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SIG G
ASES BERHAD
(Company N
o. 875083-W)
ANN
UAL REPO
RT 2018
SIG GASES BERHAD (Company No. 875083-W)PLO 137, Kawasan Perindustrian Senai III 81400 Senai, Johor, Malaysia.Tel : 07-598 3863 (5 Lines) Fax : 07-598 3869 Email : [email protected]
w w w . s i g g a s e s . c o m
(Company No. 875083-W)
annual report 2018
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CONTENTS2
3
4
5
9
15
17
21
22
38
46
50
54
Corporate Information
Corporate Milestone
Corporate Structure
Chairman’s Statement
Management Dicussion and Analysis Statement
Financial Highlights
Profile of Directors
Profile of the Key Management
Sustainability Statement
Corporate Governance Overview Statement
Audit Committee Report
Statement on Risk Management andInternal Control
Additional Compliance Information
Financial Statements
List of Properties
Analysis of Shareholdings
Notice of Annual General Meeting
Statement Accompanying Notice ofAnnual General Meeting
Annexure I
Form of Proxy
55
121
122
125
130
131
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SIG GASES BERHAD (875083-W)2
Datuk Syed Ahmad Bin Alwee Alsree
Non-Independent Non-Executive Director
Peh Lam Hoh
Executive Chairman
Lau Cheng Ming
Executive Director
Diong Tai Pew
Senior Independent Non-Executive Director
Lee Ting Kiat
Independent Non-Executive Director
Lim Tin Teng @ Lim Jit Teng
Independent Non-Executive Director
AUDIT COMMITTEE
Chairman
Diong Tai Pew
Member
Datuk Syed Ahmad Bin Alwee Alsree
Lee Ting Kiat
Lim Tin Teng @ Lim Jit Teng
REMUNERATION COMMITTEE
Chairman
Peh Lam Hoh
Member
Diong Tai Pew
Lee Ting Kiat
Lim Tin Teng @ Lim Jit Teng
NOMINATING COMMITTEE
Chairman
Diong Tai Pew
Member
Datuk Syed Ahmad Bin Alwee Alsree
Lee Ting Kiat
ESOS COMMITTEE
Chairman
Peh Lam Hoh
Member
Lau Cheng Ming
Diong Tai Pew
Koh Beng San
SECRETARIES
Yong May Li (f )
(LS 0000295)
Wong Chee Yin (f )
(MAICSA 7023530)
AUDITORS
Ernst & Young (AF0039)
B-15, Medini 9
Persiaran Medini Sentral 1
Bandar Medini Iskandar Malaysia
Iskandar Puteri
79250, Johor Bahru, Malaysia
Tel : 07-288 3111
Fax : 07-288 3112
REGISTRAR
Tricor Investor & Issuing Services
Sdn Bhd (11342-H)
Unit 32-01, Level 32,
Tower A, Vertical Business Suite
Avenue 3, Bangsar South,
No. 8, Jalan Kerinchi
59200 Kuala Lumpur, Malaysia
Tel : 03-2783 9299
Fax : 03-2783 9222
REGISTERED OFFICE
Suite 1301, 13th Floor
City Plaza, Jalan Tebrau
80300 Johor Bahru, Johor
Tel : 07-335 4988
Fax : 07-335 4977
PRINCIPAL BANKERS
Malayan Banking Berhad
AmBank (M) Berhad
Hong Leong Bank Berhad
Al Rajhi Banking & Investment
Corporation (Malaysia) Berhad
STOCK EXCHANGE LISTING
Bursa Malaysia Securities Berhad
(“Bursa Securities”) Main Market
WEBSITE
http://www.siggases.com
BOARD OF DIRECTORS
CORPORATE INFORMATION
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ANNUAL REPORT 2018 3
1996Incorporation of Southern
Industrial Gas Sdn Bhd
2012Acquired 40% in the equity of a
joint venture to produce and supply liquids and compressed
gases in Samalaju Industrial Park, Bintulu, Sarawak
Started production and supply of Hydrogen gases in Nilai
Set up Oxygen and Carbon Dioxide Refilling facilities in
Krubong, Melaka
Set up Oxygen Refilling facility in Gebeng, Kuantan
Set up Argon Refilling facility in Grandmet Industrial Park,
Bintulu, Sarawak
2013Set up oxygen refilling
facility in Ipoh
2014Centralisation of production
from Puchong to Nilai
Develop 8 units of
Semi-Detached Industrial
Buildings
2015Acquired a 60-year lease
over land measuring 30
acres at Samalaju Industrial
Park
2008Plant in Juru relocated to
Bukit Minyak, Penang, with
expanded facilities to refill
oxygen, nitrogen, and
carbon dioxide
2009Commenced Group’s
Second production plant in
Nilai, Negeri Sembilan, to
produce acetylene and
fuming gas
2010Listed on Main Market of
Bursa Securities
1997Commenced factory in
Senai, Johor to produce
acetylene and carbon
dioxide, and refill various
industrial gases
2004Obtained ISO 9001:2000 in
quality management of
industrial gases production
2001Set up plant in Juru,
Penang, to refill oxygen and carbon dioxide
Set up plant in Puchong, Selangor, to refill oxygen, nitrogen, argon, carbon dioxide and gas mixture
2003Commissioned Air Separation Unit (ASU) in Senai
to produce liquid oxygen and liquid nitrogen
Set up plant in Krubong, Melaka, to refill oxygen
2017Started production and
supply of Nitrous Oxide in
Penang
CORPORATE MILESTONE
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SIG GASES BERHAD (875083-W)4
(Company No. 875083-W)
SOUTHERN
INDUSTRIAL GAS
SDN BHD(380462-X)
100% 40%
SOUTHERN
OXYGEN
SDN BHD(788562-U)
100%
SOUTHERN
NITROUS OXIDE
SDN BHD(789834-H)
100%
100%
SIG
PROPERTIESSDN BHD(1043951-K)
IWATANI-SIG
INDUSTRIAL GASES
SDN BHD(975110-V)
SDN BHD(975110-V)
CORPORATE STRUCTURE
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ANNUAL REPORT 2018 5ANAANANANANAANNNNNNUNNNNNUUUALALLALLLLLA RRRRREPEEPEPEPEPORORORRRRRT T TTTTTTTTTT 2222020000002020220002220220000202000202020202222022 1818188188181881881888188811881188118811888888 5555
CHAIRMAN’S STATEMENT
ANNUAL REPORT 2018 5
Dear Shareholders,
On behalf of the Board of Directors, I am pleased to present
the Annual Report and the audited financial statements of the
Group, SIG Gases Berhad (“SIGGAS” ) and its subsidiaries for
the financial year ended 31 December 2018.
ECONOMIC AND INDUSTRY LANDSCAPE
The Malaysian Gross Domestic Product (GDP) grew by 4.70% for the year 2018. Despite a very challenging and uncertain
domestic and international political and economic environment.
In the middle of the year 2018, for the first time in history, Malaysians elected a new coalition of political parties to run the
country. The new government swiftly implemented several major economic policies including the abolishment of Goods and
Services Tax, the re-introduction of Sales and Service Tax, the expeditious refund of input taxes of more than RM300 Million
which had a favourable impact on the business sentiment and purchasing power of the consumers. There were also numerous
other major domestic economic developments that had significantly impacted the Malaysian economy. This included the
improved market condition in the global oil and gas sector, cutting back of subsidies on essential goods, the suspension of East
Coast Rail line project, the high-speed rail project between Singapore and Kuala Lumpur and the new mega port development
in Malacca.
Globally, political and economic environments were not any less challenging. The on-going trade war and tariff negotiation
between China and USA, the protectionist policy adopted by Trump's administration and the Brexit uncertainty continued to
destabilize the global trade and investment sentiment. The anticipated further increase in the US interest rate, the heightened
tension in the Middle East and numerous other major events had also impacted unfavourably on the global economy.
The industrial gas industry in Malaysia continues to be keenly competitive. Due to low entry threshold for compressed liquid
gases, many small gas refillers and refilling stations were set up competing for a highly fragmented market. As a result, profit
margin in general, continued to be suppressed despite experiencing shortages of certain liquid products during the year.
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SIG GASES BERHAD (875083-W)6
OPERATIONS REVIEW
The Group managed to achieve a moderate growth in both revenue and earnings in the first half of the year due to volume
growth in nearly all product segments across our key operating markets. However, revenue was lower in second half of the year
with fewer trading days due to festive seasons. Overall revenue for the full year was RM 78.58 million, marginally higher than
that of 2017 by RM2.56 million.
Operating margin was lower than that of 2017 due mainly to higher cost of sales, operating cost and higher depreciation charge
on the commissioning of the Nitrous Oxide plant and refurbishment of the ASU plant.
Our associate company, Iwatani-SIG Industrial Gases Sdn Bhd in which we own 40% of the equity interest registered an
improved performance in year 2018. The associate company delivered a profit after tax of RM4.72 million compared to RM4.61
million in year 2017, an increase of 2.16%.
Our ASU plant in Senai, Johor was fully refurbished with increased production capacity, duly commissioned and commenced
production in December 2018.
