VICE PRESIDENT’S REMARKS RAJA AZLAN SHAH RAJA AZWA Vice President, Finance In 2022, as the pandemic shifted to the endemic phase, many of the restrictions such as lockdowns and border closures that had previously impeded MISC’s growth eased off. However, supply chain disruptions remained a notable challenge, owing to China’s zero-COVID policy and the onset of the RussiaUkraine war. Despite these challenges, the Group recorded higher revenue by 29.9% as compared to previous year driven by a confluence of factors. These included increased freight rates in the Petroleum & Product Shipping segment as well as higher recognition of revenue from the conversion of an FPSO in the Offshore Business segment following improved project progress during the year. As well as that, the Marine & Heavy Engineering segment recorded healthy revenue from higher progress for an on-going project and higher dry-docking activities. Adding to this, Gas Assets & Solutions’ revenue increased following higher earning days during the year. Consequently, MISC’s profit before tax (PBT) increased to RM1,874.3 million in 2022, compared to RM1,774.6 million in the previous year, which was higher by 5.6% or RM99.7 million as compared to the previous year’s profit. The Group’s operating profit rose by 59.2%, from RM1,948.3 million in 2021 to RM3,102.0 million in 2022, on the back of higher revenue posted by the Petroleum & Product Shipping and GAS segments. The Marine & Heavy Engineering segment turned profitable during the year in tandem with higher revenue coupled with recovery of COVID-19 claims and reversal of cost provisions for both ongoing and post sail-away projects. The Group maintained its robust financial position recording cash flows generated from operating activities of RM3,042.1 million in 2022, which was higher by 4.6% or RM133.5 million compared to RM2,908.6 million in the previous year, despite the higher payments for cost relating to the conversion of an FPSO amounting to RM2,679.9 million in the current year compared to payments of RM1,126.1 million in the previous year. Excluding the payments for the above FPSO conversion, the Group generated an operating cashflow of RM5,722.0 million, which was higher by 41.8% or RM1,687.3 million compared to RM4,034.7 million in the previous year, mainly contributed by the higher collections received from customers in the current year. MISC Group’s cash balance remains healthy at RM7,134.0 million, Despite these challenges, the Group recorded higher revenue by 29.9% as compared to previous year driven by a confluence of factors. These included increased freight rates in the Petroleum & Product Shipping segment as well as higher recognition of revenue from the conversion of an FPSO in the Offshore Business segment following improved project progress during the year. which together with the Group’s existing funding facilities should enable the Group to fund our committed capital expenditure and pursue growth prospects. The Group’s robust balance sheet has been augmented by an increase in total assets by 8.9%. Despite an increase in our borrowings, our net gearing ratio of 0.28 remains as one of the lowest in the industry. The strength of our balance sheet is demonstrated by MISC retaining its stellar credit ratings as one of the highest rated shipping companies globally. During the year, S&P Global Ratings and Moody’s Investor Service reaffirmed their ratings for MISC at BBB+ and Baa2 respectively. Our credit ratings are supported by stable earnings backed by long term contracts. Our strong financial standing and market creditability has enabled us to successfully secure Sustainability Linked Loans (SSL) for the financing of six Very Large Ethane Carriers on 9 December 2022. The 11-year sustainability-linked nonrecourse term loans marks MISC’s debut into the SSL space, which has been structured to align with the Group’s long-term business strategy and sustainability aspirations. Joined by seven lenders, the SLL structure includes two Key Performance Indicators (KPIs) relating to GHG emission and governance targets. MISC will continue to explore SLL solutions to support the achievement of its sustainability ambitions. Subsequent to the establishment of the USD3.0 billion GMTN Programme in March 2022, MISC had successfully priced its USD1.0 billion GMTN issuance on 30 March 2022. The issuance, which was the first since 2004, has been completed despite a very tight issuance window, due to the onset of the RussiaUkraine conflict. The successful transaction was competitively priced with a final investor orderbook that had been oversubscribed by 3.2 times. Based on our robust performance for the year, the Board of Directors (Board) declared dividends of 33 sen per share representing a dividend payout of more than 80% of profit after tax for 2022, reflecting our commitment to provide investors and shareholders with consistent dividend payments. Our demonstrated ability to continuously provide shareholders with rewarding returns was recognised at the Edge Billion Ringgit Club Corporate Awards 2022, where we received the “Highest Returns to Shareholders Over Three Years” Award in the transportation and logistics sector, for the second time. Our sustainability-centred approach to our business is demonstrated through the Group’s efforts to be fully compliant with the TCFD by 2023. In line with this, in 2022 we have stepped up on our commitments in this space by comprehensively including all business entities under the MISC Group within our TCFD Report. Having an in-depth understanding of our climate risks and opportunities, we have developed climate strategies to mitigate our financial and environmental related risks. One of our key strategies is our commitment to deploy zerocarbon emission vessels by 2030 and to achieve net-zero GHG emissions by 2050. Towards this end, we are taking the necessary measures both technically and operationally to improve our fleet’s energy efficiency. In determining our new investments, we will need to consider vessels that utilise high efficiency dual-fuel engines with methane reduction technologies and possess the ability for conversion to zero carbon fuels. From a financial standpoint, MISC is committed to focus on green assets and solutions to ensure long-term sustainable investments in line with our two-pronged climate strategy to decarbonise existing operations and explore new income streams to realise our MISC 2050 vision. As of 1 January 2023, MISC has started calculating the cost of carbon emissions as part of our new asset investments’ sensitivity assessment exercise. Given the shift in stakeholders’ preferences for low-carbon and environmentally friendly solutions, our internal carbon pricing mechanism will allow us to strategise and quantify carbon risks in order for us to make more informed decisions for future investments. Overall, MISC has achieved commendable results for 2022 contributed by the dedication, resilience and focused execution of our people. 2023 will be another challenging year with the global economy experiencing continued volatility, while trying to get inflation under control. GROUP FINANCIAL REVIEW Refer to the Financial Report for our Financial Statements for FY2022. Financial Review Financial Review 97 96 MISC Berhad Integrated Annual Report 2022
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