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
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