Facing with stiff competition, the Group continued to upgrade and expand its production facilities and product range. Capital
expenditure for year 2018 was RM12.11 million, down 10.69% from 2017.
During the year the Group has acquired the remaining 20,000 shares it did not own in Southern Nitrous Oxide Sdn Bhd at a total
consideration of RM0.14 million, making it a wholly owned subsidiary of SIGGAS.
FINANCIAL REVIEW
In summary the Group achieved a revenue of RM78.58 million in 2018, up by RM2.56 million or 3.37% as compared to that of
year 2017. The increase in revenue was partially due to sales in liquid nitrous oxide of RM0.86 million brought about by our new
production facilities.
The Group's gross profit was RM17.75 million, which was marginally lower by RM3.74 million or 17.4% as compared to that of
the same period in year 2017.
Profit before tax was slightly higher by RM0.20 million at RM4.85 million as compared with RM4.65 million of the corresponding
year mainly due to increase in other non-operating income by RM1.07 million and the reversal of impairment of the ASU plant
amounting to RM1.55 million. These amounts were partially set off by the increase in selling expenses, administrative expenses
and finance costs.
Excluding non-operating income and the reversal of impairment, the profit before tax for the year was RM3.30 million as
compared to RM4.65 million of the previous year, a decrease of 29%. The lower profit was largely due to higher operating costs
brought about by the refurbished ASU plant and newly acquired Nitrous Oxide production plant.
The Group’s net earnings per share has improved to 2.67 sen as compared to 2017 of 2.26 sen, up by 0.41 sen.
The Group’s balance sheet position remained strong, with increased shareholders’ equity of RM127.99 million, up by 2.24% from
RM125.19 million a year ago.
Total borrowings increased to RM23.81 million from RM18.30 million, with cash and bank balances remained basically
unchanged at RM3.89 million at the end of the year. The Group’s increased borrowing was largely used to finance the capital
expenditure of RM12.11 million in the year.
The net gearing ratio marginally increased to 0.19 time from 0.15 time a year ago. This gearing ratio is within our financial safety
limit and will enable us to continue undertaking further expansion when opportunities arise.
CHAIRMAN’S STATEMENT Cont’d
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ANNUAL REPORT 2018 7
DIVIDEND
Taking into consideration the overall financial results of 2018, your Board has proposed a First and Final Single-Tier Dividend of
0.50 sen per ordinary share in respect of the financial year. This will translate to a dividend payment of RM937,500 or 18.73%
pay out rate of the Group’s 2018 net after tax profit.
In proposing the dividend payment, the Board has sought to balance the reward to shareholders with Group’s need to conserve
cash in order to drive its plans for future growth.
The proposed First and Final Single-Tier Dividend is subject to shareholders’ approval at the upcoming Annual General Meeting
to be held on 21 June 2019.
INDUSTRY OUTLOOK AND PROSPECTS
Given the prevailing economic climate many international financial institutions have expressed their concern about the global
economic outlook in 2019. Tighter monetary policy, weaker earnings growth and political challenges are confronting many
major economies in the world.
The prolonged US-China trade war and tariff negotiation, the uncertainty around the UK’s exit from the European Union and
other global political happenings have soured business and consumer sentiment in 2019. The uncertain business environment
is expected to slow down activities in manufacturing, construction and engineering sectors. Nevertheless, our industrial gases
business is well positioned to benefit strongly from any future improvement in these sectors.
The Government remains committed to steer the economy forward, demonstrated most clearly by its Budget 2019
announcement. The key thrusts of these initiatives include infrastructure developments to enhance transportation networks the
continuing focus on economic development and the launching of programmes to improve the socio-economic well-being of
the people.
The Group will continue to penetrate further into the East Malaysia market, especially given the vast opportunities opening up
with the rapid progress of the SCORE.
The Group expects that its investment in the UHP Nitrous Oxide plant and second new Nitrous Oxide Plant will meet the
demand of both local and export markets to increase the revenue of the Group in the coming years. We plan to further invest
approximately RM8.00 million in 2019 to increase production facilities.
The revision of minimum wage policy starting 1 January 2019 and the announcement by the government of a lower foreign
workers’ levy are mutually off-setting in effect and therefore will not bring about significantly impact on the operating cost in
the year.
We will continue to focus on our sales and marketing initiatives to build bigger market share from manufacturing and
engineering sectors and to seize business opportunities in the export markets. The Group remains confident to achieve a
sustainable medium-term growth.
SUSTAINABILITY
As a listed entity, we support and sustain economic development and have a clear responsibility to play a positive role in the
industry in which we operate. We have continued to build a formal assessments and sustainability process so that we can
clearly identify and minimise our environmental economic and social risks. Going forward, we will conduct the sustainability
assessment on an annual basis.
CHAIRMAN’S STATEMENT Cont’d
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SIG GASES BERHAD (875083-W)8
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Our commitment to the CSR agenda remains intact and we believe that our pursuit of achieving our business objectives will
require a balance between financial stability and our contribution not only to society, but the environment as well. Therefore, in
the year under review, we have adhered to our sustainable CSR programme.
As part of our environmental preservation efforts, we continued to evaluate the safety of our manufacturing plants and the
effects of the emissions to the environment. We have monitored our plants stringently and ensured that it is not harmful to the
environment.
In today’s society, the successful corporations are also measured in terms of their standing in the eyes of the community and
the well-being of the community. At our corporate level, we have continued to encourage the children of our employees in
their studies and reward those who excelled in their public examinations from ‘Ujian Penilaian Sekolah Rendah (UPSR) up to Sijil
Tinggi Persekolahan Malaysia (STPM)’ via our yearly ‘SIG Academic Awards’.
CORPORATE GOVERNANCE
SIGGAS takes seriously our overall responsibility to adhere to the high level of corporate governance and recognises the
importance of maintaining a sound system of risk management and internal controls and reviewing its adequacy and integrity
so as to safeguard shareholders’ investment and the Group’s assets.
As such, we have established a comprehensive risks management policy, processes and infrastructure to ensure that all risks are
well managed throughout the Group.
During the year the Board continued to further focus on strengthening the effectiveness of governance and continued to
undertake various measures to enhance corporate governance processes.
ACKNOWLEDGEMENTS
On behalf of the Board of Directors and all our employees, I would also wish to thank all our shareholders for your confidence
and investment in our Company and valued customers for your continued trust, loyalty and support.
I believe the dedication of our management team and staffs together with the support of our bankers and business associates
will enable us to create value and drive sustainable growth in the Group.
I would like to take this opportunity to thank every of our employees for their outstanding efforts during such a challenging
year. Their absolute dedication, commitment and hard work are the driving force behind our continued success. I look forward
to your continued support and dedication in the coming year.
As ever, my gratitude also goes to my colleagues on the Board for their unwavering support and guidance through the
challenging year. With your continuing support, I am confident we will achieve all we have set out to do and deliver sustainable
returns well into the future.
PEH LAM HOH
Executive Chairman
CHAIRMAN’S STATEMENT Cont’d
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ANNUAL REPORT 2018 9
MANAGEMENT DICUSSION AND ANALYSIS STATEMENT
A. OVERVIEW OF THE GROUP’S BUSINESS AND OPERATIONS
SIG Group is a local group of industrial gases companies. Its main subsidiary, Southern Industrial Gas Sdn Bhd was
incorporated in 1996 and commenced business operations in 1997. The holding company, SIG Gases Berhad has been
listed on the Main Market of Bursa Malaysia since 2010.
The Group’s core industrial gases business is engaging in supplies of atmospheric and process gases and related
equipment to manufacturing, construction, engineering, electronics, packaging assembly, food and beverage, leisure and
recreation, medical, metal fabrication, ship building and petrochemical industries.
The Group is also a distributor of process chemicals, refrigerants and ammonia products.
The Group operates from 8 distribution and manufacturing locations, 6 of which are in Peninsular Malaysia, namely Senai
in Johor, Krubong in Melaka, Nilai in Negeri Sembilan, Ipoh in Perak, Bukit Minyak in Penang, and Gebeng in Kuantan. The
other 2 are located at Bintulu and Samalaju, both in Sarawak, East Malaysia.
Each of the integrated network of the locations are well equipped with cylinder refilling plants, production facilities,
specialty gas laboratories and distribution centres. All these locations are strategically sited to support and respond to
customers’ requirements expeditiously.
Principal products and services
The Group is principally engaged in the manufacturing, refilling and distribution of the industrial/specialty gases and
related gas products. It markets through multiple channels including its own network of operation and distribution
centres and sales force, appointed distributors and dealers. The gases are delivered directly through on-site production
facilities as well as retailed through cylinders.
Refrigerants
Specialty Gases
Chemicals
Distribution
Argon
Carbon Dioxide
Refilling
Cylinder Maintenance
and Sales
Delivery Services
Services
Welding Products
Purging project
Other Productsand Services Manufacturing
Oxygen
Nitrogen
Acetylene
Gas Mixture
Fumigas
Hydrogen Gas
Liquid Nitrous Oxide
Segments and Products of the Group
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SIG GASES BERHAD (875083-W)10
MANAGEMENT DICUSSION AND ANALYSIS STATEMENT Cont’d
Group’s Structure
SIG Gases Berhad is an investment holding company with the following subsidiaries.
