MISC Integrated Annual Report 2020

HAZRIN HASAN Managing Director and CEO, MISC Maritime Services Sdn. Bhd. (MMS) MISC Maritime Services (MMS) started the year positively in January 2020 with the official recognition from the Oil Companies International Marine Forum (OCIMF) which granted MMS membership in the organisation. This important milestone signified our successful transition from a subsidiary of PETRONAS to one of the three key enabling businesses of the MISC Group. The OCIMF membership has augmented our ability to conduct independent assurance and compliance exercises, and significantly strengthened our market proposition. However, from the first quarter of 2020 onwards, our business was not spared the impacts of the COVID-19 pandemic. As a significant portion of our business operations is heavily reliant on our inspectors travelling to perform vessel inspections, the travel restrictions and border closures imposed as a result of the COVID-19 pandemic posed a huge challenge. We mitigated the risks and responded PORT MANAGEMENT & MARITIME SERVICES MANAGING DIRECTOR AND CEO’S REMARKS to the disruptions in a timely manner by engaging local third-party inspectors and conducting inspections remotely, among other measures. As an ‘essential services’ sector, all our port and terminal operations as well as our Marine Assurance segment pursued business as usual under the new normal in line with the stringent standard operating procedures (SOPs) announced by the government and relevant ministries. MMS continued to create value for our stakeholders by delivering all our contractual obligations to our clients in 2020. MMS’ key strength is our people, as the main drivers of our growth through the provision of top-class port management and maritime services. Our workforce demonstrated exemplary teamwork during the year, to persevere through a challenging operating environment. Despite the challenges and health risks, MMS’ very own front liners comprising our inspectors, pilots, loading masters, marine controllers and all our port operators, continued to work to ensure that operations and inspections were conducted efficiently and safely without any interruption. As a result, we were able to sustain our profitability levels, despite revenue declining by around 6% during the year, as demand for oil dropped significantly on the back of the pandemic. Despite the lower revenue, we succeeded in exceeding our annual profit target. We protected our profitability by effectively mitigating against identified risks, to drive cost optimisation across our operations. Leveraging on the strong relationships we had built with our clients and contractors over the years, we implemented cost optimisation initiatives that benefited both MMS and our partners. During the year, a number of our clients extended their contracts, a testament of their trust and satisfaction with the quality of the services we provide. In addition, we are indeed proud of our achievement in expanding our client base beyond the PETRONAS Group and securing new contracts with several third-party clients. This augurs well for our future business growth as we seek to expand our base of clients. A key element which drove our success in a difficult operating environment was our ability to accelerate the digitalisation of our operations and processes. This served as a key enabler of our ability to deliver a high level of services to our customers in an efficient and timely manner, in line with our mission to exceed customers’ expectations. We successfully launched our mobile-based application for the Vessel Inspection System (VIS) and the Offshore Support Vessel Inspection System (OSVIS). These applications have enabled our inspectors to provide quicker turnaround times on their reports and added value for our clients who can check for updates on the status of their vessels at their own convenience in the palm of their hand via either their mobile phones or tablets. A historic first for us was Sungai Udang Port Sdn. Bhd. (SUPSB) successfully managing Southeast Asia’s first LNG bunker vessel (LBV) operations for the Avenir Advantage , which was commissioned at the regasification terminal (RGT) unit at Sungai Udang Port with the help of our pilots and mooring master. This marks the start of many more LNG bunkering activities, and gives us a significant edge over our regional competitors. In a year when HSSE has been of paramount importance, MMS continued to uphold safety as our top-most priority. We closely engaged with both internal and external stakeholder groups to enhance the safety culture at our port and terminal operations. We successfully organised the first virtual Contractor HSSE Awards in July 2020, with more than 100 participants attending the online event. Our continuous engagements with our vendors and suppliers are a key component of our excellent safety culture. As a result, for the first time in five years, we achieved zero Total Recordable Case Frequency (TRCF) in 2020. In November 2020, MMS through SUPSB was named as the Malaysian Society for Occupational Safety and Health’s (MSOSH) OSH ‘Gold Class II’ Award winner under the category of Petroleum, Gas, Petrochemical and Allied Sectors. This is our first attempt at participating in the MSOSH Awards programme, and the award symbolised our hard work and proven outstanding track record in maintaining the highest levels of Occupational Safety and Health (OSH) performance at the workplace. Our commitment to practice green initiatives at our offices were recognised by Green Seal Inc. which certified MMS as a Green Seal Green Office Partner for all of our operating locations in Malaysia. This certification demonstrates our leadership in creating more sustainable workplaces. As we embark on the MISC Sustainability Strategy 2021–2025, MMS is committed to ensuring responsible and sustainable maritime practices. We plan to focus on protecting marine biodiversity, and have crafted the Five-Year MMS Marine Biodiversity Programme for the conservation of sea turtles. We have embarked on an employee environmental volunteerism programme for our people to undertake a hands-on approach in protecting marine life in order to instil a greater sense of responsibility and appreciation for marine biodiversity. We plan to continue the programme once the pandemic is better contained in 2021. Additionally, we will implement the “Hijaukan Pantai Kita” (Green our Beaches) initiative and a Mangrove Planting Programme in the vicinity of the Sungai Udang Port to replant mangrove forests in the area. As we move into 2021, the COVID-19 pandemic looks set to continue to be a challenge to our business. Nevertheless, we have identified several key strategic priorities that will guide our future business development and growth. We plan to intensify efforts to upskill our marine professionals in line with our OCIMF membership, especially in terms of building our in-house marine engineering and maintenance services. We will also be seeking out new business opportunities, such as the provision of engineering maintenance services for SPMs to potential clients. As for our existing lines of business, we have identified several areas of improvements, as well as collaborative business development opportunities we plan to embark on to expand our client base. Having accelerated our transition into the digitalisation of our business and operations, we will maintain our momentum in this space to continue with efforts in Smart Port Operations and Remote Assurance. HAZRIN HASAN Managing Director and CEO, MISC Maritime Services Sdn. Bhd. (MMS) Market Review In 2020, businesses around the world were significantly impacted by the COVID-19 pandemic. With the pandemic, safety has become the top- most priority and several new SOPs had to be put in place in performing inspections as well as port and terminal operations globally. In response to the pandemic, governments throughout the world imposed lockdowns as a countermeasure to stem the spread of the virus. In Malaysia, the restrictions in movement of people resulted in limitations in how vessel inspections providers such as MMS conducted inspection jobs. However, MMS overcame this with the assistance of third-party inspectors located around the world and were able to conduct inspections remotely. The pandemic had also caused oil demand to drastically drop, which in turn led to the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) reducing crude oil production to counteract the oversupply of oil in the market. This had a direct impact to the port and terminal operations such as MMS as it limited the number of crude and condensate liftings that could be performed. ///// Sustainability / Financial Review / Business Review / Leadership / Governance /// MISC Berhad / Integrated Annual Report 2020 7 180 MISC Berhad / Integrated Annual Report 2020 7 181 /// Governance / Leadership / Business Review / Financial Review / Sustainability ///// Section Section