MISC BERHAD INTEGRATED ANNUAL REPORT 2023 www.miscgroup.com KEY MESSAGES SECTION 3 28 29 Resilient and Sustainable Growth MISC recorded a 2.9% increase in revenue, contributed by several key achievements across our various operational segments. The Marine & Heavy Engineering segment recorded an increase in revenue from higher progress in both new and ongoing projects. Our Gas Assets & Solutions as well as Petroleum & Product Shipping segments also contributed to the overall revenue growth, benefitting from elevated charter rates during the year. However, our Offshore Business segment recognised lower construction revenue for the MERO 3 Project. During the year in review, the Group registered a lower operating profit of RM2,881.4 million compared to RM3,102.0 million reported in FY2022. This was largely due to additional cost provisions arising from revised schedule on ongoing projects in the Marine & Heavy Engineering segment. However, both Petroleum & Product Shipping and Gas Assets & Solutions segments recorded higher operating profit from higher revenue as mentioned above. Despite the lower operating profit, MISC reported a higher profit before tax of RM2,093.7 million in FY2023, an increase of 11.7% from RM1,874.3 million recorded in FY2022 mainly due to higher share of profit from joint ventures and lower impairment charges compared to the previous year. The Group recorded strong CFO amounting to RM5,696.3 million in FY2023, an increase of RM2,654.2 million compared to RM3,042.1 million in FY2022. This was mainly contributed by the lower payments for costs relating to turnkey activities for the MERO 3 Project in the current year and the charter hire prepayment received for two Floating Storage Units (FSU prepayments) in the Gas Assets & Solutions segment. Additionally, the Group benefitted from the higher charter rates in the Petroleum & Product Shipping segment. Excluding the one-off FSU prepayments and the turnkey activities above, the Group’s adjusted CFO of RM6,536.1 million was higher by RM814.1 million or 14.2% compared to RM5,722.0 million in FY2022. MISC Group’s cash balance remains healthy at RM7,731.6 million which together with the Group’s existing funding facilities should enable us to fund committed CAPEX and pursue targeted strategic investments. Furthermore, MISC’s balance sheet remained resilient, with total assets growing by 3.8%, as a result of an increase in recognition of contract assets stemming from the MERO 3 Project, coupled with the CAPEX incurred on vessels during the year. The Group exhibited improved financial leverage, evidenced by a reduction in the net gearing ratio from 0.28 to 0.25 from lower borrowings and increased shareholders’ funds. Given our strong balance sheet, S&P and Moody’s reaffirmed MISC’s ratings at BBB+ and Baa2, respectively, reflecting the company’s prudent financial management. Underscored by our commitment to advance in environmentally responsible practices, our Sustainability-Linked USD527 million Senior Secured Term Loan for six VLECs was awarded the “Sustainability-Linked Deal of the Year for Asia” by Marine Money. The 11-year non-recourse term loan is MISC’s debut sustainability-linked loan which has been structured to align with the Group’s long-term business strategy and sustainability aspirations. Following our robust financial performance in FY2023, the Board of Directors declared a higher dividend of 36 sen per share, reflecting a dividend payout of over 80% of profit after tax for 2023, demonstrating the company’s commitment to enhance shareholders’ returns. Overall, MISC recorded commendable results for 2023, thanks to our dedicated and resilient workforce who have worked hard to overcome the challenges and seized the opportunities to deliver strong performance. Looking Forward The MISC 2030 Aspiration of 50% improvement in CFO and 25% of the CFO from clean energy solutions is in line with MISC’s strategy to increase shareholders’ returns and to grow the clean energy segment. Going forward, a significant portion of our CAPEX will be directed towards clean energy solutions. MISC remains committed to prudent financial management to sustain our growth trajectory responsibly and deliver long-term value to our shareholders. RAJA AZLAN SHAH RAJA AZWA Vice President, Corporate Planning (effective 1 March 2024) Vice President, Group Finance (until 29 February 2024) The tightening of monetary policies by central banks globally has led to higher interest rates and financing costs, exposing economic growth to downside risks. Nevertheless, major central banks’ interest rate monetary policies are expected to be nearing their respective cyclical peaks. Despite these challenges, our strategic financial management, including maintaining a high fixed-to-floating rate borrowings ratio, has been instrumental in navigating market volatility. Furthermore, we have tactically deployed excess cash to support projects under construction, thereby optimising our financing cost while maintaining our liquidity position. Overall, MISC delivered solid financial results for FY2023. Vice President’s Message Corporate Planning & Group Finance Vice President’s Message Corporate Planning & Group Finance FINANCIAL PERFORMANCE REVIEW
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