04 PRESS METAL OVERVIEW 04 Our Corporate Values 05 Our Integrated Value Chain 08 STRATEGIC AND PERFORMANCE REVIEW 08 Chairman’s Statement 12 Management Discussion & Analysis by Group CEO 23 Key Performance Indicators 24 Press Metal Highlights 2022 28 LEADERSHIP & GOVERNANCE 28 Corporate Information 30 Profile of Directors 36 Profile of Key Senior Management, Key Operating Management and Country Heads 40 Corporate Governance Overview Statement 63 Directors’ Responsibility Statement 64 Additional Compliance Information 66 Audit Committee Report 72 Statement on Risk Management and Internal Control 78 SUSTAINABILITY REPORT 195 FINANCIAL STATEMENTS 317 LIST OF PROPERTIES 318 ANALYSIS OF SHAREHOLDINGS 322 NOTICE OF ANNUAL GENERAL MEETING PROXY FORM
Upholding our role as a good corporate citizen by continually contributing to the development of a better industry, community and world. Harnessing the collective capabilities and skill sets of our people towards realising company goals and objectives. The ability to enable strategic decision-making that supports value creation for both the Group and its stakeholders. Business Acumen To drive business growth with a global perspective and to progressively expand into a top industry player. Global Outlook Quality Excellence A constant focus to attain, retain and improve the quality of products based on industry benchmarks and clients’ requirements. PRESS METAL OVERVIEW PRESS METAL OVERVIEW ANNUAL REPORT 2022 4
Bauxite Mining & Alumina Refining t 8PSTMFZ "MVNJOB 6OJODPSQPSBUFE +PJOU 7FOUVSF t 15 #JOUBO "MVNJOB *OEPOFTJB Carbon Anode Manufacturing t 4IBOEPOH 4VOTUPOF 1.# $BSCPO -UE $P UPSTREAM* MIDSTREAM Smelting t 1SFTT .FUBM #JOUVMV 4EO #IE t 1SFTT .FUBM 4BSBXBL 4EO #IE Casting t 1SFTT .FUBM "MVNJOJVN 3PET 4EO #IE Extrusion t 1.# "MVNJOJVN 4EO #IE t 1SFTT .FUBM *OUFSOBUJPOBM -JNJUFE t 1SFTT .FUBM *OUFSOBUJPOBM 5FDIOPMPHZ -UE DOWNSTREAM Trading & Distribution t 1SFTT .FUBM 6, -JNJUFE t 1SFTT .FUBM "MVNJOJVN "VT 1UZ -UE t 1SFTT .FUBM /PSUI "NFSJDB *OD t 1.# "MVNJOJVN 4BCBI 4EO #IE t 1.# $FOUSBM 4EO #IE t 1.# &BTUFSO 4EO #IE t 1.# /PSUIFSO 4EO #IE TRADING & DISTRIBUTION *Joint Investments $POTUSVDUJPO t 5SBOTQPSUBUJPO t 'PPE #FWFSBHF t &MFDUSPOJDT t *OGSBTUSVDUVSF PRESS METAL OVERVIEW Cont’d PRESS METAL ALUMINIUM HOLDINGS BERHAD 5
Press Metal is steadfast in our focus to deliver value to our stakeholders. We remain committed and energised, leveraging on our core strengths and the increased smelting capacity to drive scale and growth. Datuk Yvonne Chia Chairman Creating Competitive Advantage, Balancing Growth with Sustainability CHAIRMAN’S STATEMENT ANNUAL REPORT 2022 8
CHAIRMAN’S STATEMENT Cont’d CHAIRMAN'S STATEMENT Dear Stakeholders, On behalf of the Board of Directors (the “Board”) of Press Metal Aluminium Holdings Berhad (the “Company” or “Press Metal”), I am pleased to present to you the annual report of the Company for the financial year ended 31 December 2022 (“FY2022” or the “year under review”). In 2022, the world began to emerge from the shadow of the pandemic and lockdowns with a sense of hope and renewal. Nevertheless, the fragility of macroeconomic variables continued with supply chain disruptions, inflation and monetary tightening. The ongoing tensions between Russia and Ukraine also significantly impacted global economies. Addressing this, governments worldwide have effected stimulus packages to improve the economic situation and revive activities as businesses continue to face headwinds. As we navigate this period of external volatilities, Press Metal is steadfast in our focus to deliver value to our stakeholders. We remain committed and energised, leveraging on our core strengths and the increased smelting capacity to drive scale and growth. I believe our success is primarily due to our nurture of teamwork and collaboration, bringing together diverse skills to achieve our strategic objectives. REVIEW OF FINANCIAL PERFORMANCE I am pleased to report that Press Metal has achieved a new record performance in FY2022, despite being faced with elevated raw material prices and abnormally high freight costs. We registered revenue of RM15.68 billion and profit after tax and minority interest of RM1.41 billion, an increase of 42.6% and 40.4%, respectively, compared to the preceding year. The year was marked by rising interest rates with the Federal Reserve’s aggressive tightening policies. We stayed proactive and managed to reduce our financial expenses and will remain vigilant in maintaining this financial discipline. We also completed a private placement exercise in April 2022, raising RM970.6 million for additional working capital, expansion of our extrusion operations and repayment of bank borrowings. With this and our healthy operational cashflow, our gearing ratio reduced to 0.56 times as of 31 December 2022 from 1.20 times the year before. In today’s challenging business environment, a strong balance sheet is essential to allow us to stay proactive to capture opportunities and manage any challenges. PRESS METAL ALUMINIUM HOLDINGS BERHAD 9
CREATING COMPETITIVE ADVANTAGE, BALANCING GROWTH WITH SUSTAINABILITY During the year, we stepped up our sustainability agenda, recognising the arbiter of environmental and social responsibility in our long-term success. We are on a journey to embed sustainable practices across our operations, reducing our carbon footprint while promoting diversity and inclusion, fostering a corporate social responsibility culture, and extending to inculcate sustainability values into our supply chain. Over the past year, we have worked closely with our suppliers, vendors, and partners to ensure they share our commitment on ESG principles and goals. Our ambition and actions were rewarded when Press Metal was included in the FTSE4Good Bursa Malaysia Index in June 2022. We secured a 4-star ESG rating, placing us among the top 25% of publicly listed companies in the FTSE Bursa Malaysia EMAS Index. The Sustainability Report from pages 78 to 194 comprehensively details our report card for 2022, where we are today on our journey towards our goals, our sustainability performance, key highlights and achievements for the year under review. ENHANCING RISK MANAGEMENT AND GOVERNANCE Our growth trajectory for the year under review has been notable as we continued to expand our operations and capacity. As we scale, we have continued to evolve and improve our risk management practices to match the new challenges of business continuity. Press Metal has made significant progress in this regard, enhancing processes and SOPs to monitor and manage our risks more holistically. We invested in our people, providing comprehensive training across the organisation, including our Board, to ensure everyone is in line with the enhanced