100%Southern Industrial
Gas Sdn Bhd
40%Iwatani-SIG Industrial
Gases Sdn Bhd
100%Southern Oxygen
Sdn Bhd
100%Southern Nitrous
Oxide Sdn Bhd
100%SIG Properties
Sdn Bhd
SIG Gases Berhad
The details of our subsidiaries are as follows:-
Company
Date/
Place of
Incorporation
Issued and
Paid-up Share
Capital
Effective
Equity
Interest Principal Activities
(RM) (%)
Southern Industrial Gas
Sdn Bhd
20.03.1996/
Malaysia
23,000,000 100.00 Manufacturing, refilling and
distribution of all kinds of industrial
gases.
Southern Oxygen Sdn Bhd 17.09.2007/
Malaysia
2 100.00 Dormant.
Southern Nitrous Oxide
Sdn Bhd
26.09.2007/
Malaysia
100,000 100.00 Manufacturing, refilling and
distribution of liquid Nitrous Oxide.
SIG Properties Sdn Bhd 25.04.2013/
Malaysia
100 100.00 Dormant.
Iwatani-SIG Industrial Gases
Sdn Bhd
13.01.2012/
Malaysia
16,400,000 40.00 Manufacturing and distribution of
liquid products and compressed
gases.
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ANNUAL REPORT 2018 11
MANAGEMENT DICUSSION AND ANALYSIS STATEMENT Cont’d
B. DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS AND FINANCIAL CONDITIONS
The financial performance in the past 5 years is summarised below:
Revenue RM’M Gross profit RM’M EBITDA RM’M Operation Profit RM’M PBT RM’M PAT RM’M
-
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
2014 2015 2016 2017 2018
10.00
65.36
20.86
9.77
3.64
9.92
2.09
75.70
24.50
16.00
8.586.40
4.12
75.83
23.45
15.31
8.686.296.02
76.02
21.49
11.47
3.62 4.65 4.23
78.58
17.75
12.70
3.304.85 5.01
Revenue Gross Profit EBITDA
Operations
Profit PBT PAT ROE
RM’M RM’M RM’M RM’M RM’M RM’M %
2014 65.36 20.86 9.77 3.64 2.09 9.92 9
2015 75.70 24.50 16.00 4.12 8.58 6.40 5
2016 75.83 23.45 15.31 6.02 8.68 6.29 5
2017 76.02 21.49 11.47 4.65 4.65 4.23 3
2018 78.58 17.75 12.63 3.30 4.85 5.01 4
The Group’s revenue for financial year 2018 increased by RM2.56 million or 3.3% over year 2017 to RM78.58 million. This
revenue growth was largely attributed to increase in export sales of Nitrous Oxide as well as refrigerant products.
Revenue for the past 5 years has grown from RM65.36 million to RM78.58 million, up by 20% despite increasingly
competitive market condition.
Gross profit margin was down in 2018, mainly due to keen competition and increase in raw materials cost. The increase in
operating costs further eroded operating profit by 8.8% from RM3.62 million in year 2017 to RM3.30 million in year 2018.
Profit before tax for year 2018 included the reversal of impairment of ASU plant of RM1.55 million after the plant was fully
refurbished and commissioned in December. In years 2015 and 2016, profit after tax consisted of gain of RM4.46 million
from sale of the Puchong factory and RM2.66 million from sales of 4 units of semi-detached industrial buildings in Bintulu.
The Group’s net current assets decreased from RM11.00 million at the end of FY 2017 to RM3.07 million in FY 2018 with
increase in short term bank borrowings to finance capital expenditure.
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SIG GASES BERHAD (875083-W)12
2014 2015 2016 2017 2018
RM'000 RM'000 RM'000 RM'000 RM'000
Property, plant & equipment
(New carrying amounts) 106,021 108,038 107,674 115,530 122,634
Net working capital 10,236 5,559 14,275 10,998 3,069
Total borrowings
Short term borrowings 25,288 19,760 11,109 7,404 13,230
Long term borrowings 10,768 2,501 6,537 10,903 10,577
36,057 22,261 17,646 18,307 23,806
Shareholders Equity 114,066 119,150 123,186 125,191 127,985
Gearing ratio 31.61% 18.68% 14.32% 14.62% 18.60%
The gearing ratio has reduced from 31.61% in FY 2014 to 18.60% in FY 2018.
C. REVIEW OF OPERATING ACTIVITIES
The market is basically made up of two business segments, Bulk liquid / Tonnage market and Package / Compressed gas
market. Global players dominate the Bulk liquid / Tonnage market.
The Group is principally trading in Package / Compressed gas market and competing with both global players as well as
local manufacturers / refillers.
The Group is well positioned as an integrated solution provider and with its integrated network of 8 locations to support
and respond to customers’ increasing requirements for wider product range.
The Group is actively exploring opportunities to fulfil demand for industrial gases from refinery and petrochemical
integrated project and other associated facilities in Pengerang, Johor as well as SCORE in the East Malaysia market.
In our effort to expand market share and product range, a new N2O plant was installed in Bukit Minyak, Penang and
commissioned during the financial year 2018 to meet local and export demands. Our existing Air Separation Unit was also
upgraded to increase production capacity and to enhance competitive position of the Group.
The Group has also invested in a new UHP N2O plant which is expected to be installed and commissioned in June 2019.
Upon completion of the new UHP plant we will be able to meet the demand for higher grade of purity N2O from the
electronic industry and medical sector.
To meet the demand for liquid gases, we have also expanded our storage capacity with the installation of two additional
storage tanks during the year.
MANAGEMENT DICUSSION AND ANALYSIS STATEMENT Cont’d
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ANNUAL REPORT 2018 13
D. RISK ASSESSMENT/COMPETITOR
The Group identified the following risks which could impact the Group’s performance:
Risks Identified During
Risk Assessment Possible Consequences Affected Key Business Processes
1 Increasing
competition among
industry players
1) Loss of market share, sales and
profitability
2) Profit margin affected
Sales and Marketing
Credit Control and Collection
Customer Relationship Management
2 Changes in
technology
1) Loss of market share due to
reduced competitiveness
2) Lower efficiency compared
to technologically better
competitors
3) Limited coverage of
distribution channel
4) Reducing demand of existing
products / service
Production
Refilling Process
Distribution Management
3 Changes in
customers’
expectations and
perception
1) Customer dissatisfaction
2) Reducing demand of existing
products / services
3) Reduction in sales and
profitability
4) Failure to maintain market
share
Sales and Marketing
Credit Control and Collection
Customer Relationship Management
4 Ineffective
management
of cylinder (i.e.
insufficient cylinders
for gas supply, loss
of cylinders and
inefficient utilisation
of cylinders)
1) Inability to meet customer
requirements
2) Customer dissatisfaction
3) Unable to capitalise on
additional demand to drive
revenue higher
Procurement (Capital Expenditure)
Inventory Management
5 Industrial accident 1) Operational disruption
2) Fine and penalties by
authorities
3) Negative publicity affecting
company’s reputation
4) Legal suit by staff and public
Fire, Safety and Environment Regulations (for
factory)
Refilling Process and Safety Compliances (for
refilling plant)
6. Increase in
operations cost
1) Negative impact on
profitability
2) Affects cash flow
3) Loss competitive advantage
Procurement
Human Resource Management
Distribution Management
MANAGEMENT DICUSSION AND ANALYSIS STATEMENT Cont’d
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SIG GASES BERHAD (875083-W)14
E. OUTLOOK
We expect that the market condition for financial year 2019 to be similarly challenging, with increased operating cost and
keener competition. Given these external uncontrollable factors, we will continue to enhance our production facilities,
improve efficiency through process realignment and to expand into higher-margin product lines.
The Group’s principal objective is to provide innovative gas solutions to customers and to assist in minimizing the
environment impact.
The Group plans to increase its market share by adopting certain marketing efforts and expanding product ranges
including:
- To supply wider range of compressed gases through a safe and efficient supply chain that meets the specifications
of the industries and customers;
- To improve and realign our service approach to customers;
- To enlarge distributorship and retail the network;
- To develop leadership potential of the management and marketing team; and
- To continue investing in production facilities and technologies to enhance production capacity and to improve
reliability of supply.
