Wah Seong Corporation Berhad Annual Report 2021 39 MANAGEMENT DISCUSSION AND ANALYSIS To keep abreast with technologies on IOT4.0 to improve efficiency in our products and services, AI unit implemented separate and individual modernisation and digitalisation programs, which include SCADA & PLC Monitoring System and integration of the dust collecting system into the KCP plant. AI has incorporated such technology enhancement in our newly launched DY-30 KCP machine with higher capacity and better performance capturing interests from major palm kernel crushing players. Apart from sales at AI unit, new service centres and workshops in Medan and Banjarbaru in Indonesia have improved our response time and services to our customers especially in Sumatra and Kalimantan. In view of the COVID-19 situation limiting overseas travelling, our Indonesian operations have been beefed up through local recruitment and training to support the market in Indonesia. Discussion on Key Financial and Operational Indicators for the segment For the year under review, the RE segment recorded lower revenue of RM281.96 million as compared to the previous year of RM357.45 million but generated better segment profit of RM28.23 million compared to RM27.66 million in the previous year. Despite challenging market conditions and work restrictions faced during MCO 3.0 in Malaysia, the RE segment managed to produce commendable results and contributed strong positive EBITDA of RM36.99 million to the Group. The RE segment had an order book of RM251.82 million at the beginning of 2021 and finished the year with an order book of RM292.46 million. Continued strong order books at RE segment indicate better prospects for the coming year as we see further improvement in early 2022. 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 Risks linked to the COVID-19 outbreak are closely monitored at each operating unit to ensure smooth business activities. The RE segment recognises risks associated with supply chain disruptions due to interruption in logistic services, fluctuation in commodity prices, sanctions and embargoes against certain exporting countries. To date, several risk mitigation actions had been implemented, which includes alternative material sourcing to minimise the impact of supply chain disruptions. Movement Control Orders (“MCO”) had affected our services rendered to customers by our team during the lockdown periods. New workshops will be located closer to plantation customers to better manage this risk in the future. Fixed price contracts posed major risk to RE’s performance, and foreign currency fluctuation also threatens its overall profit margin. Execution delays might have attributed to lower revenue and resulted in weaker earnings in the RE segment. The management is actively building up its source of recurring income to cushion the impact of fixed price contracts. Various efforts to broaden customers base and diversification of products range have enabled RE to ease reliance on certain sectors and customers. Discussion on expectation of future results The global oleo chemicals industry is experiencing overwhelming expansion as the shift and reliance on sustainable chemicals are the key drivers for this major growth.
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