Frontken Berhad Annual Report 2020

Annual Report 2020 12 FRONTKEN CORPORATION BERHAD 200401012517 (651020-T) Philippines The Group’s engineering business in the Philippines achieved a revenue of RM15.7 million and an operating profit of RM2.6 million, an increase of 8% from FY2019. This was from an improved resource-planning of manpower thereby reducing overtime costs, better waste management optimising use of materials, alternative sourcing for raw materials and overall increase in productivity. During the year, we established strategic partnershipswith fewmajor energyplayers, for excitation systems, turbomachinery maintenance services and habitat systems that will strengthen our collective service portfolio. We continued to provide added value products and services to our customers to increase revenue potential through these partnerships. The recent addition of a vertical lathe will not only serve the machining needs for larger machinery and components to our customers in the power generation industry, but will also bring higher value repair works that can offer greater profit potential. We believe that the strategies in place will support our position to better serve the current and future service requirements for maintenance such as turbine overhauling, generator testing and inspection, and auxiliary equipment. Amidst the projected tapering activities in oil and gas in the coming years in the Philippines, power generation industry will remain the key focus for our operation in this unit. Forward Looking Statement Heading into 2021, there is little precedent for projecting the future. The vaccine roll out had somewhat brought some semblance of stability to the economy, but there are lingering fears over continued challenges ahead. Having said that, digital operations are more important than ever, with many transformative changes to keep the world moving forward. We believe that the growing demand and advances in technology such as 5G and AI will bring greater opportunity for the Group in the coming years. We are looking to expand our capacity in Taiwan by setting up a new state of the art facility in anticipation of increase in the demand for our services relating to tools involved in the manufacturing of the latest nodes of chips. We are currently already supporting our customer during their R&D production stage of this leading-edge node. Our customers have indicated that there will by multi-year of strong demand and growth for their business and this could be seen from their record capital expenditure. This is extremely encouraging for us, being their important partner particularly in the leading- edge technology. For the Group’s engineering division, we are cautiously optimistic that it will perform better in 2021 with the gradual resumption of economic activities and recovery of the crude oil price. As we move forward, our focus will still be to grow our portfolio of services with focus on creating long-term value and maximising total shareholders’ return. By combining our expertise with our customers’ competence, we aim to develop a more sustainable and profitable partnership. Although we have not made any significant changes to our key policies, we remain committed to reward our shareholders through sustainable dividend and capital growth, taking into account our earnings, cash generation and our ongoing investment needs. The Group is constantly on the lookout for further growth possibilities such as potential merger and acquisitions opportunities. We will continue to communicate regularly with all stakeholders as we navigate the exciting road ahead. To that end, we look forward to sharing more sustainable successes with you in the coming year and beyond. Chairman’s Message (cont’d)