preparations that we undergone over the past few years. The year under review was meaningful as we replenished our Heavy Engineering orderbook with new contract awards such as the Kasawari Gas Development project and Bekok Oil project, both from PCSB. We were also awarded the Bergading project from Hess Exploration and Production Malaysia B.V. under the six-year PETRONAS Frame Agreement that was awarded to us in late 2018. On the marine side, MHB served 24 new clients, mainly from overseas. We have secured four en bloc agreements throughout the year as part of the 86 projects secured. The completion of our third dry dock will enable us to compete head on with Singapore in securing more marine jobs. We also managed to further strengthen our presence via the contract award for an FSO facility and the construction of its external turret for the Sao Vang and Nguyet Development Project, offshore Vietnam in 2019. Our efforts to diversify our income stream bore fruit when we were awarded with the Master Service Agreement for Integrated Turnaround and Mechanical Maintenance for PETRONAS refinery in Melaka. The main challenges in 2019 were to follow through on the plans that we developed three years ago in order to grow and sustain the business and also strengthen our workforce to enable us to compete internationally and to satisfy the requirements of our existing and new clients. To overcome those challenges, we have been working intensively on our transformation internally to increase our competencies and capabilities while aggressively going for new markets and new frontiers. Despite being in a challenging environment in the last three years, our perseverance has paid off as we ended the year on a positive note. We continued with our pursuit to strengthen our business portfolio into the year as part of our long-term strategy to sustain the existing business and have been relentlessly exploring opportunities on the domestic and international front in our effort to diversify our business. While project-centric Asia Pacific remained highly prospective, we noted a rise in 2019 for potential projects in North America, the Middle East and locally where we shall continue to focus on our construction and fabrication business expansion. Equally important for us is acquiring new business with our fabrication capabilities, which includes venturing into offshore wind farm fabrication. As offshore wind farms gain momentum in the global quest for renewable energy, we continued to engage with targeted offshore wind farm EPC contractors and technology providers to position ourselves as a reliable subcontractor to the awarded main contractors. In relation to our strategy to manage cost and process efficiency, we also continued to explore ways to increase our operational efficiency and project management effectiveness. We believe that the implementation of initiatives in 2019 to reinforce internal process control and strengthen project planning will facilitate tracking of project progress and expedite identification of potential risks to prevent operational setbacks. We saw the market picking up with the increased level of bid activities in 2019, which ended with our 2019 orderbook being at a healthy level. We are hopeful that this will be a good start and that our orderbook will continue to grow as we progress. We recognise that our people are one of our most valuable assets and their development is key to operational excellence. In order to nurture skilful and competent project management team for quality project execution, various training programmes were conducted to empower them throughout the year. Capability development of our people was also one of our key focus areas for 2019. HSE remained one of our utmost priorities in our business. We stayed committed to ensuring all HSE procedures are in place and in line with regulations and safety standards. We went forth to conduct various initiatives and awareness campaigns ranging from occupational safety to promoting employees’ healthy lifestyle in general throughout the year. The market is gradually seeing an uptick and we believe that we have enough work in the pipeline for 2020. We will strive to tap into the opportunities while ensuring timely delivery of ongoing projects. Market Review Oil prices registered the largest annual gain in three years despite trading within relatively narrow price ranges, with no sharp spikes throughout 2019. Echoing the recovery in oil prices, we saw several sanctioned offshore projects being implemented as planned. Nevertheless, the volatile nature of the market was not discounted, and we instead chose to maintain a cautious and vigilant stance in our spending throughout the year. The imminent implementation of the IMO 2020 sulphur cap regulation caused a stir in the marine industry which resulted in most shipowners resorting to cost optimisation measures by cutting their dry docking budget in favour of preparations to meet the requirements by the end of 2019. Meanwhile, LNG trade expansion continued with transition from local and bilateral trading flows to regional and global markets. While overall LNG consumption is expected to be further concentrated in the Asia Pacific region, the trend towards diversification of consuming countries will continue. My aspirations for the coming year are to improve our performance, for the team to deliver on the execution, efficiently and professionally, and to be able to move the company forward. We will remain resilient in strengthening our core business and shall continue expanding strategically into new opportunities. With the right strategy in place and a capable team to execute it, I am certain we will be able to deliver our commitments to our clients and maximise value for everyone. WAN MASHITAH WAN ABDULLAH SANI Managing Director/CEO, Malaysia Marine and Heavy Engineering Holdings Berhad Key Developments In 2019, our Heavy Engineering segment successfully completed and delivered several offshore projects such as the Gumusut-Kakap Phase II Extension Subsea Manifold project for TechnipFMC and the Tembikai Non-Associated Gas Offshore Wellhead Facilities for both topside and substructure. Both contracts were completed on schedule with zero lost time injury (LTI). The hook-up and commissioning works for the Tembikai project are in progress and targeted to complete in the second quarter of 2020. For onshore projects, we also successfully completed the construction and commissioning of steel structure, piping, mechanical equipment, electrical and instrumentation erection, insulation and painting works for the RAPID project Package 14 for PETRONAS Refinery and Petrochemical Corporation and electro-mechanical works for RAPID Package 3 Area 2 for Tecnicas Reunidas Malaysia Sdn. Bhd. Both onshore projects were completed as scheduled with zero LTI. Management Discussion & Analysis Marine & Heavy Engineering M A N A G I N G D I R E C T O R / C E O ’ S R E M A R K S 111 110 OUR BUSINESS PERFORMANCE MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019