Integrated Annual Report 2021

STRATEGIC REVIEW OUR OPERATING ENVIRONMENT 2021 was a year that saw the world confronting the impacts of a protracted pandemic, bringing pressing social and economic issues to the fore. Markets remained volatile and business, mobility and supply chain disruptions continued as the norm within the energy and shipping landscape that MISC operates in. We took into account the implications of short and medium-term trends as we executed our five-year rolling business plan to strengthen our core by maximising cash from our existing assets while accelerating our diversification into new asset classes and commercialising future options to sustainably generate cash for the Group. Signs of longer-term trends became more prominent, one of them being greater attention on climate-related risks and opportunities across the energy and maritime value chain. Coupled with the acceleration of automation and digitalisation, we are seeing the evolution towards a new maritime future. We are cognisant that we need to address the threats and risks that come with these longer-term trends that are pointing to a decarbonised future. At the same time, there are new opportunities that MISC can take advantage of as we transition into a value creating business in a net-zero and circular economy through the execution of our longer-range MISC 2050 strategy. SHORT AND MEDIUM TERM (< 5 years) ROAD TO RECOVERY In 2021, the COVID-19 pandemic took the world on a roller coaster ride as daily cases fluctuated throughout the year. Multiple waves of infections that appeared, even with increasing global vaccination rates, caused governments to continuously reassess and amend their policies and procedures. Still, the global economy rebounded strongly in 2021 amid easing of movement and business restrictions, bringing the global real GDP growth back to positive at 5.9%. However, the recovery was uneven primarily due to the global supply chain crisis, geopolitical tensions amid the energy crisis and slow-paced vaccine distribution to the least developed countries. Outlook and Opportunities After the robust recovery in 2021, global GDP growth is expected to moderate in 2022 amidst continuing uncertainties surrounding the COVID-19 pandemic. Rising inflation rates in major economies is putting pressure on central banks to raise interest rates. This could rattle financial markets and tighten financial conditions globally. Meanwhile, experts have forecast that the global supply chain disruption could prolong for another two years, making economic recovery even more difficult. Implications to MISC • MISC has demonstrated resilience throughout this pandemic. Our approach of securing long-term charters and other sources of secured revenue with strong counterparties has been the cornerstone of our ability to generate sustainable and recurring income, even during uncertain periods such as this. Further, the Group’s diversified portfolio of businesses provides a strong shield against market volatility. • From a health and safety aspect, we have remained vigilant and continuously implemented all necessary pandemic mitigation measures. • While mindful of the risks as the world continues its recovery path, MISC is positioned for growth. The visibility of our cash flows from operations allows us to confidently plan our growth to meet our strategic goals, regardless of the economic backdrop. Material Matters Risks Business disruption Business cyclicality 1980 7 5.9 6 5 4 3 2 1 0 -1 -2 -3 -4 1990 2000 2010 2020 World real GDP growth (%) Source: IMF MISC Berhad 68 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 69