Frontken Berhad Annual Report 2020

Annual Report 2020 11 FRONTKEN CORPORATION BERHAD 200401012517 (651020-T) Engineering Division The impact on the Group’s engineering segment from the pandemic was quite different from that experienced by our semiconductor division. As economic activity slowed sharply across the world, demand for oil and gas products also plummeted. In the first half of 2020, worldwide demand for oil fell rapidly as governments were forced to shutter down businesses. The combination of falling demand and rising supply led to a collapse in crude oil prices to its lowest level in decades. Similarly, the Group’s engineering segment saw postponement of many scheduled maintenance and services by our customers. As economies reopened, oil prices partially recovered and rebounded from the year’s low. At the end of FY2020, the Group saw new orders trickling in from its various umbrella contracts for provision of manpower supply and also mechanical rotating equipment services and parts. In spite of the very difficult operating environment, the engineering division was able to make a small bottom-line contribution to the total Group’s earnings. Over the years, we have been making adjustments across the Group’s engineering unit by leveraging on the diverse range of expertise within the division. This allowed us to centralise and consolidate operations across the same to drive effi- ciency and scale. We were also able to expand our capabilities on advanced repair and maintenance solutions. In addition, through further enhanced training program for our skilled manpower, we were able to provide a wider range of support to the upstream and downstream segments. Moving forward, we will continue to provide our best services and support to the needs of the oil and gas value chain both domestically and regionally. Malaysia In the beginning of 2020, we saw revenue for this engineering business division picked up, but unfortunately decreased gradually as the impact of pandemic took its toll. Even though we were hampered by the challenging operating environment, we did not pause in our efforts but instead took a series of strategic initiatives. We continued to leverage on our existing competencies in the mechanical engineering for rotating equipment to explore new growth and opportunity. Our deep expertise and know-how of the industry have enabled us to continue working on our resources, increased joint business partnerships with our customers and suppliers. Our perseverance had paid off as towards the end of the year, we started to capture more works from our customers. As Malaysia is one of the key oil and gas producers in the Asia-Pacific region, we will ride on this opportunity and will continue with selective capital investments to capture the same. One such investment that is currently being developed is at Pengerang with the construction of a repair and service facility to better service the contracts that were awarded to us recently. Singapore For the Group’s engineering division in Singapore, we remain focused on customers from the oil & gas, petrochemical, refineries and marine industries. As with the other units of the same segment, the pandemic and weakened oil price have affected our operation resulting in significant reduction of our revenue. Despite that, we continued our effort in managing operating costs where we integrated two of our business units into one. Through that, we managed to streamline the operating processes and reduce the overall cost. We also extended our approach to non-traditional type of industries including consumer products and solar energy manufacturers. The approach begun in the middle of FY2020 with our team actively engaged with various customers for potential opportunities. As a result, we are in the process of being qualified to undertake services of some new products that are currently underway at customers’ production line. We also took part in a few projects at various stages, from completion of first article acceptance to production trials and testing, and we expect that to contribute positively to the revenue of this unit in FY2021. Chairman’s Message (cont’d)