50 YINSON HOLDINGS BERHAD | INTEGRATED ANNUAL REPORT 2023 Our commitment is to maintain a cash balance to cover our working capital and meet our financial requirements for the years to come. We place continuous focus on both improving our free cash flow position and increasing our long-term borrowings to finance our future growth. We are committed to maintaining this prudent and forward-looking approach, as it has been a crucial strategy for the achievement of our success thus far, and we believe it will continue to safeguard the growth plans that we have ahead. The Group’s cash and bank balances and liquid investments decreased by 42% from RM2.9 billion to RM1.7 billion in FYE 2023. This was mainly due to the redemption of USD100 million (RM465 million) perpetual securities and higher project expenditure for EPCIC business activities and the construction of the Nokh Solar Park to build our portfolio of assets in the current financial year. The Group’s current ratio decreased from 2.21 times to 0.98 times in FYE 2023, mainly as a result of the lower cash position and increased payables to fund the EPCIC business activities and construction of the Nokh Solar Park at the end of the current financial year. The decrease is also in line with our prudent cash and working capital management policy as explained below. During the construction period of our FPSOs, there is a trade-off between maintaining our short-term payables, and drawing down our financing facilities to settle these payables. In the current high interest rate environment, it is more prudent for us to maintain our short-term liabilities rather than incurring additional financing costs. Included within the Group’s cash and bank balances and liquid investments of RM1.7 billion are bank balances and deposits of RM476 million which are pledged to banks or lenders and can only be used for the servicing of debts or the payment of suppliers relating to the construction of certain FPSO projects. The remaining balance of RM1.2 billion represents Yinson’s free and available cash position, which provides flexibility for expansion and an adequate buffer to meet any unforeseen cash requirements. Free and available cash is derived from cash flows from operations, the raising of financial capital and the drawdown of loans and borrowings pending deployment for projects. It is important to note that the cash flows generated from our operations have been extremely stable in recent years. As part of how we prudently manage our liquidity risk, our free and available cash is mainly held in time deposits and interest-bearing accounts and is managed with a goal of capital preservation and liquidity so that funds are available at the required time buckets based on cash flow projections. Our strategy for managing liquidity includes: • Maintaining an appropriate mix of high-quality liquid investments and adequate cash buffers to meet unexpected cash outflows. • Maintaining and monitoring 5-year cash flow projections to match the allocation of long-term financial capital with project capital expenditure needs. • Using reasonable assumptions on continuing operations and financing of projects secured, Yinson’s liquidity is sufficient for at least the next 5 years. • Conducting monthly stress testing to assess cash flow vulnerability under stressed situations and deploying the necessary action plans. CASH FLOWS AND LIQUIDITY FYE 1,660 2,873 2,050 1,465 1,290 Cash and liquid investments (RM million) FYE 0.98 2.21 1.45 1.45 1.40 Current ratio (times) 2023 2022 2021 2020 2019 2023 2022 2021 2020 2019 FINANCIAL REVIEW
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