MISC Integrated Annual Report 2020

SHORT AND MEDIUM TERM GLOBAL HEALTH CRISIS In 2020, the world experienced one of the most difficult years in modern history mainly due to the rapid spread of the COVID-19 coronavirus around the globe beginning early in the year. Besides measures such as physical distancing, testing and quarantine, strict lockdowns and travel restrictions became the norm. Source: WHO ECONOMIC RECESSION The lockdowns and mobility restrictions imposed by governments around the world to contain the pandemic resulted in the deepest global recession since the Second World War. As many countries slowly reopened and lifted their lockdowns, the global economy started to recover since mid- 2020 but it has been fragile and uneven. Sources: OECD, IMF Source: IMF 0 5 10 15 20 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Global monthly con rmed cases (million) million Global real GDP growth since 1980 1980 2020 -3.5 2010 2000 1990 -4 -3 -2 -1 0 1 2 3 4 5 6 (%) OUR OPERATING ENVIRONMENT 2020 was an exceptionally challenging year as the world grappled with the cascading effects sparked by COVID-19. The energy and shipping industries in which MISC operates were not spared. The cyclicality and volatility that is characteristic of these industries was evident in 2020, although there are encouraging signs of a recovery in 2021. Peering into the more distant future, we foresee that the maritime industry continues to be a vital cog in global commerce. However, industry players will need to adapt to key long-term trends and technological changes, which present both opportunities and challenges to be tackled. OUTLOOK AND OPPORTUNITIES IMPLICATIONS TO MISC On the positive side, multiple vaccines have been developed at record pace. However, the emergence of new strains of the virus and further waves of infections, combined with a slower than expected vaccine rollout could delay the recovery. Source: WHO Our core businesses have kept operating throughout the pandemic, although the Marine & Heavy Engineering segment was more heavily affected mainly due to the temporary yard suspension and other measures under the government’s Movement Control Order (MCO). We have remained vigilant and continuously implement all necessary COVID-19 mitigation measures. Read more on this topic in our Special Feature: Our Response to COVID-19 on pages 82 to 83 and Marine & Heavy Engineering Business Review section on pages 160 to 169. Material Matters Risks Global GDP is predicted to rebound to around 4%-5% growth in 2021, supported by vaccination campaigns, concerted health policies and government stimulus, but the path remains long and difficult amid many uncertainties. On the positive side, new norms that are based on new technologies, new business models and new paradigms could engender faster productivity growth. There are also areas of opportunity, such as China. As one of the first countries to bring the outbreak under control and ease restrictions, China looks set to retain its position as the growth engine of the world post-COVID. Sources: OECD, Fitch Solutions Despite the turbulent landscape, 2020 turned out to be a banner year for MISC, where we secured projects worth USD2.8 billion in terms of CAPEX, more than double the previous year. This included our maiden deepwater FPSO project in Brazil and our first Chinese charterer, STL, for a long-term charter contract for six VLECs. Even if the economy is not recovering as quickly as forecasted, MISC has, as part of the strategy towards more secured profit, attained a sustainable level of recurring income from our long-term contracts that will enable us to weather through this period. In the meantime, we will be kept busy focusing on executing and delivering the very sizeable contracts that we have won in the last two years, whilst positioning ourselves to take advantage of opportunities that will arise when the market rebounds. Material Matters Risks Despite the short-term outlook being clouded by the ongoing pandemic, the long-term picture remains positive. We continue to monitor the changes in our operating environment and the impact that these have on our business, and we align and define our strategies accordingly to ensure that our business will remain relevant and sustainable in the years ahead, as we continue to deliver on our goal of moving energy to build a better world. Risk management Health and safety Business cyclicality Business disruption Risk management Business cyclicality Business disruption // Key Messages / Highlights / Strategic Review / Sustainability / Financial Review ////// MISC Berhad / Integrated Annual Report 2020 4 70 MISC Berhad / Integrated Annual Report 2020 4 71 ////// Financial Review / Sustainability / Strategic Review / Highlights / Key Messages // Section Section