MANAGEMENT DICUSSION AND ANALYSIS STATEMENT Cont’d
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ANNUAL REPORT 2018 15
RM’000PROFIT BEFORE TAX
RM’000PROFIT AFTER TAX
RM’000REVENUE
RM’000GROSS PROFIT
RM’000
EARNING BEFORE
INTEREST, TAX, DEPRECIATION
& AMORTISATION
RM’000
PROFIT BEFORE EXCEPTIONAL
ITEM AND TAX
Audited2014
Audited2015
Audited2016
Audited2017
Audited2018
RM’000 RM’000 RM’000 RM’000 RM’000
Revenue 65,364 75,705 75,830 76,018
Gross Profit 20,862 24,500 23,452 21,493
Earning Before Interest,
Tax, Depreciation & Amortisation 9,770 16,004 15,312 11,468
Profit Before Exceptional Item and Tax 3,639 8,578 8,677 4,653
Profit Before Tax 2,088 8,578 8,677 4,653
Profit After Tax 9,922 6,397 6,286 4,235
78,576
17,754
12,626
4,851
4,851
5,009
‘18
78
,57
6
‘15 ‘16 ‘17
76
,01
8
75
,70
5
75
,83
0
‘14
65
,36
4
‘18
17
,75
4
‘15 ‘16 ‘17
21
,49
3
24
,50
0
23
,45
2
‘14
20
,86
2
‘18
12
,62
6
‘15 ‘16 ‘17
11,4
6816
,00
4
15
,31
2
‘14
9,77
0
‘18
4,8
51
‘15 ‘16 ‘17
4,6
53
8,5
78
8,6
77
‘14
3,6
39
‘18
5,0
09
‘15 ‘16 ‘17
4,2
35
6,3
97
6,2
86
‘14
9,9
22
‘18
4,8
51
‘15 ‘16 ‘17
4,6
53
8,5
78
8,6
77
‘14
2,0
88
FINANCIAL HIGHLIGHT
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SIG GASES BERHAD (875083-W)16
STATEMENT OF FINANCIAL POSITION
Audited2014
Audited2015
Audited 2016
Audited 2017
Audited 2018
RM’000 RM’000 RM’000 RM’000 RM’000
Total Assets 168,523 158,323 154,109 162,846
Total Borrowings 36,057 22,261 17,646 18,307
Shareholders Equity 114,066 119,150 123,186 125,191
FINANCIAL INDICATOR
ROE %
Return On Total Assets %
Gearing Ratio %
Interest Cover Times
EPS Sen
Net Asset Per Share RM
Gross Dividend Per Share Sen
PE Ratio
Gross Dividend Price As At FYE 31 December %
Share Price As At FYE 31 December
Audited
9
5.89
31.61
1.95
6.61
0.61
0.60
7
1.20
0.50
2014Audited
5
4.04
18.68
3.46
3.41
0.64
0.70
16
1.30
0.54
2015Audited
2016
5
4.08
14.32
8.23
3.35
0.66
1.20
12
2.93
0.41
Audited 2017
3
2.60
14.62
7.12
2.26
0.67
1.20
48
1.11
1.08
171,873
23,806
127,985
Audited2018
4
2.91
18.60
5.04
2.67
0.68
0.80
30
0.99
0.81
FINANCIAL HIGHLIGHTCont’d
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PROFILE OF DIRECTORS
PEH LAM HOH
Executive Chairman
Age/ Gender: 69 / Male
Nationality: Singaporean
Mr Peh Lam Hoh was appointed to the Board on 14 October 2009 and is responsible for overseeing the management of the Group. He is the Chairman of Remuneration Committee and the ESOS Committee of the Company.
Mr Peh began his career in 1969 when he joined the accounting department of a company. From 1970 to 1976, he was employed by a company engaged in manufacturing and trading of rubber. He then joined a company that was engaged in supplying industrial gases as a Partner in 1976. In 1978, Mr Peh formed Sing Swee Bee Enterprise Pte Ltd, which was initially engaged in trading. Sing Swee Bee Enterprise Pte Ltd started supplying industrial gases in 1981. Mr Peh founded Southern Industrial Gas Sdn. Bhd. in 1996 which is currently a wholly-owned subsidiary of the Company and has been instrumental in building and developing the Group into a manufacturer of industrial gases. He is currently a shareholder and Managing Director of several private companies, namely Sing Swee Bee Enterprise Pte Ltd, Sing Swee Bee Investments Pte Ltd, SSB Products Pte Ltd, Sing Swee Bee Industries Pte Ltd, SSB Cryogenic Equipment Pte Ltd, SSB Cryogenic Services Pte Ltd, Sing Swee Bee Sdn Bhd and Sing Hoh Realty Sdn Bhd. He is currently a shareholder and the President Director of PT Sing Swee Bee Indonesia and is also a shareholder and Director of Shanghai Yuhe Trading Co Ltd. Several of the companies in which he is a shareholder and a board member is engaged in importing,exporting and/or distributing industrial gases and related products and/or providing services related to industrial gases.
Mr Peh does not have any family relationship with any Director and/or major shareholder of the Company. Except for certain related party transactions of revenue in nature which are necessary for day to day operation of the Company and its subsidiaries and for which he is deemed to be interested, there are no other business arrangements with the Company in which he has personal interest. Mr Peh has no conviction for any offences within the past 5 years (other than traffic offences, if any) and there was no sanction or penalty imposed by the relevant regulatory bodies during the financial year.
Mr Peh attended all the five (5) Board of Directors’ Meetings held during the financial year ended 31 December 2018.
ANNUAL REPORT 2018 17
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SIG GASES BERHAD (875083-W)18
PROFILE OF DIRECTORS Cont’d
LAU CHENG MING
Executive Director
Age/ Gender: 65 / Male
Nationality: Malaysian
Mr Lau Cheng Ming was appointed to the Board on 14 October 2009 and is responsible for strategic planning and for the overall management of the Group. He is a member of ESOS Committee of the Company.
Mr Lau obtained his Bachelor of Commerce degree from the University of Canterbury, New Zealand in 1979. He has been an Associate Chartered Accountant with the New Zealand Society of Accounts since 1981. He began his career as a Junior Accountant with Hunt & Duthie & Co in New Zealand in 1978. He then joined Ernst & Whinney, New Zealand as a Senior Accountant in 1980. He was attached with Metas Holdings Sdn Bhd as the Financial Controller from 1982 to 1995, where he was responsible for evaluating investment portfolios and overseeing the management of associated companies. Mr Lau served as a Director of Bintulu Industrial Gas Sdn Bhd from 1982 to 1998. He also served as an Executive Director of B.I.G. Industries Bhd in 1995 and he is currently a Director and shareholder of a number of private companies.
Mr Lau does not have any family relationship with any Director and/or major shareholder of the Company. He does not have any conflict of interest with the Company. Mr Lau has no conviction for any offences within the past 5 years (other than traffic offences, if any) and there was no sanction or penalty imposed by the relevant regulatory bodies during the financial year.
Mr Lau attended all the five (5) Board of Directors’ Meetings held during the financial year ended 31 December 2018.
DATUK SYED AHMAD BIN ALWEE ALSREE
DATUK SYED AHMAD BIN ALWEE ALSREENon-independent Non-executive DirectorAge/ Gender: 53 / MaleNationality: Singaporean
Datuk Syed Ahmad Bin Alwee Alsree was appointed to the Board on 14 December 2009. He is a member of Audit Committee and Nominating Committee of the Company.
Datuk Syed Ahmad Bin Alwee Alsree is Group Executive Director of Cahya Mata Sarawak Berhad (“CMS”) and having been appointed to the Board of CMS on 4 September 2006. He joined the CMS Group in February 2004 as Group General Manager - Human Resources, was appointed as Deputy Group Managing Director in September 2006, and was subsequently re-designated as Group Executive Director in August 2008. Datuk Syed Ahmad is the Deputy Chairman of Kenanga Investment Bank Berhad. He is also a director of KKB Engineering Berhad and Kenanga Islamic Investors Berhad. He is Chairman of Samalaju Aluminium Industries Sdn Bhd, Kenanga Investors Berhad, CMS Cement Sdn Bhd, CMS Clinker Sdn Bhd, CMS Education Sdn Bhd, CMS Land Sdn Bhd and a director of several CMS subsidiaries in construction materials and property development. Datuk Syed Ahmad graduated with a Bachelor of Law (LL.B.) degree from the National University of Singapore, and practised law in Singapore for over 10 years prior to joining CMS. He completed the Advanced Management Program (AMP) at Harvard Business School in 2012.
Datuk Syed Ahmad is the husband of Dato Hajjah Hanifah Hajar Taib who is a substantial shareholder of the Company. He does not have any conflict of interest with the Company. Datuk Syed Ahmad has no conviction for any offences within the past 5 years (other than traffic offences, if any) and there was no sanction or penalty imposed by the relevant regulatory bodies during the financial year.
Datuk Syed Ahmad attended all the five (5) Board of Directors’ Meetings held during the financial year ended 31 December 2018.
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ANNUAL REPORT 2018 19
PROFILE OF DIRECTORS Cont’d
DIONG TAI PEW
Senior Independent Non-executive DirectorAge/ Gender: 68 / MaleNationality: Malaysian
Mr Diong Tai Pew was appointed to the Board on 14 December 2009 and was appointed as Senior Independent Non-Executive Director of the Company with effect from 19 February 2013. He is the Chairman of Audit Committee and Nominating Committee and a member of Remuneration Committee and ESOS Committee of the Company.
