Wah Seong Corporation Berhad Annual Report 2019

25 ANNUAL REPORT 2019 The oil and gas segment recorded 24,905,183 Man-hours without Loss Time Injury (“LTI”) in 2019. WASCO recorded other positive indicators reflecting the effectiveness of the safety culture instituted by the Group. Discussions of Health, Safety and Environment (“HSE”) are set out separately in the Sustainability Development section of the Annual Report on page 14. 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 COVID-19 outbreak which resulted in a lockdown of billions of people will have an unprecedented impact on the global economy triggering a recession. This largely remains beyond WASCO’s control. Delays on project awards in final investment decision (“FID”) and the lack of funding remain key risks for the industry. Industry players remained cautious and continue to assess the outlook prior to committing to further investments. WASCO’s Pipeline Services and Engineering Services business are independent of each other and have different target markets in the oil and gas value chain. This, in itself, is a conscious strategic decision made by WASCO to mitigate the risk of being overly reliant on a specific market. The management team conducts strategy meetings and business strategies reviews during the year to ensure operational sustainability. WASCO continues to hold engagement sessions with customers and partners to identify new opportunities. Steps are also undertaken to pre-qualify WASCO in new markets to establish a competitive presence. The risk related to the COVID-19 outbreak is also closely monitored at each business operations. WASCO has a pandemic preparedness plan as part of its business continuity. Apart from the HSE risk, the Group also recognise risk related to operational and supply disruption brought about by the COVID-19 outbreak. To date, WASCO has implemented several risk mitigation strategies that focus on split working teams and alternative sourcing strategies to minimise the impact of supply disruptions. Clients have also been duly notified should there be impacts on contractual terms for on-going secured projects. WASCO places a strong emphasis on Health, Safety & Environment (“HSE”). Non-compliance to standards or a major HSE incident in its operations would affect the Group’s business and its reputation. In mitigation of the risk, policies and procedures are established, communicated and implemented at all our operations. Audits and inspection are conducted periodically to ensure compliance. Awareness campaigns and on-going training are conducted and management does safety walkabout regularly at the sites. Target Key Performance Indicators (“KPI”) are also set to create greater accountability. WASCO today is operational in 19 offices and 12 plant/yard worldwide and the business of the Division could be exposed to the risk of litigation action by customers, vendors and other parties. Such litigation actions may have a material effect on the Company’s result. To mitigate this risk, the Company has a robust system in place to review contracts and agreements to govern contractual obligations with all parties. Discussion on expectations of future results At the point of writing, the International Energy Agency (IEA) slashed its oil demand forecast to 910,000 barrels per day from 1.1 million barrels per day as the COVID-19 outbreak disrupts. This downward revision trend in demand has dimmed the outlook of the global oil and gas industry. Similarly, research analysts have also slashed their 2020 natural gas price forecast from USD2.50/MMBtu to USD2.20/MMBtu. Coupled with the price war between Saudi Arabia and Russia, which saw the oil price plunge by 30% to USD31 per barrel for futures benchmark, experts are predicting postponement of oil and gas projects worldwide. MANAGEMENT DISCUSSION AND ANALYSIS Industrial Trading & Services segment revenue 2019 RM426.1 Million Renewable Energy segment revenue 2019 RM399.6 Million RM1.5 Billion Oil & Gas segment revenue 2019 ZERO LTI The Oil & Gas segment recorded 24,905,183 Man-hours without Loss Time Injury in 2019