risk management protocols and governance. As an extension of this, the Risk Management Committee has stepped up with the integration of our ESG risk and governance, working closely with the Sustainability Committee under the Group CEO to align our ESG and climate actions, ensuring a focused, disciplined approach and the clarity of actions and accountability. To this end, a strategic transformation mindset on embedding a “culture of integrated thinking” was inducted throughout our organisation, encouraging everyone to think critically about the impact of their actions and make choices that align with our values and principles. We are committed to enhancing our standards of business integrity and ethics, balancing growth and risk to drive our long-term value creation. THE YEAR AHEAD The fear of an earlier predicted deep recession in Europe has eased, and China’s re-opening has boosted optimism on a global recovery. The resurgence of activities from China could underpin a stronger aluminium price performance. Structural changes brought about by the consequences of the Russia-Ukraine tension with the closure of some smelters in Europe have opened up opportunities for us to fill the demand gap in the market. With our low carbon content production, we are poised to benefit from the increasing diversion to green industries of electric vehicles, renewable energy, packaging and consumer products. We have also made a significant development in our partnership with Glencore, one of the largest globally diversified natural resources companies. Sharing identical philosophies in supporting a low carbon economy and climate commitment, we leverage on this strategic partnership as a further platform to open up new markets in United States of America (“US”) and Europe. As I pen this statement, we are caught by the US and Europe banking turmoil, with implications on fundraising and liquidity in the global banking system. As we navigate through these uncertainties and macro risks ahead, we will also actively take advantage of growth opportunities. We will remain vigilant, agile and resilient. CHAIRMAN’S STATEMENT Cont’d ANNUAL REPORT 2022 10
ACKNOWLEDGEMENT I would like to express my sincere gratitude to the Board, Management team and all employees for their unwavering dedication to our Group. Their commitment has been the centre of our achievements and progress. I would also like to extend my appreciation to the Government, our partners and suppliers for their collaboration and support. We recognise that our success is built on strong relationships with all our stakeholders, and we are grateful for their trust and partnership. Our customers are at the heart of everything we do. We are committed to providing them with the highest quality products and continuously strive to exceed their expectations. We value their feedback and insights, which drive us to innovate and improve. To our shareholders, we are grateful for your continued support, confidence and trust. Press Metal is committed to creating long term value and to make a positive impact in the lives of our customers, employees, and the communities we serve. Datuk Yvonne Chia Independent Non-Executive Chairman April 2023 CHAIRMAN’S STATEMENT Cont’d PRESS METAL ALUMINIUM HOLDINGS BERHAD 11
Every business is susceptible to external challenges constantly but we must remain agile to navigate and ascend. We kept our focus on our long-term goals, and despite a year filled with unexpected occurrences, we achieved another record financial performance. Tan Sri Dato’ Koon Poh Keong Group CEO Paving The Green Path MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO ANNUAL REPORT 2022 12
FOREWORD The year 2022 started with the aluminium price heading towards one of the strongest performances in decades. This was one of the ramifications of the Russian-Ukraine tensions and compounded by an energy crisis that presented significant challenges to smelting operations, primarily from Europe, leading to immense capacity curtailment. Subsequently, in the second half of the year, the economy shakeout stemming from high inflation and monetary tightening policies impaired demand and aluminium prices. Observing this, we are constantly vigilant and responsive in adapting to the dynamics of the market, making the best out of every situation. Every business is susceptible to external challenges constantly but we must remain agile to navigate and ascend. We kept our focus on our long-term goals, and despite a year filled with unexpected occurrences, we achieved another record financial performance. We remain steadfast in our core strength and business aspirations moving forward. Aluminium will continue to have a significant role in shaping modernising societies and contributing to a cleaner world. With this, we set our eyes on new goals and possibilities in the new year. The strategic decisions that we have taken throughout the years underpinned our progress and made a material difference in our ability to overcome obstacles. Our accomplishment is attributed to our commitment to staying competitive, resilient and relevant by focusing on enhancing our competency and efficiency. As we reflect on the past year, I am reminded of the critical role that our workforce plays in our success. Our employees are our most important asset, and we recognise that their well-being is essential to the triumph of our business. We will continue to prioritise initiatives that support our employees’ health, safety, and growth as a healthy and engaged workforce is critical to achieving our strategic objectives and delivering performance. MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO Cont’d MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO PRESS METAL ALUMINIUM HOLDINGS BERHAD 13
MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO Cont’d OVERVIEW OF PRESS METAL Press Metal Aluminium Holdings Berhad (“Press Metal” or the “Company”) is a Malaysian-based aluminium company principally engaged in the manufacturing and trading of both midstream and downstream aluminium products. We were incorporated in 1986 and subsequently became a public listed company in 1993. Over the years, we have grown into an integrated aluminium corporation and the largest aluminium producer in Southeast Asia, with a production capacity of 1,080,000 tonnes per annum for the smelting segment. We are also a prominent producer in aluminium extrusion with a production capacity of 210,000 tonnes per annum. The Smelting Segment The smelting segment is our Group’s core business which produces the basic aluminium ingot P1020 and the valueadded products such as alloy ingot A356.2, aluminium billets and wire rods. We have two (2) smelting plants operating in the “Sarawak Corridor of Renewable Energy” economic region where power is predominantly generated from the hydropower plants. Our plant in Bintulu has 3 phases, with aggregate capacity of 960,000 tonnes per annum, while our other plant in Mukah, Sarawak, has a capacity of 120,000 tonnes per annum. Our key markets for primary aluminium and value-added products are European countries (31%), Korea (15%), Malaysia (15%) and Vietnam (10%). The Extrusion Segment Our Group’s extrusion segment produces a wide range of extrusion products utilised in the construction, automobile, consumer-related products, electronic and electrical industries. Presently, Press Metal owns two (2) extrusion plants, one in Klang district of West Malaysia and another in Foshan, Guangdong Province, China. The annual capacity of these two plants are 50,000 tonnes and 160,000 tonnes per annum respectively. Further, via our trading arms, we have a presence in United Kingdom, Australia and North America to market our extrusion products internationally. The primary markets for our extrusion products include China (31%), Malaysia (19%), United Kingdom (19%), United States of America (“US”) (19%) and Australia (6%). Upstream Assets and Investments To secure our raw material supply, we have ventured vertically upstream and completed several acquisitions over the past few years, especially for key raw materials and consumables required in our smelting operations being alumina and carbon anode. This will ensure a stable supply and quality over the long term and avoid any disruption in the smelting process. Alumina Assets Investments Alumina is the primary raw material for our Group’s smelting segment. We own 50% equity interest in Japan Alumina Associates Pty. Ltd (“JAA”) which in turn holds 10% interest in Worsley Alumina Unincorporated Joint Venture (“Worsley UJV”) located in Australia, one of the world’s largest and lowest cost alumina producers. Through this investment, we are entitled to a supply of 230,000 tonnes of alumina per annum. We also hold 25% equity interest in PT Bintan Alumina Indonesia (“PT BAI”) which is principally involved in alumina production in Pulau Bintan, Indonesia. PT BAI has completed the construction of its Phase 2 facility with a capacity of 1 million tonnes per annum. Including its Phase 1 facility that was commissioned in 2021, the total production capacity of PT BAI has reached 2 million tonnes per annum at the end of 2022. With our investments in JAA and PT BAI, our Group will be able to secure up to approximately 80% of our alumina requirement. This serves to enhance the stability of our Group’s aluminium operations by reducing reliance on thirdparty suppliers and shielding us against supply disruptions. ANNUAL REPORT 2022 14
MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO Cont’d Carbon Anode Joint Venture Our Group had on 20 September 2016 entered into a joint venture agreement with Sunstone Development Co., Ltd (“SDCL”) to establish and operate a new joint venture company, namely Shandong Sunstone & PMB Carbon Ltd., Co (“SSPC”) for manufacturing of pre-baked carbon anode, a primary consumable for our smelting operations. Currently, we hold 20% equity stake in this joint venture. The plant was commissioned in the first quarter of 2019 and achieved full capacity in the second quarter of 2019. SSPC’s state of the art carbon anode manufacturing plant complies and exceeds environmental compliance and local regulatory requirements. With the 20% stake in SSPC, our Group has access to up to 220,000 tonnes of carbon anode out of the total capacity of 300,000 tonnes per annum. This joint venture allows us to secure up to approximately 40% of our requirements. UPDATES ON OPERATIONAL ACTIVITIES 2022 was the first full year of contribution by our latest Phase 3 smelter at Samalaju Industrial Park, Bintulu which achieved full commissioning towards the end of 2021. With this, our annual smelting capacity increased by 42% to an aggregate of 1,080,000 tonnes, cementing our position as the largest aluminium smelter in Southeast Asia. During this commissioning process, we were simultaneously undertaking the scheduled maintenance of our existing smelters (Phase 1 & 2) and had to re-allocate resources between the existing smelters and the ramp-up schedule for Phase 3. We were operating in a constrained environment with Covid lockdowns impeding the availability of foreign technical expertise. As a result, we experienced less than optimal production volume in 2021, which carried into early 2022. This situation was resolved in the second quarter of 2022. In FYE 2022, our value-added segment constituted nearly 36% of our total sales volume on the back of expanded smelting capacity. We registered a 3% year-on-year volume growth in value-added products, driven by wire rod demand as the world focused on increasing renewable energy capacity. We also completed a new billet casting line, increasing our billet casting capacity by 80,000 tonnes per annum to a total of 300,000 tonnes per annum. On the downstream operations, our China extrusion operations have been actively exploring new applications in the electric vehicles and renewable energy sectors which are touted as the next demand drivers for aluminium. Installation of the first extrusion line for aluminium battery casing was completed and began production in our extrusion facilities in Foshan, Guangdong Province during the year. Our team is also continuously exploring new markets for our extrusion products and researching potential segments relating to renewable energy, other applications in the automotive industry, and product-based extrusion involving more technical resource planning. For our Malaysian extrusion facilities, we are installing an additional capacity of 30,000 tonnes per annum dedicated towards the fabrication of solar frames, targeting to commence production by the second half of 2023. Carrying forward from the previous year, 2022 was similarly a challenging year from a cost perspective. World events influenced raw materials and freight costs, which remained stubbornly high for most of the year. We witnessed some of these challenges dwindling towards the end of the year with global freight cost declining by more than 30% and easing of high carbon anode prices. To partially mitigate the impact of extreme freight costs during the first half of the year, we switched from containers to cargo shipment for delivery of our products to customers which yielded lower delivery cost per tonne. As a further measure to address supply chain disruptions which may interfere with raw material supply, we stocked up on raw materials to ensure that there were no interruptions to our production. Press Metal operated with an intense focus on cost and delivering consistent operational excellence while preserving financial discipline to stay resilient. Our robust cashflow has enabled us to reduce our debts and strengthen our balance sheet. As a testament to this, on 30 December 2022, RAM Ratings upgraded the rating of our RM5.0 billion Islamic Medium Term Notes Programme (2019/2049) from AA3/Stable to AA2/Stable. PRESS METAL ALUMINIUM HOLDINGS BERHAD 15
MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO Cont’d REVIEW OF FINANCIAL PERFORMANCE The following table highlights our results for the past five financial years:- Financial Year Ended 31 December (RM’Million) 2022 2021 2020 2019 2018 Revenue 15,683 10,995 7,476 8,805 9,170 EBITDA 2,768 2,045 1,239 1,229 1,446 Profit before tax 1,952 1,443 655 631 870 Profit after tax 1,767 1,295 587 582 773 Profit attributable to shareholders 1,407 1,002 460 474 619 Total assets 15,316 14,211 11,934 9,661 8,341 Shareholders’ funds 6,637 3,873 3,995 3,666 3,237 Total equity 8,005 4,920 4,890 4,480 4,028 Borrowings 5,093 6,370 5,148 3,861 2,985 Net Debt/Equity Times 0.56 1.20 0.91 0.78 0.69 Net earnings per share* Sen 17.16 12.41 5.69 5.90 7.79 Dividend per share* Sen 6.0 3.4 2.1 2.6 3.2 * Adjusted retrospectively to reflect the 1 for 1 bonus issue exercise completed in April 2021 0 5,000 10,000 15,000 20,000 0 300 600 900 1,200 1,500 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 0 500 1,000 1,500 2,000 2,500 3,000 Revenue (RM’ Million) EBITDA (RM’ Million) Profit Attributable to Shareholders (RM’ Million) Shareholders’ Funds (RM’ Million) 22’ 21’ 20’ 19’ 18’ 22’ 21’ 20’ 19’ 18’ 22’ 21’ 20’ 19’ 18’ 22’ 21’ 20’ 19’ 18’ ANNUAL REPORT 2022 16
MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO Cont’d Revenue Our Group’s smelting segment is the main driver of our revenue and profitability. Aluminium prices as traded on the London Metal Exchange (“LME”) plays a vital role in determining our performance. We achieved a revenue of RM15.68 billion in FYE 2022, an increase of 42.6% as compared to FYE 2021. This was supported by higher average aluminium prices during the year, a stronger US Dollar (“USD”) and increased production output. Our sales volume increased year-on-year as this was the first full year of commissioning our Phase 3 Samalaju smelter. It is our practice to hedge a portion of our aluminium production for a period of up to three years, at the Company’s discretion and depending on market prices from time to time. Manufacturing costs Alumina, pre-baked carbon anodes and electricity are the primary manufacturing costs for our smelting operations. Alumina and Carbon Anode Alumina prices increased strongly at the beginning of the year following the onset of the Russian-Ukraine tensions reflecting heightened supply risk, reaching an annual high of over USD530 per tonne in the middle of March 2022. Prices trended down during the second quarter and ended at an average of USD319 for the final quarter of the year. Carbon anode prices rose steadily since the start of the year due to rising calcined petroleum coke and pitch prices as the increasing global energy demand is driving the growth of the petroleum coke industry and anode materials have benefited from thriving downstream activities. Over the year, prices reached a peak of over RMB7,900 per tonne in November 2022 compared to RMB5,500 at the beginning of the year. Electricity Our smelters are located in Sarawak, a state blessed with high and consistent rainfall and abundant rivers, where the state has built substantial hydropower assets. Our Group’s smelting plants in Bintulu receive a stable electricity supply generated predominantly from this hydropower, secured by long-term power purchase agreements with the Sarawak State’s power company. Unlike smelters operating under a floating rate of power purchase agreement which depends on coal-fired or gas-fired power plants, we are not subjected to coal and gas price fluctuations. Profitability Profit after tax (“PAT”) increased by 36.4% to RM1.77 billion in FYE 2022 as compared to the preceding financial year, stemming from higher revenue during the year and increased contributions from associated companies. This was partially offset by higher raw material and freight costs, and provision for taxes during the year. Total assets Total assets increased by 7.8% from RM14.21 billion in FYE 2021 to RM15.32 billion in FYE 2022. This was mainly due to an increase in cash balances on the back of higher retained earnings as well as higher trade receivables which increased in tandem with higher aluminium prices and higher output. Borrowings, finance cost, debt-to-equity ratio and shareholders’ equity Total borrowings decreased by 20.0% from RM6.37 billion in FYE 2021 to RM5.09 billion in FYE 2022. The decrease in borrowings resulted from accelerated repayment of borrowings on the back of stronger cash flow generation from operations and proceeds from our private placement exercise. In April 2022, we completed a private placement exercise of 163.4 million shares at the price of RM5.94 per share, raising total proceeds of RM971 million. RM120.0 million from the total proceeds raised was used to partially retire bank borrowings. As a consequence, debt-to-equity ratio reduced from 1.20 times in FYE 2021 to 0.56 times in FYE 2022. PRESS METAL ALUMINIUM HOLDINGS BERHAD 17
MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO Cont’d Earnings per share and net assets Earnings per share (“EPS”) for FYE 2021 and FYE 2022 were 12.41 sen and 17.16 sen respectively. The higher EPS in FYE 2022 was in tandem with increased profit attributable to shareholders. Meanwhile, net assets per share increased from RM0.48 per share in FYE 2021 to RM0.81 per share in FYE 2022. Dividends Total dividend pay-out in FYE 2022 was 6.0 sen as compared to 3.4 sen in FYE 2021. We are committed to rewarding shareholders for their continuous support subject to our profitability, capital expenditure requirements and overall liquidity position. MARKET UPDATES 2022 presented one of the most volatile aluminium price trends in recent memory due to various factors, including the energy crunch aggravated by the Russian-Ukraine tensions, inflation driven interest rate hikes resulting in strong US Dollar and softened demand due to recession fear. At the start of the year, LME prices shot up to above USD3,800 per tonne after Russia invaded Ukraine in February. It later witnessed a pullback as demand concerns surfaced with macroeconomic uncertainties and escalating inflationary pressures. Unaccommodating supply-chain disruptions worsened the situation as it interrupted components supply to various industries causing lower production output. Despite the challenging backdrop, global demand for primary aluminium registered a marginal growth rate in 