• Ensures our business continuity and sustains the growth of all other capitals • Majority of capital allocated to operations and maintenance of our fleet and other assets, ongoing project requirements, new capex investments and purchasing new assets • Capex allocations reduce our financial capital in the short term, but builds our physical capital base for longer term growth • Long-term customer contracts for newbuild and purchased assets ensure long-term secured income streams, thus growing our financial capital into the future • Investment in digitalisation and innovation initiatives to drive operational and organisational efficiencies has reduced our financial capital in the short term but will enhance our intellectual capital in the long term • Consisting mainly of our vessel fleet, floating assets, yards and infrastructure • Focused on investments in eco-friendly newbuilds with lower emissions to provide greener shipping solutions towards enhancing our natural capital • By providing clients with an eco-friendly fleet with enhanced efficiency and safety measures, we are improving our customer service, thus boosting our social and relationship capital • Reducing our obsolete physical capital by disposing older assets through green ship recycling initiatives to positively impact our natural capital as well as contributing to energy transition and climate change imperatives for long-term sustainable growth • Investing financial capital to drive our intellectual capital by rejuvenating our fleet with the latest technologies as well as investment in new digital start-ups to build smart ships • Intellectual capital investments are improving our natural capital (lower emission fleet) and enhancing our human capital (new digital knowledge and skills), while boosting our social and relationship capital (improved customer satisfaction) • Reduction in our financial capital in the short term with investment in technical solutions for our floating assets, as well as new technologies for port management, vessel inspections and yard operations • In the long run, the integration of IR4.0 technologies across our maritime value chain will boost our intellectual capital, while internal digitalisation transformations will result in MISC as a data-driven organisation • Our human capital’s capabilities, skills and knowledge drives our intellectual capital • Investing our financial capital in our human capital through salaries, talent development programmes and human capital management in line with our five-year business plan and longer range MISC 2050 strategies • Short-term reduction of our financial capital to sustain our human capital enables us to strengthen the capabilities of our workforce to respond to clients’ needs and exceed customer expectations, thus building our social and relationship capital in the long run • Investing our financial capital to expand our social and relationship capital through stakeholder engagements • Stakeholder engagements are conducted by our employees, thus impacting our human capital through manhours spent • Expenses associated with engagements reduce our financial capital in the short term, but enables the growth of our social and relationship capital in the long term • Our community initiatives give us the social license to operate, our regulatory engagements ensure we comply with all legal requirements, and our industry collaborations enable us to chart new paths towards sustainable future growth, thus continuously building our social and relationship capital into the future to maintain our industry reputation • Industry collaborations focusing on zero-emission vessels and our community-based environmental programmes positively impact our natural capital • The growth of our social and relationship capital ultimately contributes to increasing our financial capital growth as we maintain and grow our customer base • Our physical capital’s emissions and waste have a negative impact on our natural capital • Towards improving our natural capital, and in line with energy transition, climate change and industry decarbonisation, we have in place MISC’s commitment towards net-zero GHG emissions by 2050 and the MISC 2050 longer range strategy to explore opportunities in the renewable energy and waste-to-value value chains • Efforts towards improving our natural capital will reduce our financial capital in the shorter term, and impact on our human, intellectual and physical capital • Improvement of natural capital will heighten our social and relationship capital, as MISC gains an industry reputation as energy