MISC BERHAD INTEGRATED ANNUAL REPORT 2023 www.miscgroup.com KEY MESSAGES SECTION 3 22 23 President/Group Chief Executive Officer’s Message President/Group Chief Executive Officer’s Message We achieved a significant milestone with the sail away of FPSO Marechal Duque de Caxias from Yantai, China to the Mero field of the Santos Basin in offshore Brazil. This FPSO is our Group’s first ultra-deepwater asset and is amongst the largest of its kind, with first oil scheduled in the second half of 2024. Our team navigated the significant challenges of the COVID-19 pandemic and the consequent supply chain issues and completed the construction phase, safely with 28 million man-hours LTI free. I commend them for their relentless focus on project execution and excellence. We successfully delivered two new LNGCs and two new eco-friendly LNG dual-fuel VLCCs into long-term charters, with the third delivered to our client in early 2024. These vessels will bolster our secured income profile and reinforce our commitment to reducing our carbon footprint. Through MHB, we successfully secured a contract for an Offshore Submersible High Voltage Direct Current (HVDC) project. This marked a notable milestone for the Group as we venture into the renewable energy sector. Additionally, we entered into a binding Heads of Agreement with Pengerang LNG (Two) Sdn. Bhd. for the supply, operation and maintenance of an FSU for a 20-year period, repurposing and extending the operational lifespan of our nominee vessel, Puteri Delima Satu, securing future cash flows, while supporting the national energy transition in Malaysia using LNG as a transitionary fuel. Prioritising HSSE At MISC, safety is paramount. Throughout the year, we launched several initiatives aimed at enhancing workplace safety, preserving the environment and upholding regulatory compliance. Whilst our group cultural maturity survey results have improved, we have experienced unfortunate Health, Safety, Security and Environment (HSSE) related incidents and injuries. We have conducted an exhaustive review of our frontline processes and reinforced the “Tone at the Top” throughout the group. The HSSE management of our contracting partners is an area of focus for the coming years. Sustainable Maritime Leadership It is our priority to deliver the energy the world needs today in a responsible manner that minimises our carbon footprint and impact on tomorrow. We continue to advocate internationally for tangible action towards delivering an equitable and resilient transition. In 2023, we were able to provide a voice for Malaysia, Southeast Asia and our industry at several events including the launch of the Clean Energy Marine Hubs at the G20 in Goa and the Shaping the Future of Shipping Summit at COP28. In addition to these engagements, we remain active in several industry bodies such as the Global Maritime Forum, INTERTANKO and SIGTTO. Our leaders have been involved in a number of these industry bodies, which allows MISC to address industry issues as well as provide our input in shaping industry policies. 2023 was a dynamic year. Recent times have unveiled challenges of unprecedented scale, from the impacts of COVID-19, worsening geopolitical tensions to society’s intensifying demand to accelerate the energy transition. In 2023 these challenges prompted a critical reflection – how do we translate our ambition into action? This year has been a testament to such perspective, signifying a pivotal period of strategic recalibration and operational advancement for MISC, as we forge ahead in the shift from emissions to solutions. A year where we have again shown resiliency as a team. A Review of 2023 2023 was a year of project execution, ambition setting and laying the groundwork for future success. A strategic business review was conducted, leading to various structural adjustments within the group. These adjustments are essential for the successful implementation of our strategy, aimed at delivering sustainable financial returns and reducing GHG emissions in line with our ambitious targets. MISC delivered robust financial returns and improved year-on-year performance. Group revenue rose 2.9% to RM14,271.7 million in FY2023 compared to RM13,867.0 million in FY2022, while profit before tax increased by 11.7% to RM2,093.7 million in FY2023, as compared to RM1,874.3 million in FY2022 – improving our returns to shareholders. The Group recorded cash flows from operating activities (CFO) of RM5,696.3 million in 2023. Excluding the CAPEX relating to the MERO 3 Project and the one-off FSU prepayments, MISC would have had an adjusted CFO of RM6,536.1 million in FY2023, a 14.2% increase from 2022. Our balance sheet continues to demonstrate resilience, evidenced by the reduction in our net gearing ratio from 0.28 to 0.25. MISC’s credit rating remains investment grade and is one of the highest in the shipping industry. This recognition reflects the strong financial positions of both our company and our major shareholder. As a result of our healthy financial position and after taking into account our future CAPEX requirements, our Board declared an increased dividend of 36 sen per share for 2023, surpassing that of prior years. Strategic Progress & Highlights As outlined in my message last year, our focus for 2023 was to prioritise project execution while remaining open to opportunistic investments which met our strategic aims and created long-term shareholder value. We completed a strategic business review in 2023, strengthening our foundation for the future. This has led to the development of our MISC 2030 Aspiration. This formed the basis to strengthen our foundation to grow our core business, as well as commence our pivot to support a low-carbon future. We also took the decision to merge two of our divisions, Port Management & Maritime Services and Integrated Marine Services into a unified segment, Marine Services. The merger, which should complete in 2024, will allow our services arm to scale up and enhance our capabilities to support our growing business requirements, for the medium and long-term. In addition, after a successful incubation year, the New Energy and Decarbonisation (NED) unit established in 2023 shall become a full-fledged business division in 2024, amplifying our efforts in this critical area. Dear Stakeholders, CAPTAIN RAJALINGAM SUBRAMANIAM President/Group Chief Executive Officer FPSO Marechal Duque de Caxias sailed away safely in February 2024 with 28 million man-hours LTI free
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