2022. The transportation and construction sectors were the key demand drivers in 2022, making up close to half of the market demand. The electrical, packaging and foil stock industries were other prominent sectors for aluminium demand. The renewable energy sector is set to become a growth engine for aluminium demand because of solar PV and wire rod from infrastructure spending on transmission lines. The application for aluminium is vast and it has been replacing traditional materials. Even though global demand from the construction sector softened last year, it still contributed a significant portion to total aluminium demand. Going forward, government initiatives such as the US Infrastructure Bill or supportive policies towards the property market from Chinese government are some drivers in reviving demand from the sector. For the first three quarters of 2022, soaring energy prices and power shortages were putting supply in check, especially in Europe. Several smelters have reported production curtailments or shutdowns in Europe and US, pressured by margin squeeze. Going into 2023, we believe supply tightness will persist, especially in Europe, due to the scarcity of renewable energy and the deficiency of reliable energy supply amid ongoing Russia-Ukraine tensions. Although China increased production capacity last year, weather constraints continued to curtail output intermittently, posing a risk to global supply. With a relatively low visible world inventory of aluminium, any demand recovery led by influential economies will underpin a stronger aluminium price performance as the scarcity of renewable energy and high energy cost will preclude the massive restart of curtailed smelters. RISK FACTORS & RISK MANAGEMENT Anticipated or known risks The business risks that may significantly impact our performance are the adverse changes in aluminium prices and foreign currency rates as our primary aluminium and value-added products are indexed to LME aluminium prices and quoted in USD. Other financial and market risks are those related to financing our Group’s activities such as interest rates. We also face operational risks directly or indirectly relating to our core operating activities due to inefficient or ineffective business processes, systems or human errors. ANNUAL REPORT 2022 18
MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO Cont’d Geopolitical uncertainties and trade disputes continue to be key external risks to global demand and commodity prices. Rising interest rates, cost inflation and recession are other factors which could potentially dampen future consumption. The underlying risks related to sustainability are trending upwards. Regulations to drive decarbonisation policies are tightening globally. All industries and companies with a significant negative sustainability footprint are expected to come under increased scrutiny in the coming years. The rising scrutiny on sustainability to a large degree is affirmative to Press Metal due to our low carbon content aluminium products. Mitigating measures Commodity hedges It is our practice to hedge a portion of our total aluminium production for a period of up to three years. This hedging strategy is undertaken at the company’s discretion but will be continuously refined from time to time, based on market dynamics and aluminium prices, among other considerations. Foreign currencies hedges We have exposures to foreign currency exchange risk on sales, purchases, cash and cash equivalents and borrowings that are transacted in USD, Australian Dollar (“AUD”), British Pound Sterling (“GBP”), Renminbi (“RMB”), Singapore Dollar (“SGD”), Hong Kong Dollar (“HKD”) and Euro (“EUR”). USD is the main exposure as our core business, smelting revenue and purchases are substantially linked to USD. In order to mitigate USD exposure, we enter into foreign currency hedging contracts with reputable financial institutions. Bolstering Financial Strength We completed a private placement exercise in April 2022 to strengthen our war chest, raising RM970.6 million for additional working capital, expansion of our extrusion operations and repayment of bank borrowings. In today’s dynamic business environment, a strong balance sheet is essential to seize opportunities that may arise in the market. ESG PRIORITIES Looking back at 2022, we have achieved several significant milestones in our ESG journey as a results of our collective and relentless effort of our workforce. Sustainability is a pivotal agenda for our Group, and we believe that by prioritising it, we can future-proof our business and ensure long-term success. We have also set specific goals and targets that are related to environmental performance. These include reducing our greenhouse gas emissions, using renewable energy sources, and minimising waste generation. We regularly monitor our progress towards these targets and hold ourselves accountable to ensure that we are making meaningful progress towards a more sustainable future. Our unceasing commitment towards a sustainable operation, guided upon stringent ESG protocols, has been recognised with Press Metal Bintulu Sdn Bhd achieving the ASI Performance Standard V2 (2017) Certification from Aluminium Stewardship Initiative (“ASI”) on 21 November 2022. It is the first smelting operation to achieve ASI Certification in Southeast Asia. Our ESG efforts were acknowledged with the inclusion of Press Metal into the FTSE4GOOD Index in June 2022 with a 4-star rating, placing us among the top 25% of publicly listed companies in the FTSE Bursa Malaysia EMAS Index. Press Metal has also well-surpassed global industry averages and international peers across all themes – environmental, social and governance, underscoring our persistent and progressive efforts in advocating the sustainable development agenda. In addition, we received an ESG rating of “BBB” by Morgan Stanley Capital International (“MSCI”) and was named by The Edge ESG Awards as the most improved performance over three years under the category of market capitalisation above RM5 billion. These external recognitions will further drive us to strive for greater positive impacts and long-term sustainability, therefore, making our shareholder value more sustainable and holistic. Detailed information on our sustainability journey is further set out in the Sustainability Report from pages 78 to 194. PRESS METAL ALUMINIUM HOLDINGS BERHAD 19
MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO Cont’d STRATEGIC FOCUS AREAS As we move into 2023, Press Metal is laser-focused on operational improvements to pursue our strategic growth agenda. The vulnerabilities in global supply chains were revealed by the pandemic and further amplified by the Russian-Ukraine tensions. The long-term supply and access to our key raw materials will provide us with a strategic advantage and is paramount to sustainable operations. We will continue strengthening our supply chain to minimise risks of disruptions and maintain business continuity. With our larger smelting capacity, we will have room to enhance our value-added segment which provides better margins. Moving forward, we will be expanding our market presence on value-added products to enhance growth and margins over the mid to long term. We will also look towards increasing our extrusion portfolio to support the renewable energy and consumer-related sectors. Last but not least, pursuing growth helps us to become the best version of ourselves. Press Metal will continue to embed a growth mindset and looking at various opportunities to expand its business and increase its revenue. Our success as a company is not only dependent on our internal capabilities but also on the strength of our relationships with our strategic partners. On the external front, besides already having Sumitomo Corporation as an equity stakeholder of our smelters, we have made a significant development in our partnership with Glencore by inking a 10-year alumina supply and aluminium offtake agreement. We are delighted that Glencore recognises our efforts in sustainable and responsible production of low carbon aluminium. Glencore, as one of the largest globally diversified natural resources companies, will be another prominent platform for us to raise our profile in markets such as America and Europe, and to penetrate some of the global green brands. As we share identical philosophies in supporting a low carbon economy and climate commitment, we will leverage on this strategic partnership to identify investment opportunities within our value chain. TRENDS & OUTLOOK Amid all the unprecedented global events and uncertainties over the last few years, there was an overarching and unwavering theme - higher climate ambitions and greater attention towards sustainability. We are now seeing this progressively being ingrained into policies and regulations globally. Consumers and companies are more likely to purchase ethically-sourced and sustainable products, while actively avoiding companies that score poorly or are perceived as having negative environmental impacts. In this regard, sustainability frontrunners will be valued and preferred. We are well-poised in this area and are committed to contributing to a better world. Press Metal will continue strengthening our position in low-carbon aluminium which has seen accelerating demand during this green transition towards a low-carbon economy. As for the current year’s demand, we remain cautious and vigilant in monitoring the world development. Although global economy remains uninspired, the fear of an earlier predicted deep recession in Europe has eased somewhat, and China’s re-opening has boosted optimism on recovery which may push primary demand higher. The relatively low world inventory of aluminium and a resurgence of activities from China could potentially underpin a stronger aluminium price performance. The structural changes brought about by the curtailment of smelters in the west and also the consequences of the Russian-Ukraine tensions have opened up an opportunity for us to strengthen our position further in the western market. Despite short-term market volatilities, longer-term fundamentals for the aluminium industry remain positive, supported by global decarbonisation drive and green initiatives. ANNUAL REPORT 2022 20
MANAGEMENT DISCUSSION & ANALYSIS BY GROUP CEO Cont’d APPRECIATION In closing, I would like to take this opportunity to express my gratitude to all of the stakeholders, including our shareholders, customers, suppliers, and employees. Your unwavering support has been instrumental in helping us to achieve our goals and remain competitive in the global marketplace. To our shareholders, we appreciate your confidence in us and our ability to deliver results. We remain focused on creating value for you through our growth and sustainable financial performance. To our customers, we are grateful for your loyalty and trust, and we look forward to continuing to serve you in the years ahead. To our suppliers, we recognise the critical role that you play in our business. We are grateful for your commitment to quality and reliability, and we look forward to continue building strong relationships with you. To our esteemed board of directors, I thank you for your guidance, leadership, and unwavering commitment to our Company’s mission and values. Your collective wisdom and expertise have been invaluable to our success, and we look forward to continuing to work together to achieve our goals. As we close the chapter on another remarkable year, I am filled with immense pride and gratitude for each and every member of our team who has tirelessly dedicated themselves to achieving our goals. Your unwavering commitment, resilience, and passion for excellence have driven us to new heights, in what was another unconventional year. Press Metal is honoured to have such an incredible team and I thank you for your invaluable contribution. Together, we will continue to rise to the occasion and build a better future. TAN SRI DATO’ KOON POH KEONG Group Chief Executive Officer April 2023 PRESS METAL ALUMINIUM HOLDINGS BERHAD 21
ANNUAL REPORT 2022 22
DIVIDENDS 493 Mil 17.16 Sen EARNINGS PER SHARE 15,683 Mil 2,768 Mil 1,767 Mil PAT EBITDA REVENUE KEY PERFORMANCE INDICATORS KEY PERFORMANCE INDICATORS PRESS METAL ALUMINIUM HOLDINGS BERHAD 23
FTSE4Good Bursa Malaysia Index Press Metal Aluminium Holdings Berhad Top 25% by ESG Ratings amongst PLCs in FBM EMAS (rated 4 stars) Aluminium Stewardship Initiatives Performance Standard Certification Press Metal Bintulu Sdn Bhd Press Metal International Limited
Champion in Manufacturing (Metal) Category Graduates’ Choice Award 2023 Press Metal Aluminium Holdings Berhad The EDGE ESG Award 2022 Industrial Products and Service (Gold) Most Improved Performance Over Three Years (Gold) Market cap over RM5 billion Press Metal Aluminium Holdings Berhad The EDGE Billion Ringgit Club Corporate Awards 2022 Highest Return on Equity Over Three Years Highest Returns to Shareholders Over Three Years Best Corporate Responsibility Initiatives Press Metal Aluminium Holdings Berhad Super Big Cap Companies