mover that is committed to a sustainable and green future OFFSHORE OIL PRODUCTION AND STORAGE • Our floating assets processed and stored approximately 64.4% of Malaysia’s crude oil (2021: processed and stored 64.4%) HOW WE CREATE VALUE STRATEGIC REVIEW MISC Provides Core Business Solutions and Capabilities Across the Energy Value Chain 4 3 INPUTS We analyse our operating landscape to identify current trends, challenges and opportunities that shape our value creation ability We identify long-term trends that are shaping our macro environment IDENTIFICATION AND ASSESSMENT OF: FINANCIAL CAPITAL Internally generated funds and debt financing • Shareholders’ equity of RM37.6 billion • Cash and cash equivalents of RM7.1 billion • Debt of RM17.9 billion PHYSICAL CAPITAL Our universe of physical assets • 30 LNG carriers • 6 VLECs • 1 LBV • 68 Petroleum and product tankers • 2 FSUs • 12 Floating assets • Marine and heavy engineering facilities • Maritime training facility INTELLECTUAL CAPITAL • Specialist knowledge and experience in ship operation and management, ship-to-ship transfers, EPCIC and operations of floating production system, fabrication of complex heavy engineering structures, marine repairs, and operating the only MCV in the world, along with our digitalisation initiatives and innovation capacity HUMAN CAPITAL Our base of dedicated, high performing and specialised personnel at sea and shore • Experienced Board and senior management team • A diverse and inclusive workforce of 9,355 employees from 44 nationalities SOCIAL & RELATIONSHIP CAPITAL Our positive brand reputation and the strategic partnerships we develop, along with trusted relationships fostered with our stakeholders NATURAL CAPITAL Reliance on natural resources such as fuel, water and land PHYSICAL INTELLECTUAL HUMAN SOCIAL & RELATIONSHIP NATURAL FINANCIAL CAPITAL • Revenue of RM13.9 billion (2021: 10.7 billion) • PAT of RM1.8 billion (2021: PAT of RM1.7 billion) • Cash flow from operating activities of RM3.0 billion (2021: RM2.9 billion) • Dividend payout of 33 sen per share (2021: 33 sen per share) • Credit rating of S&P Global Ratings at BBB+, Moody’s Investor Service at Baa2 (2021: S&P Global Ratings at BBB+, Moody’s Investor Service at Baa2 and MARC at AAAIS) • Share price increased by 6% resulting in market capitalisation increasing to RM33.5 billion (2021: Share price increased by 3%, resulting in market capitalisation increasing to RM31.5 billion) PHYSICAL CAPITAL • Vessel availability of above 99% (2021: >97%) and utilisation rate of above 99% (2021: >99%) • Floating asset uptime performance of above 95% (2021: >99%) • Capex value of new contracts secured USD1.1 billion (2021: USD300 million) INTELLECTUAL CAPITAL • Developed capability to operate new class of vessels - VLECs • Ongoing development of zero-emission vessel together with other partners under The Castor Initiative • Commercialisation of digital ventures • Digital transformation initiatives HUMAN CAPITAL • Enhanced leadership programme and succession planning with 98% MC and critical positions filled (2021: 97% MC and critical positions filled) • RM78.8 million spent on training and development (2021: RM27.9 million) • 17% females in decision making roles and 14% female employees • Zero fatalities. LTIF at 0.08 and TRCF at 0.14 (2021: LTIF 0.15; TRCF 0.39) GAS ASSETS & SOLUTIONS PETROLEUM & PRODUCT SHIPPING OFFSHORE BUSINESS MARINE & HEAVY ENGINEERING INTEGRATED MARINE SERVICES PORT MANAGEMENT & MARITIME SERVICES MARITIME EDUCATION & TRAINING RISKS & OPPORTUNITIES We identify and analyse internal and external risks, both current and emerging, along with prevailing and future opportunities to ensure our ability to create value over time STAKEHOLDERS We seek to understand the needs of our key stakeholders and align our business priorities against their expectations in order to create value for both MISC and our stakeholders MATERIAL MATTERS We identify the material matters that impact our ability to create value in the short, medium and long term, and take them into consideration in the development and execution of our strategy OUTLOOK We identify both positive and negative outlooks within our business context which inform our business priorities LONG-TERM TRENDS EXTERNAL ENVIRONMENT SOCIAL & RELATIONSHIP CAPITAL • Strong reputation and effective engagements that led to favourable outcomes in winning more contract and securing contract extensions • Continued contribution to the growth of the nation’s maritime and oil and gas industries through our well-established programmes in ALAM that