Wah Seong Corporation Berhad Annual Report 2020

29 ANNUAL REPORT 2020 With its technical know-how and close collaboration with the team of Steam Engineers, the RE steam solution unit successfully developed a new single-pass high tower compact boiler capable of burning demanding Empty Fruit Bunch (“EFB”) biomass fuel. The 60 tons @ 55 Barg @ 430 degrees Celsius steam boiler system has recorded more than 80% EFB mix on a stable and continuous long hours operation mode. Many additions have been incorporated to lengthen the operating life of the boiler. This new range of utility-grade boiler rollout has addressed the long quest for a reliable and cost-competitive solution in the EFB-fired power plant applications. In line with its strategy to strengthen its presence in the fast growing Indonesia market, RE’s agro-based business established two new workshops cum service centers in Medan and Banjarbaru, both located in Indonesia. These facilities sustained RE’s servicing business due to the workshop’s proximity to the customer’s mills, resulted in shorter response time to customers’ needs. Plans have been developed to allocate more resources to increase our presence in Indonesia which offers excellent growth potential in the agro-based industries. In line with RE strategy of further enhancing its competitiveness in the agro-based products, PMT Industries Sdn. Bhd. will be actively increasing its local content in the manufacturing of steam turbines and other agro-based products. During the year, RE’s agro-based also completed the installation of solar panels at its facility in Shah Alam, Malaysia. The system capable of generating 500 kWp of electricity is expected to reduce its energy bill costs significantly, as it is one of its significant cost components. This will not only allow the company to be more competitive but also as an initiative to power sustainable growth in RE. RE continues to place great emphasis on HSE. Audits and inspection are conducted periodically to ensure compliance. Discussion on key Financial and Operational Indicators for the segment For the year under review, the RE segment recorded revenue of RM357.4 million and a segment profit of RM27.7 million. The segment generated an EBITDA of RM37.7 million in the year. RE has been generating positive operating cash flows and dividend streams to the Group consistently and is expected to remain a significant contributor to the Group’s revenue and bottomline in the years ahead. The RE segment had an order backlog of RM309.3 million at the beginning of 2020 and ended the year with an order backlog of RM251.8 million. The decline in order book is mainly due to deferment of award of new projects in the market due to current economic situation and COVID-19 pandemic lockdown worldwide. Discussion of anticipated or known risks that may have a material effect on, among others, the sustainability of the group’s results or operations, financial condition or liquidity RE’s performance is driven mainly by project awards. Delay in project awards results in lower order intake and causes fluctuation to earnings. RE has been actively building up its recurring income business stream to cushion negative impact of project cycles. RE has broadened its customer base and diversified its products and services range across a few industries to avoid being overly reliant on a particular sector. MANAGEMENT DISCUSSION AND ANALYSIS