KUB Malaysia Berhad Annual Report 2021

The Group Managing Director’s Statement and Management Discussion & Analysis The business activities of our LPG division encompass the importation, bottling, marketing and distribution of Liquefied Petroleum Gas (‘LPG’) under the brand name of Solar Gas, through our wholly owned subsidiary Solar Gas Sdn Bhd (‘Solar Gas’). Solar Gas is a recognised and reputable brand across the domestic, commercial and industrial gas markets, and own a network of facilities across Peninsular Malaysia that include its main import plant in Westport, Klang. While its main markets are the Central and Southern regions, Solar Gas also leverages on third party bottling suppliers in Penang and Perak to extend its reach across the peninsula. In FP2021, the LPG division recorded revenue of RM451.0 million and PAT of RM11.0 million. Given the extended, 18-month duration of FP2021, this represents a subdued performance result for the division and was precipitated by a 10% decline in monthly sales volume across both the domestic and industrial segments following the introduction of Movement Control Order (‘MCO’) restrictions. The MCO restrictions have reduced demand from restaurants, factories and other commercial entities, many of which have had to operate at reduced capacity or shutter completely for periods of time. Downward pressure on demand was further exerted by the prolonged closure of the Malaysia-Singapore border which effectively cut off many consumer market businesses in Johor and other Southern region states from a major portion of their regular clientele. Compounding the effects of the pandemic, tightening market conditions have seen the rise of additional competitors in the LPG space, leading to downward pressure on price, while substitute products such as Natural Gas and Liquefied Natural Gas continue to dilute the market. Amidst this challenging operating environment, we have continued apace with the brand modernisation and uplift activities that were initiated in FY2019 to increase our long-term brand awareness and competitiveness. As part of our ongoing cylinder inventory upkeep exercise, we spent a total of RM14.31 million on reconditioning and requalification (‘RCRQ’) of the existing cylinders (53%), the acquiring of new cylinders (36%) and repainting the existing cylinders (11%). At the same time, all 14kg cylinders (‘C14’) for the domestic market are being transitioned to a new gold coloured exterior to create a more distinctive appearance. LPG Division 18 KUB MALAYSIA BERHAD