MISC Integrated Annual Report 2020

Introduction / Who We Are / Key Messages / Highlights / Strategic Review //////// MISC Berhad / Integrated Annual Report 2020 36 MISC Berhad / Integrated Annual Report 2020 37 //////// Strategic Review / Highlights / Key Messages / Who We Are / Introduction 2 2 Section Section CHAIRMAN’S MESSAGE Dear Valued Shareholders, On behalf of the Board of Directors, it is my honour to present to you the Integrated Annual Report and Audited Financial Statements of MISC Berhad and its subsidiaries for the financial year ended 31 December 2020. This is my inaugural year as the Chairman of MISC Berhad and I look forward to an exciting journey together with my fellow Board members to steer MISC’s value creation in the years to come. “ “ VOLATILE EXTERNAL ENVIRONMENT The year 2020 certainly proved to be one of the most challenging years in recent history as the global community reeled from the fallouts of the COVID-19 pandemic. This ongoing crisis is different from anything the world has experienced in over a century. While the road ahead will still be bumpy, there is reason for optimism in 2021. Worldwide lockdowns that were imposed to contain the spread of the virus has caused a sharp global economic downturn, arguably the worst since the Second World War. With demand for oil facing a slump, oil prices plunged. This in turn led to large cuts in oil exploration and production CAPEX, and in many instances, cancellation or deferment of new projects by major oil companies. Petroleum tanker rates were extremely volatile in 2020, surging in the first half of the year, but then tumbling around the middle of the year and remaining depressed thereafter as the seasonal peak winter demand for oil and tankers did not materialise as in the past. With LNG however, carrier spot rates initially declined, but recovered with the return of seasonal winter peak demand towards the end of the year. COMMENDABLE PERFORMANCE IN A CHALLENGING YEAR Faced with the unstable market conditions, the Group’s strategy of focusing on long-term charters for most of its assets shielded it from the market volatility and improved its resilience. MISC’s revenue rose by 4.9% to RM9,401.2 million for the financial year ended 31 December 2020 (FY2020) as compared to the previous financial year. However, the Group reported a loss before tax of RM123.6 million compared to a profit before tax of RM1,512.3 million in FY2019. This was mainly due to the unfavourable decision on arbitration proceedings by Gumusut-Kakap Semi-Floating Production System (L) Limited (GKL) against Sabah Shell Petroleum Company Limited (SSPC). This prompted the provision for litigation claims amounting to RM1,049.2 million, as well as a write-off of trade receivables and loss on re- measurement of finance lease receivables of RM846.2 million. Excluding the impact from GKL’s arbitration decision, the Group would have recorded a profit before tax of RM1,771.8 million which is 17.2% higher than FY2019’s profit before tax of RM1,512.3 million. Notwithstanding the loss, MISC’s cash flow generated from operating activities for FY2020 of RM5,587.9 million was in line with RM5,579.1 million recorded in the corresponding year. This was mainly due to the steady cash flow generated from the Group’s portfolio of long-term contracts. The Group’s balance sheet remains healthy. In line with our commitment to provide sustainable distributions to shareholders, the Board has approved and declared a total tax- exempt dividend of 33.0 sen per share in respect of FY2020 which was consistent with the total dividend declared and paid in the previous year. The Group has made notable strides in expanding its footprint into new markets, developing new solutions and diversifying its portfolio. During the year, the Group secured USD2.8 billion worth of CAPEX in long-term projects. With international oil majors as a part of MISC’s portfolio of long- term clients, the projects that have been secured are testament to MISC’s reputation as a competitive global energy and maritime solutions provider that conducts itself according to the highest industry leading standards. PEOPLE-CENTRED ORGANISATION As reflected in the theme ‘People, Passion, Possibilities’, MISC is a people-centred organisation that places great value on its diverse, high- performing and skilled workforce of over 8,000 employees from more than 40 nationalities working around the world at sea and shore. In an extremely difficult year where COVID-19 has dramatically changed the way we live and work, it is the people that kept the Group moving forward, employing ingenuity and agility in overcoming the various challenges and rising to the occasion in order to sustain its trajectory. For that, I must applaud the people of MISC for their commitment and tireless efforts. I believe that it is important for MISC to continue its efforts in building a resilient and dynamic workforce that is able to strive and thrive together in any challenging situation in the future.