AUDIT COMMITTEE Chairman Lim Hun Soon @ David Lim Member Noor Alina Binti Mohamad Faiz Member Susan Yuen Su Min Member Chong Kin Leong NOMINATION AND CORPORATE GOVERNANCE COMMITTEE Chairman Susan Yuen Su Min Member Noor Alina Binti Mohamad Faiz Member Lim Hun Soon @ David Lim Member Chong Kin Leong REMUNERATION COMMITTEE Chairman Noor Alina Binti Mohamad Faiz Member Lim Hun Soon @ David Lim Member Susan Yuen Su Min RISK MANAGEMENT COMMITTEE Chairman Chong Kin Leong Member Koon Poh Ming Member Lim Hun Soon @ David Lim Member Susan Yuen Su Min BOARD OF DIRECTORS Datuk Yvonne Chia (Yau Ah Lan @ Fara Yvonne) Independent Non-Executive Chairman Koon Poh Ming Executive Vice Chairman Tan Sri Dato’ Koon Poh Keong Group Chief Executive Officer Dato’ Koon Poh Tat Executive Director Koon Poh Weng Executive Director Koon Poh Kong Executive Director Noor Alina Binti Mohamad Faiz Independent Non-Executive Director Lim Hun Soon @ David Lim Independent Non-Executive Director Susan Yuen Su Min Independent Non-Executive Director Chong Kin Leong Independent Non-Executive Director CORPORATE INFORMATION CORPORATE INFORMATION ANNUAL REPORT 2022 28
PRINCIPAL BANKERS Alliance Bank Malaysia Berhad Ambank (M) Berhad/ AmIslamic Bank Berhad Hong Leong Bank Berhad/ Hong Leong Islamic Bank Berhad Malayan Banking Berhad/ Maybank Islamic Bank Berhad Standard Chartered Bank Malaysia Berhad/ Standard Chartered Saadiq Berhad Sumitomo Mitsui Banking Corporation Malaysia Berhad AUDITORS KPMG PLT Firm No. LLP0010081-LCA & AF 0758 (Chartered Accountants) Level 10, KPMG Tower 8 First Avenue, Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan, Malaysia STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad COMPANY SECRETARIES Tai Yit Chan (MAICSA 7009143) (SSM PC No. 202008001023) Tan Ai Ning (MAICSA 7015852) (SSM PC No. 202008000067) SHARE REGISTRAR Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur Wilayah Persekutuan, Malaysia Tel : +603 – 2783 9299 Fax : +603 – 2783 9222 CORPORATE OFFICE Suite 61 & 62, Setia Avenue No. 2, Jalan Setia Prima S U13/S Setia Alam Seksyen U13 40170 Shah Alam Selangor Darul Ehsan, Malaysia Tel : +603 – 3362 2188 Fax : +603 – 3362 2000 Website : www.pressmetal.com REGISTERED OFFICE 12th Floor, Menara Symphony No. 5, Jalan Prof. Khoo Kay Kim Seksyen 13, 46200 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : +603 – 7890 4800 Fax : +603 – 7890 4650 CORPORATE INFORMATION Cont’d PRESS METAL ALUMINIUM HOLDINGS BERHAD 29
Board Meeting Attendance 7/7 Board Meeting Attendance 7/7 Datuk Yvonne Chia FCB is the Independent Non-Executive Chairman of the Company. She was rst appointed to the Board of the Company on 27 May 2021 as an Independent Non-Executive Director and was re-designated to her current position on 2 August 2021. She has more than 40 years’ experience in the nancial services industry, having held leading positions in both foreign and local institutions. She is a Fellow Chartered Banker and holds a Bachelor of Economics (Hons) from the University of Malaya. She started her career in Bank of America and held various roles in Malaysia and in the Asia region. She was the former Group Managing Director and Chief Executive Of cer of RHB Bank Berhad from 1996 to 2002 and Hong Leong Bank Berhad from 2003 to 2013. Currently, she is the Independent Non-Executive Chairman of Standard Chartered Bank Malaysia Berhad and Standard Chartered Saadiq Berhad. She is also the Senior Independent Non-Executive Director of Astro Malaysia Holdings Berhad, an Independent Non-Executive Director of Silverlake Axis Limited (listed on the Singapore Exchange Ltd) as well as the Chairman and Independent Non-Executive Director of Cradle Fund Sdn Bhd. She is a Council Member of the Asian Institute of Chartered Bankers, a Trustee for Teach For Malaysia Foundation and The Merdeka Awards Trust (until December 2022) respectively and an Honorary Professor of the University of Nottingham School of Economics, as well she is a member of the Chartered Institute of Islamic Finance Professionals. She has no con ict of interest with the Group and has no family relationship with any Director and/or major shareholder of the Group. She has not been convicted of any offence (other than traf c offence, if any) within the past ve (5) years nor any public sanction or penalty imposed by regulatory bodies during the nancial year. Mr. Koon Poh Ming is a founding Board member of Press Metal Berhad (“PMB”) since its inception on 13 May 1986. He was appointed to the Board of PMAH on 4 July 2017 as an Executive Vice Chairman; ahead of the Company’s assumption of the listing status of PMB pursuant to the internal reorganisation on 10 July 2017. Presently, he is a member of the Risk Management Committee of the Company. After graduating with a Degree in Civil Engineering from the University of Wales in United Kingdom, he started his career with an international consulting engineering rm based in Kuala Lumpur. He is currently a professional engineer registered with the Board of Engineers and The Institution of Engineers, Malaysia. Mr. Koon Poh Ming has been actively involved in the management and business development of the Group. Currently, he also holds the position of Chief Executive Of cer of PMB Technology Berhad. He is the brother to Tan Sri Dato’ Koon Poh Keong, Koon Poh Kong, Koon Poh Weng and Dato’ Koon Poh Tat. He has not been convicted of any offence (other than traf c offence, if any) within the past ve (5) years nor any public sanction or penalty imposed by regulatory bodies during the nancial year. Datuk Yvonne Chia P.M.W. (Yau Ah Lan @ Fara Yvonne) Independent Non-Executive Chairman Koon Poh Ming Executive Vice Chairman Malaysian, Male 67 years of age Malaysian, Female 70 years of age PROFILE OF DIRECTORS PROFILE OF DIRECTORS ANNUAL REPORT 2022 30
Board Meeting Attendance 7/7 Board Meeting Attendance 7/7 Tan Sri Dato’ Koon Poh Keong is one of the founding members of PMB and has been the Group Chief Executive Of cer since 1993. He has been instrumental in growing the Group into the largest integrated aluminium producer in Southeast Asia. Tan Sri Dato’ Koon Poh Keong was appointed as the Group Chief Executive Of cer of PMAH on 4 July 2017; ahead of the Company’s assumption of the listing status of PMB pursuant to the internal reorganisation on 10 July 2017. Tan Sri Dato’ Koon Poh Keong graduated with a Bachelor of Science degree in Electrical Engineering from The University of Oklahoma, United States of America, in 1986. He has more than 30 years of experience in the aluminium industry. Currently, he also acts as the Executive Chairman of PMB Technology Berhad. He is the brother to Koon Poh Ming, Koon Poh Kong, Koon Poh Weng and Dato’ Koon Poh Tat. He has not been convicted of any offence (other than traf c offence, if any) within the past ve (5) years nor any public sanction or penalty imposed by regulatory bodies during the nancial year. Dato’ Koon Poh Tat was rst appointed to the Board of PMB on 7 June 1999. He is a co-founder of PMB and has been actively involved in PMB’s operations including forming up new business outlets both domestic and overseas to enlarge PMB’s network and market share. His hard work and dedication have led the Group to be the pioneer in the aluminium industry. Dato’ Koon Poh Tat was appointed as the Executive Director of PMAH on 4 July 2017; ahead of the Company’s assumption of the listing status of PMB pursuant to the internal reorganisation on 10 July 2017. He is currently the Executive Director of PMB Technology Berhad. He is the brother to Koon Poh Ming, Tan Sri Dato’ Koon Poh Keong, Koon Poh Kong and Koon Poh Weng. He has not been convicted of any offence (other than traf c offence, if any) within the past ve (5) years nor any public sanction or penalty imposed by regulatory bodies during the nancial year. Tan Sri Dato’ Koon Poh Keong Group Chief Executive Officer Dato’ Koon Poh Tat Executive Director Malaysian, Male 62 years of age Malaysian, Male 64 years of age PROFILE OF DIRECTORS Cont’d PRESS METAL ALUMINIUM HOLDINGS BERHAD 31