Mr Diong obtained his Diploma in Commerce from Tunku Abdul Rahman College, Malaysia in 1976. He is currently a Fellow Member of the Institute of Singapore Chartered Accountants, a Member of the Malaysian Institute of Accountants and a Fellow Member of the Chartered Tax Institute of Malaysia. He began his career in 1976 with a chartered accountants company in Singapore. He left the chartered accountants company in 1980 and has since been practising as a public accountant in Singapore under CA Diong. He is currently an Independent Non-Executive Director of VS International Group Ltd, a public listed company in Hong Kong, the lead Independent Non-Executive Director of Hengyang Petrochemical Logistics Ltd a public listed company in Singapore and he is also an Independent Non-Executive Director of V.S. Industry Berhad, a company listed on the main market of Bursa Malaysia. He is the Chairman of the Audit Committee of the VS International Group Ltd, Hengyang Petrochemical Logistics Ltd and V.S. Industry Berhad.
Mr Diong does not have any family relationship with any Director and/or major shareholder of the Company. He does not have any conflict of interest with the Company. Mr Diong has no conviction for any offences within the past 5 years (other than traffic offences, if any) and there was no sanction or penalty imposed by the relevant regulatory bodies during the financial year.
Mr Diong attended all the five (5) Board of Directors’ Meetings held during the financial year ended 31 December 2018.
LEE TING KIAT
Independent Non-executive DirectorAge/ Gender: 51 / MaleNationality: Malaysian
Mr Lee Ting Kiat was appointed to the Board on 15 March 2011. He is a member of Audit Committee, Nominating Committee and Remuneration Committee of the Company.
Mr Lee graduated with a Bachelor of Laws from University of Malaya, Kuala Lumpur. Currently, he is a practising lawyer and the Managing Partner of Messrs Lee & Tengku Azrina, a firm set up by him and Tengku Azrina since 2005. Prior to the current firm, he was a partner in Messrs Zaid Ibrahim &Co., at present the largest legal firm in Malaysia, from 2000 – 2005. He was also a partner in Messrs Andrew Wong & Co. from 1995 – 1999. He did his pupilage and started his early days of practice in Messrs Azim, Tunku Farik & Wong (previously known as Azim, Ong & Krishnan) from 1991 – 1994. In his extensive career as an advocate and solicitor, he has wide experience in corporate and commercial, financing and property matters. He has advised in matters relating to mergers and acquisitions, corporate exercises, restructuring of corporations, foreign direct investment, financing matters, property development, joint venture agreements,conducting legal due diligence on companies and other commercial matters. His legal firm currently represents a large number of corporations, developers and banks. He is an Independent Non-Executive Director of PESTECH International Berhad, a public listed company in Malaysia and a Director of MTAG Group Berhad.
Mr Lee does not have any family relationship with any Director and/or major shareholder of the Company. He does not have any conflict of interest with the Company. Mr Lee has no conviction for any offences within the past 5 years (other than traffic offences, if any) and there was no sanction or penalty imposed by the relevant regulatory bodies during the financial year.
Mr Lee attended all the five (5) Board of Directors’ Meetings held during the financial year ended 31 December 2018.
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SIG GASES BERHAD (875083-W)20
PROFILE OF DIRECTORS Cont’d
LIM TIN TENG @ LIM JIT TENG
Independent Non-executive DirectorAge/ Gender: 76 / MaleNationality: Malaysian
Mr Lim Tin Teng @ Lim Jit Teng was appointed to the Board on 23 May 2014. He is a member of Audit Committee and Remuneration Committee of the Company.
Mr Lim graduated with a Bachelor of Commerce from Melbourne, Australia and is a member of the Australian Society of Accountants, FCPA. He started his career with Bell Chemical Pty Ltd in Melbourne in 1969 and later joined Singapore Oxygen as Financial Accountant and seconded to Malaysian Oxygen Berhad in 1976. He had over 30 years’experience in the industrial gases industry and had held various senior positions with Malaysian Oxygen Berhad. He was seconded to Commonwealth Industrial Gases Ltd, Sydney, Australia in 1988 for 4 months. He was the General Manager – Corporate Affairs prior to his retirement in 2003. Mr Lim does not hold any other directorship in other public companies.
Mr Lim does not have any family relationship with any Director and/or major shareholder of the Company. He does not have any conflict of interest with the Company. Mr Lim has no conviction for any offences within the past 5 years (other than traffic offences, if any) and there was no sanction or penalty imposed by the relevant regulatory bodies during the financial year.
Mr Lim attended four (4) Board of Directors’ Meetings held during the financial year ended 31 December 2018.
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ANNUAL REPORT 2018 21
FOO PENG BOON
– SALES & MARKETING DIRECTOR
AGE/ GENDER: 43 / Male
NATIONALITY: Malaysian
He obtained his Bachelor of Science (Human Development) Degree from Universiti Putra Malaysia in 1999. He
started his career as a Sales Executive with Southern Industrial Gas in 1999. He was promoted to the positions
of Senior Sales Executive in 2000 and Assistant Branch Manager in 2001. In 2003, he was promoted to the
position of Branch Manager of our Group’s Puchong, Selangor facility, where he was responsible for the
branch’s sales and operations. He was promoted to his current position as Sales and Marketing Director of
Southern Industrial Gas Sdn Bhd in 2015. He is currently responsible for overall sales at our Group.
CHONG JOON KIONG
– CYLINDER CONTROL AND DISTRIBUTION DIRECTOR
AGE/ GENDER: 44 / Male
NATIONALITY: Malaysian
He graduated with a Bachelor Degree of Management (Technology) from Universiti Teknologi Malaysia in 1999
and subsequently obtained a Master of Technology Management (Technology) from the same institution in
2002. His career started in 1999 when he joined Southern Industrial Gas as a Sales Executive. He was promoted
to the position of Assistant Sales Manager in 2000, Assistant Operation and Sales Manager in 2001, and
Operation and Sales Manager in 2003. In 2004, he was promoted to the position of Sales Manager (Bulk,
Compressed Gases and Projects), where he was responsible for the operational and sales planning for these
products and services. He was promoted to his current position as Cylinder control and Distribution Director of
Southern Industrial Gas Sdn Bhd in 2015, where he is responsible for our Group’s operational.
KOH BENG SAN
– FINANCE DIRECTOR
AGE/ GENDER: 45 / Male
NATIONALITY: Malaysian
He was admitted as a Member of the Association of Chartered Certified Accountants in 2001 and was admitted
as a Fellow Member in 2006. He was also admitted as a Member of the Malaysian Institute of Accountants in
2001. He began his career in 1999 as an Audit Assistant with BDO Binder, where he was responsible for
conducting financial audits. In 2003, he joined Southern Industrial Gas Sdn Bhd as the Finance Manager. He is
responsible for our Group’s treasury, accounting and finance functions. He was promoted to his current
position as Finance Director of Southern Industrial Gas Sdn Bhd in 2015. He is also in charge of matters relating
to our Group’s human resources, administration, procurement and information technology.
BOO CHIN ENG
– PRODUCTION DIRECTOR
AGE/ GENDER: 40 / Male
NATIONALITY: Malaysian
He graduated in 2003 with a Bachelor Degree in Chemical Engineering from Universiti Teknologi Malaysia. He
began his career as a Chemical Engineer with Southern Industrial Gas in 2004 and was subsequently promoted
to the position of Assistant Production Manager in 2007. He was promoted to his current position as
Production Director in 2017. He is responsible for managing the production, operations, safety and
maintenance of our Group’s ASU, Acetylene manufacturing facilities, mixed gas production facilities and
industrial gas refilling facilities in Senai, Johor. He is also responsible for our Group’s internal quality control and
providing technical support to our Group’s customers. He manages and co-ordinates external projects and
provides technical assistance to our Group’s regional branches
PROFILE OF THE KEY MANAGEMENT
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SIG GASES BERHAD (875083-W)22
SUSTAINABILITY STATEMENT
INTRODUCTION
The Board of Directors of the Company acknowledges that businesses are not judged solely on its financial performance but
also, on its conducts in respect of governance, economic, environment and social aspects in order to sustain in this challenging
environment and to create value for its stakeholders on long term sustainable manner. It is, therefore, the Company and its
subsidiaries’ (“the Group”) fundamental objective to achieve optimum equilibrium between short-term financial performance
and its long-term business sustainability and value creation. The Board is committed to promote good sustainability practices
and to continuously integrate such practices into the Group’s working environment, business processes and strategy making
process. As such, the Board is committed to be accountable and transparent in its sustainability performance.
The Board is committed to continuously update the sustainability progress and engage openly with the Group’s stakeholders
through transparent sustainability reporting. The Board recognises that stakeholder engagement plays an important role to
ensure the businesses pursued by the Group is sustainable in the long term. Through Sustainability Statement, the Board
provides the Group’s stakeholders a better understanding on the Group’s approach to sustainability and progress in meeting
these commitments.
The Board is pleased to present this Sustainability Statement for the financial year ended 31 December 2018 prepared pursuant
to paragraph 29 in Part A of Chapter 9 - Appendix 9C Main Market Listing Requirements (“MMLR”) of Bursa Securities Malaysia
Berhad’s (“Bursa Securities”) whereby the Company is required to prepare a narrative statement of the Company’s management
of material economic, environmental and social risks and opportunities (“sustainability matters”) and Part III of Practice Note 9 of
MMLR and Sustainability Reporting Guide issued by Bursa Securities (‘the Guide”) on the content of the Sustainability Statement
on the disclosure of the sustainability management of the Group.
