Discussion on Key Financial and Operational Indicators for the segment In the year under review, the ITS segment achieved revenue of RM320.44 million and recorded a segment profit of RM10.76 million, which included a gain of RM2.14 million from the disposal of an associate and a oneoff gain of RM5.15 million from the disposal of property. The segment’s EBITDA for the year was RM13.46 million, which also included the afore mentioned one-off gains. At the beginning of 2021, the ITS segment had an order backlog of RM54.1 million, which decreased by approximately 26% to RM40.08 million at the end of the year. 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 The possibility of economic downturns poses a risk to business activities and may lead to a decrease in demand for its products, thereby reducing its trading revenue. The building material industry is fiercely competitive and faces stiff competition from local and international firms. As such, the management is adopting a prudent and cautious approach to control credit assessments and reduce trading volumes. The weakening of MYR has resulted in higher imported equipment costs, which has had an adverse effect on profit margins and intensified price competition among industry players. Furthermore, increasing financing rates could lead to higher input costs, thereby causing cost escalation and lowering the net profit of the segment. Dealership rights for equipment distribution are subject to renewal at the discretion of principals. To mitigate the risk of relying too heavily on one distributorship, the segment has diversified its product ranges over the years. Discussion on expectation of future results In 2023, the growth of Malaysia’s macro-economy is expected to slow down due to a mild recession in the global economy caused by stagnation or recession in major advanced economies due to high inflation and resulting high interest rates. To remain competitive in the building materials industry, companies need to keep up with the latest technological advancements, as the industry is constantly evolving. Additionally, building material trading companies are under pressure to adopt sustainable practices to reduce their environmental impact. This includes reducing greenhouse gas emissions, using recycled materials, and improving energy efficiency. Adopting sustainable practices, developing robust supply chains, and expanding market coverage can help ITS segment remain competitive and profitable in the industry. MANAGEMENT DISCUSSION AND ANALYSIS Annual Report 2022 Wah Seong Corporation Berhad 43
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