Board Meeting Attendance 7/7 Malaysian, Male 68 years of age Malaysian, Male 70 years of age Koon Poh Weng Executive Director Koon Poh Kong Executive Director Mr. Koon Poh Kong was a Board member of PMB since 13 May 1986. As a key founder of PMB, Mr. Koon Poh Kong has been responsible for managing various prominent projects involving aluminium applications. His expertise and knowledge in business development and aluminium applications are instrumental to the growth and development of the Group. Mr. Koon Poh Kong was appointed as the Executive Director of PMAH on 4 July 2017; ahead of the Company’s assumption of the listing status of PMB pursuant to the internal reorganisation on 10 July 2017. He resigned as Executive Director of PMB on 19 September 2017. He is the brother to Koon Poh Ming, Tan Sri Dato’ Koon Poh Keong, Koon Poh Weng and Dato’ Koon Poh Tat. He has not been convicted of any offence (other than traf c offence, if any) within the past ve (5) years nor any public sanction or penalty imposed by regulatory bodies during the nancial year. Mr. Koon Poh Weng was a Board member of PMB since 13 May 1986. Being a key founder of PMB, Mr. Koon Poh Weng was pivotal to the Group’s aluminium façade and curtain wall business. Mr. Koon Poh Weng was appointed as the Executive Director of PMAH on 4 July 2017; ahead of the Company’s assumption of the listing status of PMB pursuant to the internal reorganisation on 10 July 2017. Mr. Koon Poh Weng has been widely involved in the design, engineering and development of cost-effective, innovative and versatile system solutions for both local and international projects. He continually strives on the changing and creative ideas to meet the complex and advanced technical skills to all aspects of aluminium and glazing industry. Currently, Mr. Koon Poh Weng is also an Executive Director of PMB Technology Berhad. He is the brother to Koon Poh Ming, Tan Sri Dato’ Koon Poh Keong, Koon Poh Kong and Dato’ Koon Poh Tat. He has not been convicted of any offence (other than traf c offence, if any) within the past ve (5) years nor any public sanction or penalty imposed by regulatory bodies during the nancial year. Board Meeting Attendance 7/7 PROFILE OF DIRECTORS Cont’d ANNUAL REPORT 2022 32
Board Meeting Attendance 7/7 Malaysian, Male 67 years of age Lim Hun Soon @ David Lim Independent Non-Executive Director Mr. Lim Hun Soon @ David Lim was appointed to the Board on 15 August 2018. He is the Chairman of the Audit Committee and also serves as a member of the Nomination and Corporate Governance Committee, Remuneration Committee and Risk Management Committee of the Company. Mr. David Lim is a Member of the Chartered Institute of Taxation, United Kingdom; a professional member of The Institute of the Chartered Accountant in England and Wales, a member of the Malaysian Institute of Accountants; and a member of Malaysian Institute of Certi ed Public Accountants. He graduated with a Bachelor of Arts in Economics from the University of Leeds in 1978 and started his professional career in Peat Marwick Mitchell (now known as KPMG) in the United Kingdom. He returned to Malaysia in 1982 to continue his service with KPMG. Mr. Lim has had an extensive career serving as an Auditor at KPMG for 33 years. During his career with KPMG, he was admitted as Partner of the Firm in 1990 and served in the Management Committee of the Firm from 1997 to 2001 as well as KPMG's Partnership Supervisory Council from 2002 to 2010. He was also the Asian Anchor Practice representative for Marketing from 2000 to 2001 in which he gained extensive and insightful knowledge from KPMG Global counterparts worldwide. In May 2006, he was tasked to start up the Audit Committee Institute, Malaysia, which was a virtual worldwide initiative sponsored by KPMG to assist Independent Non-Executive Directors in enhancing their awareness and ability to implement effective board processes. Mr. David Lim actively served as an examiner for Company Law examinations conducted by the Malaysian Institute of Certi ed Public Accountants (“MICPA”) for over a period of 10 years. He was also the Chairman of the MICPA Code of Ethics Committee and a member of the Malaysian Institute of Accountants Code of Ethics Committee from 2002 to 2004. He also developed an expertise from undertaking the role of Reporting Accountants in initial public offerings (“IPO”) and was the audit partner in charge of over 30 IPOs whilst at KPMG. He retired from KPMG in 2011. In 2013, he was appointed as Council member of The Institute of Chartered Accountants in England & Wales (“ICAEW”). This was the rst time that ICAEW, in its illustrious history had granted Malaysia a seat in the Council. The position was for a term of two (2) years till 2015. He was reappointed for a further two (2) terms till March 2019 (being the maximum permitted tenure). Mr. David Lim sits on the Board of several public listed companies, namely Ranhill Utilities Berhad (formerly known as Ranhill Holdings Berhad) and Kawan Food Berhad as an Independent Non-Executive Director. He also holds directorships in Public Bank Investment Berhad, Rockwills Trustee Berhad, Af n Investment Berhad (in Member’s Voluntary Liquidation) and TSA Group Berhad. He retired from Manulife Holdings Berhad and Manulife Insurance Berhad on 16 July 2021 after having served nine (9) years as Independent Non-Executive Director (maximum tenure permitted for Financial Institution). He has no con ict of interest with the Group and has no family relationship with any Director and/or major shareholder of the Group. He has not been convicted of any offence (other than traf c offence, if any) within the past ve (5) years nor any public sanction or penalty imposed by regulatory bodies during the nancial year. PROFILE OF DIRECTORS Cont’d PRESS METAL ALUMINIUM HOLDINGS BERHAD 33
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