SCOPE OF THE STATEMENT
This Statement covers all business operations of the Group, i.e. manufacturing, refilling and warehousing, for the only
geographical location the Group is operating in, namely, Malaysia. The contents of this Statement primarily include activities
carried out during the financial year ended 31 December 2018 and up to the date of this Statement. This Statement covers the
Group’s economic, environmental and social management and performance across all business operations in Malaysia.
The disclosures of the corporate governance practices and compliance with relevant provisions and requirements per Main
Market Listing Requirements and Malaysia Code on Corporate Governance 2017 are made in the Corporate Governance
Overview Statement and Corporate Governance Report in the Annual Report.
SUSTAINABILITY PRINCIPLES
As the highest governance body within the Group, the Board assumes the ultimate accountability for the integration of
sustainability into the business operations of the Group, including sustainability-related strategy and performance. The
sustainability principles instilled by the Board are:
To observe and comply with all relevant legislations, regulations, recommended trade practice and code of practice
applicable and relevant to the Group;
To consider sustainability matters and integrate these considerations into the Group’s business operations and when
making and implementing business strategies;
To manage sustainability matters in a structured and systematic manner, whereby sustainability matters are embedded
throughout the Group and to be documented, continuously assessed and managed with reporting to the Board on
scheduled interval or as and when the materiality of the sustainability matters requires such reporting;
To continuously promote, train and communicate with all employees, suppliers, business partners and other relevant
stakeholders to ensure that they are aware of, and are committed to, implementing and measuring sustainability activities
as part of the Group’s or their strategy, taking into consideration economic, environment, social and governance aspects;
To continuously engage and communicate with all relevant stakeholders for the identification, assessment and
management of material sustainability issues and
To strive to improve the Group’s sustainability performance over time.
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ANNUAL REPORT 2018 23
SUSTAINABILITY STATEMENTCont’d
SUSTAINABILITY POLICY
The Sustainability Policy established by the Board is guided by the 17 Sustainable Development Goals (“SDGs”) developed by the United Nations to address a range of social and economic development issues, just name a few, poverty, hunger, health, education, climate change, gender equality, water, sanitation, energy, environment and social justice.
Sustainable Economic Policy
To ensure that the economic interest of all relevant stakeholders is preserved in all significant business operations and strategic business decisions.
To promote the economic development of the communities where the significant business operations are carried out or when making business strategy decisions or when implementing business strategies.
Sustainable Environment Policy
To comply with all guidelines and regulations relating to the preservation of environmental aspects in the relevant jurisdictions where the Group is operating.
To comply with recommended environmental practices in the business conducts and implement appropriate measures to reduce the impact on the environment arising from activities of the Group.
To avoid contamination and to improve the quality of environmental management. To reduce carbon footprint through product designs that is energy-efficient, optimising manufacturing efficiency
and investment in energy-efficient production machinery. To conserve the consumption of water, electricity and other natural resources in the business operations. To implement “Reuse, Reduce and Recycle” policy across the Group and along the internal value chain. To ensure all materials, where possible, are sourced from sustainable, renewable or recycled means and to assess
and monitor external value chain partners to ensure that the Group’s environment objectives and procedures are complied.
To protect, and proactively manage the impact on biodiversity in the ecosystems over which the Group is operating.
Sustainable Social Policy
To ensure that all stakeholders receive fair treatment and do not engage in or support discrimination based on race, nationality, religion, disability, gender, age, sexual orientation, union membership and political body.
To ensure that the Group’s and the suppliers’/subcontractors’ human resources practises advance and protect the rights of employees not to be discriminated against, not to be enslaved, to be treated with dignity, to have rest and leisure (including reasonable limitation of working hours and periodic holidays with pay) and to freedom of opinion and expression.
To ensure that the Group, the suppliers/subcontractors do not allow child workers to be employed at the workplaces in contravention with applicable laws and regulations.
To provide a safe and healthy workplace for all employees, customers, suppliers, subcontractors, business partners and the public at large, and all the relevant stakeholders have the right to work in a safe and healthy environment, consistent with the Occupational Safety and Health Act and any other applicable legislations.
To prohibit agreements or other coordinated activities with competitors, customers or suppliers that limit competition, abuse of a dominant position, monopolisation or attempted monopolisation and concentrations between companies that may substantially lessen competition.
To conduct its business in an open, honest and ethical manner with conflict of interest situation properly addressed and to adopt a zero-tolerance approach to all forms of bribery and corruption. To ensure that all level of employees, suppliers/subcontractors, customers, business partners and other stakeholders do not engage in corrupt practice, take unfair advantage of any other person, including without limitation, participating in illegal practices.
To promote development of the local communities through direct support of local communities, charitable donations and support of non-profit agencies in the communities in which the Group is operating. To nurture long term relationship with the local communities and to provide safe and healthier environment for the local communities.
To preserve and respect local heritage and customs of the local communities. To work with the local authorities and government bodies for the development of conducive environment for
stakeholders. To uphold the quality, safety and health of our products and services with expected standard of legitimacy and
integrity. To uphold the highest standard in the preserving confidentiality and privacy of information collected by the
Group in the course of its business and to ensure its employees, customers and business partners receiving such
information to observe the confidentiality and privacy of such information.
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SIG GASES BERHAD (875083-W)24
SUSTAINABILITY STATEMENTCont’d
GROUP PROFILE
From the humble beginning in the manufacturing, refilling and distribution of industrial gases in Malaysia more than twenty
(20) years ago, SIG Gases Berhad, a public limited company listed on the Main Market of Bursa Malaysia with headquarter
at Johor Bahru, Johor, has grown to its prominent presence as a ‘one-stop’ industrial gas solutions and service provider. The
Group’s business comprises manufacturing of liquid oxygen and liquid nitrogen as well as re-filling and distribution of industrial
gases, such as, oxygen, nitrogen, argon, carbon dioxide, acetylene, special gases, gas mixture, refrigerant products and gas-
related equipment throughout Malaysia. To date, the Group, comprises the Company, four (4) subsidiaries operating under the
corporate brand of SIG and an associate company, has made its mark in major cities, such as Johor Bahru, Nilai, Melaka, Ipoh,
Penang, Kuantan, Bintulu and Samalaju in Malaysia.
During the financial year under review, there was no major changes of the composition of the contractors and suppliers for
manufacturing, refilling and distribution of industrial gases. On the other hand, there was no major changes in the location of
operations nor share capital structure during the financial year under review.
The Group employs 200 permanent employees at 31 December 2018 as follows:
Johor Selangor Other States Total
No. of Employees Male Female Male Female Male Female Male Female
Permanent 62 29 0 0 84 25 146 54
Temporary 0 0 0 0 0 0 0 0
Total 62 29 0 0 84 25 146 54
Manufacturing
Re-filling &
Distribution
Supporting
Functions Total
No. of Employees Male Female Male Female Male Female Male Female
Permanent 14 7 103 7 29 40 146 54
Temporary 0 0 0 0 0 0 0 0
Total 14 7 103 7 29 40 146 54
At the date of this report, the Group is a member of the FMM Malaysian Industrial Gas Manufacturers Association and there is no
collective agreement entered between the Group and any trade union in Malaysia that remains effective and the Group do not
intend to enter into any collective agreement with any trade union in Malaysia.
GOVERNANCE STRUCTURE AND PROCESS
The Board affirms its overall responsibility for integration of the recommended sustainable economic, environment and social
practices throughout of the Group to ensure business strategies of the Group take into consideration of the sustainability
policies and to ensure sustainability performance are monitored from time to time. The governance structure and process in
relation to the Group’s sustainability management is established by the Board and incorporated in the formal Sustainability
Framework approved by the Board. The formal Sustainability Framework is, in material aspects, guided by the Guide and the
Toolkit: Governance issued by Bursa Securities with necessary adaption based on the nature and scale of the businesses of the
Group.
The Group’s commitment towards sustainable business practices is imputed throughout all levels of its organisation. At the
leadership level, the Board, Executive Directors and Management recognise the importance of ensuring good sustainable
economic, environment and social practices understood and implemented by all level of organisation.
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ANNUAL REPORT 2018 25
SUSTAINABILITY STATEMENTCont’d
GOVERNANCE STRUCTURE AND PROCESS cont’d
To ensure such commitment of good sustainable economic, environment and social practices is embedded throughout of the
Group, the Board put in place formal structure to ensure accountability, oversight and review in the identification, management
and reporting of sustainability matters and performance. Such formal structure is important to ensure that execution of the
sustainability initiatives at all level of organisation and business units are aligned with the Board’s sustainability and business
strategy with reporting at predetermined intervals. Further, with the formal structure, the Group can response timely with the
sustainability risks and opportunities applicable to the Group. The duties for the identification, management and reporting of
sustainability matters and performance are delegated to the Executive Chairman.
