Wah Seong Corporation Berhad Annual Report 2021 37 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 Although we are already seeing more relaxation in the various restrictions previously imposed to contain Covid-19 spread, there is still some lingering uncertainty. Any change in the current plan globally will have a material impact on the Group as it may disrupt operations, mainly in relation to logistics services, human capital movement, cost escalation, new capital spending deferment etc. Such issues are largely beyond Wasco’s control. However, the senior management team at Wasco monitors market developments closely and take mitigating actions quickly to contain any impact arising from Covid-19 related events. The escalating tension from the Ukraine / Russia conflict may impact the supply chain, especially those based out of Europe. There is also a concern on cost escalation due to shortage of supply in the market created by the conflict. Wasco has procurement activity in many different geographical locations with presence of local procurement teams. The procurement teams continue to identify alternative sources of supply where a clear risk arising from this conflict is identified. As a good practise, Wasco also has multiple suppliers for many of the materials and services it uses to mitigate the risk of over reliance on a single source. Wasco places strong emphasis on a Safety Culture through its HSE programmes. Non-compliance to safety rules and guidelines are viewed seriously and could lead to termination of employment or services in some cases. The policies and procedures are clearly communicated to our employees, contractors and service providers. Management walk about, audit and inspection are carried out periodically to ensure compliance and also to identify any improvements required. Awareness campaigns and regular training are conducted for employees and contractors onsite. Target Key Performance Indicators (‘KPI’) are also set to create greater accountability. Wasco operates in 17 countries and 10 plants/yards worldwide. Wasco can be exposed to risk of litigation action by customers, vendors and other parties. Such litigation actions may have material effect on its results. To mitigate the risk, Wasco has a robust system to review contracts and agreements that governs all parties contractual obligations. Discussion on expectation of future results The current Ukraine / Russia conflict has resulted in a supply shortage and significant uncertainty in the market. This is reflected by the significant increase in the Brent oil price that stands at USD104/bbl. With many countries sourcing for alternate supply of gas, the capital spend on this sector is expected to show an increasing trajectory in the short to medium term. This will create new opportunities for Wasco. This is expected to have a positive impact on Wasco’s results. Wasco has been predominantly involved in gas development projects for many years now. With gas still expected to be a major source of energy, Wasco is well positioned to secure and execute gas projects for the foreseeable future. Decarbonisation being the main focus for major energy market participants, Wasco sees opportunities in the short term as these companies invest in upgrading their existing operations with more energy-efficient pumps and compressors, installing LIDAR systems and vapour recovery units and expanding petrochemical production. This will increase the demand for Wasco’s products and services using existing resources and core capabilities in many instances. The push for alternative and renewable energy has opened up new market opportunities for Wasco. The early engagement and positioning of capabilities over the past four years has enabled Wasco to win projects related to hydrogen in Australia. Wasco believes this market will grow steadily over the coming years. MANAGEMENT DISCUSSION AND ANALYSIS RM868.53 Million Oil & Gas segment revenue 2021 RM281.96 Million Renewable Energy segment revenue 2021 RM278.77 Million Industrial Trading & Services segment revenue 2021 ZERO LTI The Oil & Gas segment recorded 47,728,040 Man-hours without Loss Time Injury in 2021
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