Serba Dinamik Annual Report 2016

2016 Annual Report 007 CHAIRMAN’S MESSAGE (Cont’d) OVERVIEW In 2016, the global economic environment saw expansion as well as financial market volatility due to concerns surrounding issues within the advanced economies, such as policy and political uncertainties, subsequent to the outcome of the United State of America (“US”) presidential election and the United Kingdom’s (“UK”) vote to exit the European Union. Nevertheless, the local economy for the financial year under review saw steady growth, mainly driven by domestic demand. The Malaysian economy grew by 4.5% in the fourth quarter of 2016 (3Q 2016: 4.3%; Quarter-on-Quarter: 1.4%), supported by continued private sector expenditure. On the supply side, growth continues to be driven by the manufacturing and services sectors. [1] Over the year, Serba Dinamik has managed to weather the demanding market circumstances and strengthen its financial position as the services it offers are essential in extending the life of the equipment and structures used in the O&G industry. Whilst mindful of the challenging market conditions, the Company continued to secure contracts in O&M services and EPCC, as well as embarked on our asset ownership business model with our CNG plant in Muaro Jambi, Indonesia. We have also secured contracts for the development, ownership, operations and maintenance of several small gas power plants and water utilities in Indonesia, as well as an industrial park in Sarawak. Malaysia has been our business stronghold, however over the years our international business have seen growth and contributed 64% of the total revenue of the Group. We are seeing an increase in activities overseas and with the deterioration of the Ringgit it augurs well on our overall financial performance from overseas market. LOOKING AHEAD The economic landscape for Malaysia is expected to remain resilient in 2017, with external events continuing to weight in on the volatility of the domestic financial markets. These include increased uncertainty over political developments and growth in the major economies as well as volatile commodity prices. Still, we are looking for modest Gross Domestic Product (“GDP”) growth of 4.5% for the coming year, with domestic demand remaining the key driver of growth. [2] The O&G sector, on the other hand, is likely to remain challenging for 2017. The oversupply of global LNG production has resulted in the decline of more than 70% in LNG prices as compared to its 2014 peak. [3] As reported by the Malaysian Petroleum Resources Corporation (MPRC), the combined profit for Malaysian O&G services and equipment companies suffered a dip by 52% to RM3.1 billion in financial year 2016 as compared to RM6.5 billion from the previous year. [4] In order to ensure the company’s continued sustainability over these persistent challenges, we have a solid line of business growth strategies in place by leveraging on our core competencies of operating within the O&G and power generation industries and also by expanding our asset ownership business model. We expect our O&M and EPCC operations to maintain their performance in 2017 as we continue to enhance our business activities to