The Board has formalised the sustainability principles, policies and processes envisaged by the Board through formal
Sustainability Framework approved by it. Furthermore, formal governance structure, based on the existing geographical scope,
scale and nature of the business the Group is pursuing, for the identification, management and reporting of sustainability
matters and performance of the Group is established by the Board in the following manner:
The Board
Audit Committee
Assurance Unit Executive Chairman
Executive Director
Head of
Departments/Divisions
The governance structure defines clearly on the roles and responsibilities expected of the Board, Audit Committee, Executive
Chairman, head of departments and divisions, Executive Director and assurance function. In a nutshell, the Board assumes the
ultimate responsible for sustainability management and performance within the Group while the Audit Committee is tasked
with the duties to oversee the sustainability management and performance of the Group for reporting to the Board.
More importantly, the Executive Chairman, is tasked with the following duties:
to implement the sustainability framework and strategies approved by the Board;
to lead and implement the process of sustainability management and to monitor and devise appropriate action plan;
to conduct periodic review of all sustainability matters of the Group (at least on an annual basis) and to report the review
results and recommendations to the Audit Committee;
to manage stakeholder engagement;
to implement the material sustainability matters’ indicator and the target and monitoring thereof and the preparation of
sustainability disclosures and to ensure that relevant sustainability trainings are provided.
As for the heads of departments/divisions, their primary responsibilities are to manage sustainability matters of the business
processes under his/her control and to assist the Executive Chairman with the implementation of the sustainability process of
identification, assessment, management and monitoring of all sustainability matters.
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SIG GASES BERHAD (875083-W)26
SUSTAINABILITY STATEMENTCont’d
GOVERNANCE STRUCTURE AND PROCESS cont’d
The sustainability matters management process established by the Board, guided by the Guide and Toolkit: Materiality
Assessment issued by Bursa Securities with necessary adaption based on the nature and scale of the businesses of the Group, is
as follows:
Identification of the intended stakeholder groups and sub-groups, the focus areas expected by the intended stakeholders
and engagement objective(s) for each stakeholder group through Stakeholders’ Mapping and the establishment of the
Stakeholders’ Profile;
The stakeholders identified are prioritised in relation to its influence over and dependence on the Group so that the
Group can put in more effort on stakeholder groups that have higher influence and dependency and the concerns of such
stakeholders will carry greater weight. The prioritisation of the stakeholders is conducted by Executive Chairman with the
assistance from the head of departments/divisions by using Stakeholder Prioritisation Matrix whereby each stakeholder
identified are assessed by using influence and dependence criteria and rating scale established by the Board. The results
of the prioritisation can be used to determine the level of engagement to be employed by the Group with respective
stakeholders (from collaborate/empower to keep informed) based on the perceived influence and dependency of each
stakeholder group;
Identification of sustainability matters via internal sources and from external sources;
Sustainability matters identified are refined, consolidated and categorised into respective sustainability categories
determined by the Board and enlisted in the Sustainability Matters Listing, detailing the influential and dependent
internal and external stakeholders;
Sustainability matters categorised in the Sustainability Matters Listing are subjected to internal materiality assessment by
the Executive Chairman with the assistance from the head of departments/divisions in order to prioritise the sustainability
matters for assessment by internal and external stakeholders.
Sustainability issues considered material if:
it has significant economic, environmental and social impacts on the Group from the organisation’s point of view;
substantively influence the assessments and decisions of stakeholders from the stakeholders’ point of view; and
it has significant economic, environmental and social impacts that affect the ability to meet the needs of the
present and future generations.
The internal materiality assessment entails the assessment by the Executive Chairman with the assistance from the head
of departments/divisions based on the rating scale established by the Board on the significance of each sustainability
matters on the revenue, cost, reputation, strategic and operational risk and business opportunities criteria.
From internal and external stakeholders’ perspective, stakeholders’ assessment of the sustainability matters is based on
the significance of such matters to influence on the assessment and decision by respective stakeholder.
The identification of the material sustainability matters is performed by the Executive Chairman with the assistance from
the head of departments/divisions by input into the Materiality Matrix, the result of the stakeholder prioritisation exercise,
internal materiality assessment by the Group and stakeholders’ assessment of the significance of relevant sustainable
matter to influence on the assessment and decision by respective stakeholder.
The material sustainability matters are identified by reference to the sustainable matters above the acceptable threshold
established by the Board.
Subsequent to the assessment process, sustainable matters identified above are subjected to risk management policy and
process established by the Board for the assessment and management of the risk and opportunities identified.
In the context of the sustainability matters management, the current standing of sustainability matters is assessed for
its adequacy and effectiveness by the Executive Chairman and to formulate management response to mitigate the
sustainability risk or optimise the sustainability opportunities, in line with the risk tolerance and business strategies
established by the Board. Please refer to Statement of Risk Management and Internal Control on the risk management
system employed by the Group in the identification, management and monitoring of business risks.
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ANNUAL REPORT 2018 27
SUSTAINABILITY STATEMENTCont’d
GOVERNANCE STRUCTURE AND PROCESS cont’d
For the management of material sustainability matters, the Executive Chairman is to develop and response with respect to
each material sustainability matters in the following manners:
developing policies and procedures
implementing various initiatives, measures or action plans
to comply with applicable laws and regulations
setting indicators, goals, targets and timeframe in line with the strategic objectives
implementing new, or changing existing systems, to capture, report, analyse, and manage data requirements
The Executive Chairman is to monitor the current standing (including but not limited to, indicators, target and actual
performance), responses to the material sustainability matters and actual performance and to report to the Audit
Committee on annual basis for review and for their recommendation to the Board for review and approval.
SUSTAINABILITY MANAGEMENT ACTIVITY
The Board had put in place formal sustainability framework, including the sustainability management process. The Group had,
during the first phase of implementation of the formal sustainability management during the financial year under review and
up to the date of this Statement, performed the following activities in relation to the identification, management and reporting
of sustainability matters and performance:
Identification of the internal and external stakeholders that have influence over and dependence on the Group through
Stakeholder’s Mapping.
Internal and external stakeholders identified by the Executive Chairman, together with the head of departments/divisions,
were assessed and prioritised for its degree of influence over and dependence on the Group based on the agreed upon
criteria and rating scale approved by the Board via the Stakeholder Prioritisation exercise.
During the first phase of implementation, the Executive Chairman, together with the head of departments/divisions,
performed identification of the sustainability matters through internal sources and stakeholders’ engagement via
direct communication with relevant internal and external stakeholders by head of departments/divisions and Executive
Directors. The sustainability matters identified are categorised accordingly into the relevant sustainable category for
assessment purposes by way of Sustainability Matters Listing.
As at the date of this Statement, the Executive Chairman, together with the head of departments/divisions, has yet to undertake
an internal materiality assessment of sustainability matters identified by using predetermined criteria and rating scale approved
by the Board and to engage with the stakeholder group identified to obtain their assessments of the degree of significance of
the sustainable matters identified to influence on their decision.
As phase 2 of the implementation of the formal Sustainability Framework approved by the Board, the Executive Chairman,
together with the head of departments/divisions, is committed to such assessments during the financial year ending 31
December 2019 and to report the sustainability assessment activities undertaken, the performance indicator(s) and target(s)
used to measure progress, the actual performance with comparison to preceding financial year(s) and target(s), effectiveness
or efficiency of the policies, measures or actions taken to manage associated sustainability risks for financial year ending 31
December 2019.
During the financial year under review and up to the date of this Statement, the Board had fed the key sustainability
matters identified onto the formal risk management process for identification and formulation of responses to mitigate the
sustainability risk factors or to maximise the sustainability opportunity present so that key sustainability matters are adequately
and effectively managed in accordance with the risk tolerance of the Board.
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SIG GASES BERHAD (875083-W)28
SUSTAINABILITY STATEMENTCont’d
STAKEHOLDERS’ ENGAGEMENT
The Board recognises and admits that the contribution and support of the internal and external stakeholders are utmost
important for the realisation the Group’s missions and the Group’s long-term business sustainability and excellence. It is on this
basis that the Board is pursuing the sustainable strategy of continuous engagement with internal and external stakeholders
who is dependent on and influence by the activities undertaken by the Group and to ensure such engagements are to include
all internal and external stakeholders across the value chain and to response proactively, via formal and informal channels, to
the concerns and views of respective stakeholder groups at required interval. By actively engaging with all stakeholders, the
Board can identify risks and opportunities in the way the businesses of the Group are carried out. During such engagement, the
Group can validate the sustainable matters identified by the Management of the Group. The Group’s stakeholder engagement
process is guided by the Guide and Toolkit: Stakeholder Engagement issued by Bursa Securities with necessary adaption based
on the nature and scale of the businesses of the Group.
During the financial year under review and up to the date of this Statement, the stakeholder engagement was largely led by the
respective business units whose operations were most impacted or depended by such stakeholder group. The Group engaged
with the internal and external stakeholders in both formal (for example, formal performance appraisal and customer survey
process) and informal manners (for example, meetings with stakeholders and informal feedback from stakeholders).