promote education and awareness amongst the youth NATURAL CAPITAL • GHG reduction initiatives: »» 17% reduction in our fleet average CO2e intensity (gas and petroleum) compared to 2008 due to improved efficiency and low carbon design of newbuild vessels (2021: 15%) • Pollution control: »» Almost 100% of refrigerant used on our vessels are non-ozone-depleting with zero ozone-depleting potential (2021: 97%) • Natural resources management: »» Through freshwater generation system onboard our vessels, about 313,388 m3 freshwater withdrawal from land was avoided (2021: 315,154 m3) • Waste management: »» Hazardous waste from shore-based operations were 99.1% recycled, reused or recovered (2021: 99.9%), minimising impact to natural resource depletion • Biodiversity: »» Conducted 32 reef sites surveys and 7 reef clean-ups with 124 kg marine debris removed, 32 sites monitored for coral bleaching and predator monitoring, 4 mooring buoys installed, 9 programmes with school and community conducted and 14 beach clean-ups with 3,775 kg trash collected »» Support SEATRU by constructed a new kitchen, washroom and recycling corner • Financial Performance • Climate Change • Energy Management • Digitalisation • Talent Attraction • Digitalisation • Business Knowledge • Talent Attraction • Diversity and Inclusion • Business Knowledge • Values, Governance and Business Ethics • Community Investment • Climate Change • Energy Management • Digitalisation • Ocean Health • Air Emissions • Natural Resource Use • Waste Management FINANCIAL For further details on the Group’s key activities, please refer to What We Do on pages 10 to 14. CORE BUSINESSES KEY ENABLERS We ensure that our identification and analysis of all the matters above are aligned with our Vision and Mission to create sustainable value for all We have embedded robust governance processes to ensure that our strategy execution is enabled by an effective organisational structure and an accountable decision-making structure We are guided by our clearly-defined corporate and sustainability strategies which address both the short to medium term and the long-term time horizons, which are responsive to the value creation drivers we have identified for our business VISION AND MISSION GOVERNANCE STRATEGY AND RESOURCE ALLOCATION HEAVY ENGINEERING AND MARINE REPAIRS • MHB’s Heavy Engineering segment completed one FEED project (2021: 1 sail away) • MHB’s Marine segment completed 87 vessel repair and maintenance jobs and secured 111 jobs (2021: 97 vessels and 111 jobs) PORT MANAGEMENT AND MARITIME SERVICES • MMS provided pilotage and loading master services to ports and terminals in Terengganu, Melaka, Sabah and Sarawak and its accredited inspectors and engineers performed more than 49,500 vessels’ screenings, about 63,000 inspections, world-class marine operations, consultancy and assurance services (2021: more than 5,000 vessels screening, about 800 inspections) SEAFARER EDUCATION • ALAM enrolled 550 students for Cadetship, Post Sea and Ratings programmes (2021: enrolled 607 students) • ALAM offered 18 new programmes in 2022 with over 160 customised courses ASSET EXPANSION AND FLEET REJUVENATION • Took delivery of 6 DPSTs and 2 DF VLCCs • Ongoing construction of 12 LNGCs via a consortium (25%) and 2 more LNGCs with contract extension for 2 FPSOs (2021: 6 DPSTs, 5 VLCCs, 2 LNGCs and 1 FPSO) ENVIRONMENTALLY-FRIENDLY AND SAFE OPERATIONS • One incident of major oil spill in 2022 (Zero oil spill incident in operations since 2013 to 2021) • Delivered 6 eco-friendly DPST for operations in international waters (2021: 1 eco-friendly DPST) • Zero fatality in our shipping operations (2021: zero fatality) ENVIRONMENT • 4.20 million tonnes of GHG emissions (2021: 4.19 million tonnes) • 3,362 tonnes’ SOx emissions into the atmosphere (2021: 3,922 tonnes SOx) • 21,736 tonnes of hazardous and general waste from non-shipping created (2021: 20,366 tonnes) • 799,532 m3 freshwater withdrawal consumption (for non-shipping activities) (2021: 658,153 m3) ENERGY RESOURCE TRANSPORTATION • LNG carriers transported 6.1% of the world’s LNG which provides cleaner energy globally (2021: 6.7%) • Petroleum and product tankers transported an estimated 99 million tonnes of crude, petroleum products and chemicals to global customers (2021: 115 million tonnes) • Eaglestar provided safe and reliable ship operations and successfully conducted crew change for 5,524 seafarers (2021: 10,864 crew changes) KEY ACTIVITIES OUTPUTS OUTCOMES TRADE-OFFS MATERIAL MATTERS UNSDGs STAKEHOLDERS
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