42 YINSON HOLDINGS BERHAD | INTEGRATED ANNUAL REPORT 2023 In FYE 2023, the Group continued to deliver on its value creation objectives, producing its best performance to date in terms of revenue and PAT. Revenue was RM6.3 billion, a 75% increase compared to the RM3.6 billion recorded the year before. As a result, PAT also increased to RM588 million, 12% higher from RM524 million in FYE 2022. Notably, PAT growth was recorded despite one-off costs incurred and higher financing costs largely attributable to increased investments in our businesses. FINANCIAL REVIEW Commentary by Mr Guillaume Jest, Group Chief Financial Officer STRATEGIC PROGRESS In FYE 2023, we continued to build our financial foundation in alignment with our goal of advancing an inclusive transition. Significant capital was allocated to our two business units that directly support the development of an economy powered by clean energy, YR and YGT, clearly demonstrating our commitment to the transition. As of 31 January 2023, the cumulative capital invested into developing these two business units, represented by their total asset values, amounted to RM1.1 billion since their establishment in 2019 and 2020 respectively. We also actively invested in the decarbonisation of our core FPSO business, by studying, developing and implementing technologies to ensure that our FPSOs operate efficiently and in an environmentally responsible manner. Thanks to these efforts, we are leading the energy transition in our industry and that we have established a solid organisational foundation that will support and future-proof our business. In line with Yinson’s expansion internationally, we recognise there will be costs incurred, especially given the Group’s priority in ensuring a strong in-house talent base and sustained investments into systems and digitalisation. We believe these investments are necessary for our transformation and we will continuously monitor these costs to ensure that the Group’s profitability is protected. CHALLENGES AND MITIGATION In FYE 2023, like most other businesses globally, the Group was subject to the two key market forces of inflation and interest rates. We continue to work actively to mitigate these market forces, with strategies and actions as described below. Inflation Project costs for EPCIC and Renewables projects have been rising, resulting in lower returns for committed projects under construction. We have already seen an impact with the recognition of an impairment loss of RM117 million for the Nokh Solar Park project as we acted conservatively in factoring in these project cost increases. Nevertheless, the Nokh project is expected to be profitable following its commencement of operations, scheduled for Q3 FYE 2024. To mitigate the impact of inflation, we conduct effective forecasting and cost management through strong collaborations between our Project and Finance teams. Wherever possible, we strive to lock in the prices of materials and major equipment in the initial phase of the contract. Inflation risk is also factored into our contracts through agreed rate escalation based on key market inflation benchmarks. In the FPSO business specifically, we manage inflation by diversifying the location of the construction, i.e. FPSO Anna Nery, FPSO Maria Quitéria and FPSO Agogo in China, and FPSO Atlanta in Dubai. We are also managing our inventories strategically by carrying buffer stocks to ensure the smooth operation of our FPSOs while minimising cost volatility.
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