The Board had determined that, through stakeholder mapping exercise conducted by Executive Chairman together with the
head of departments/divisions, the following stakeholders are dependent on and have influence over the Group in the context
of the businesses carried out by the Group and industries that the Group is participating in:
Stakeholder Group
Sub-Group Focus Areas Engagement Objectives
Preferred Level of Engagement
[Preferred Frequency]
Investor Long term sustainable
growth
To build up investor
confident level in order
to continue receive
support/cooperative from
investors
Annual report [Annually], Investors’
sustainability survey [Annually] general
meeting [Annually], shareholders’
dialogue [Annually], press release
[On-going], public announcements
[On-going], Communication with Investor
Relation function [On-going]
Employees
Management
Non-Management
Contract Staffs
Human rights,
career development,
discrimination,
remuneration
commensurate with
job responsibilities and
occupational safety
and health
To retain competent
employees
Employees’ survey [Annually], employees’
dialogue [Annually], performance
appraisal [Annually], memorandum
[On-going], Management/Operation
meetings [On-going], trainings [On-
going] and communication with Human
Resources function [On-going]
Board of Directors Sustainable business
practices
To ensure business
strategy take into
consideration of
sustainable practices
Board of Directors meeting [Quarterly],
Board Committee meeting [Quarterly]
and communication with Executive
Chairman and Finance Director
[On-going]
Suppliers
Direct and Indirect
materials
Service providers
Payment practice,
purchasing practices
and business
sustainability
To ensure sustainable
supply of quality services
and materials that
preserve environment
and with adequate safety
and health features
Supplier’s evaluation and appraisal
[Annually], meeting [On-going], official
letter [On-going], corrective action report
[On-going], suppliers’ sustainability
survey [On-going] and communication
with Purchasing function [On-going]
Customers
Local
Overseas
Safety, health and
environmental friendly,
value for money,
accessibility, Quality of
goods & services and
lead time
To improve customer’s
satisfaction
Customer’s Feedback Form [On-
going], meeting [On-going], corrective
action report [On-going], customers’
sustainability survey [On-going], official
letter [On-going], customers’ audit
[On-going] and communication with
Sales & Marketing function [On-going]
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ANNUAL REPORT 2018 29
SUSTAINABILITY STATEMENTCont’d
STAKEHOLDERS’ ENGAGEMENT cont’d
Stakeholder Group
Sub-Group Focus Areas Engagement Objectives
Preferred Level of Engagement
[Preferred Frequency]
Financial Institutions Long term sustainable
growth
To ensure continuous
financial support from
financial institutions
Annual review [Annually], meeting
[On-going], sustainability survey
[Annually], official letter [On-going] and
communication with Finance function
[On-going]
Government
Inland Revenue
Board and Customs
Department
Department of
Occupational Safety
and Health
Department of
Environment
Ministry of Domestic
Trade and Consumer
Affairs
Department of
Labour
Immigration
Department
Securities
Commission and
Bursa Malaysia
Local Authorities
To comply with
relevant laws and
regulations
To ensure full compliance
with relevant laws and
regulations
Official submission [Predetermined
interval], official letter [On-going], public
dialogue involving government officials
[On-going], public announcement
[On-going], audit by relevant regulatory
authorities [On-going], and meeting with
relevant regulatory authorities
[On-going]
Media
Professional
Reporter -
Newspaper &
Magazine
Non-Professional
Reporter - Social
Media
Environmental and
social issues and safety
& health
To minimise instances of
inaccurate reporting
Press conference/release [On-going],
interview/visit [On-going] and
communication with Executive Directors
and Finance function [On-going]
Local Society
Local Community
Local Charity
Organisation
Local community
development and
safety
To improve the
acceptance of local
communities of the
business
Corporate social responsibility
programme [On-going], dialogue session
with local community/businesses [As &
when organised] and communication
with Executive Directors [On-going]
Industry Peers
FMM Malaysian
Industrial Gas
Manufacturers
Association
Follow the policy of the
trade association
To ensure business
practice in line with the
policy
Participation in members’ dialogue
[As & when organised], official letter
[On-going] and communication with
committee members by Executive
Directors [On-going]
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SIG GASES BERHAD (875083-W)30
SUSTAINABILITY STATEMENTCont’d
STAKEHOLDERS’ ENGAGEMENT cont’d
Subsequent to the stakeholder groups identification with respective engagement methods proposed, Executive Chairman
together with the head of departments/divisions conducted stakeholders priortisation exercise to rank respective stakeholder
groups’ influence over and dependence on the Group based on influence over and dependence rating criteria and scale
approved by the Board. The results of the stakeholders priortisation exercise are tabulated in the following Stakeholder
Prioritisation Matrix with recommended level of engagement for respective quadrum:
Stakeholder Prioritisation
Sta
keh
old
er
de
pe
nd
en
ce
Low
de
pe
nd
en
ceH
igh
de
pe
nd
en
ce
No influence Low influence Some influence High influence
Consult/involve
Keep informed
(minimum effort)
0.50
0.5
0.0
1.0
1.5
2.0
2.5
3.0
3.5
4.0
- 1.00 1.50 2.00 2.50 3.00 3.50 4.00
Inform/engage
Collaborate/empower
Investors
Investors
Customers
Customers
Employee
Employee
Government &Regulators
Government &Regulators
Media
Media
Local Society
Local Society
Board of Directors
Suppliers
Suppliers
Financial Institutions
Financial Institutions
Industry Peers
Board of Directors
Industry Peers
The Board acknowledges that the above stakeholder engagement by the Group can be further improved by engaging
respective stakeholder groups based on preferred engagement level so that key topics and concerns of respective stakeholder
group are communicated proactively at required interval to the correct governance body of the Group to response to such
topics and concerns on timely manner.
MATERIAL SUSTAINABILITY MATTERS
The Group’s material sustainability matters are identified through the materiality assessment process whereby the Economic,
Environmental and Social (“EES”) issues matters relevant and important to the Group’s long-term sustainability are identified
and prioritised through structured process and assessment mechanism as approved by the Board, guided by the Guide Toolkit:
Materiality Assessment issued by Bursa Securities, with necessary adaption based on the nature and scale of the businesses of
the Group, through a cycle of identification, prioritisation, validation and review. Please refer to the “Governance Structure and
Process” section on the details of the process employed.
A list of material sustainability issues was identified and determined by the sustainability matters identification exercise
undertaken by the Executive Chairman, with the help by head of departments/divisions, that reflected the critical sustainable
considerations expected of the Group in respect of the businesses and geographical extent the Group is operating in after taken
into consideration of the expectations and concerns of stakeholder groups.
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ANNUAL REPORT 2018 31
SUSTAINABILITY STATEMENTCont’d
MATERIAL SUSTAINABILITY MATTERS cont’d
Notwithstanding of the identification of the sustainable matters by the Executive Chairman after consolidated the sustainability
concerns of relevant stakeholder group, the sustainability matters were not subjected to internal materiality assessment by
the Executive Chairman with the assistance from the head of departments/divisions in order to assess its significance from
the Management’s perspective in term of financial and non-financial impact in the context of the Group’s operations nor
the assessment by the respective stakeholder groups of the significance of relevant sustainable matter to influence on the
assessment and decision by respective stakeholder group.
The final list of sustainability matters together with its details of identification were reviewed by the Audit Committee and
reported the Board for its approval during the financial year under review and up to the date of this Statement to ensure all
relevant sustainability matters relevant to the Group for long term value creation were included for future assessment and
monitoring purposes in line with the formal Sustainability Framework approved by the Board.
The sustainability matters identified by Executive Chairman with the assistance from the head of departments/divisions are as
follows:
Sustainability Matters Economic
Category Definition
Local sourcing of suppliers Procurement, Spending &
Employment practices
Spending on local employee and suppliers at significant
location of operationsLocal sourcing of employees
EducationCommunity investment
Voluntary contributions made by an organisation to enhance
socio-economic benefits and create a positive social impactAgeing population
Job opportunities
Indirect economic impact
Indirect economic impacts are additional consequences of
the direct impact of financial transactions and the flow of
money between an organisation and its stakeholdersPromotion of local economy
Sustainability Matters Environment
Category Definition
Carbon footprint
Air quality
Ozone depletion
EmissionsEmissions refer to the discharge of environmentally
hazardous substances into the atmosphere
Usage of toxic chemicals/
materials
Waste and effluentWaste and effluent discharged from operations into public
areasGeneration and treatment/
disposition of scheduled
waste and non-hazardous
waste
Water pollutionWater
Consumption and efficiency of water usage for industrial
processes and general purposesInsufficient clean water
Energy conservation
Renewable energyEnergy
Efficient use and consumption of finite material and
electricity as well as energy generated from renewable
sources
Reduce material consumption
during Manufacturing
Product and Services
Responsibility
(Environmental)
The environmental impact of products and services in
the course of their lifecycle, (including product design,
development, testing, etc.)Environmental consideration
during product design and
manufacturing
Use of environmental
friendly/ recyclable materials
Materials Materials are components used as inputs in the production of
goods
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SIG GASES BERHAD (875083-W)32
SUSTAINABILITY STATEMENTCont’d
MATERIAL SUSTAINABILITY MATTERS cont’d
Sustainability Matters Environment
Category Definition
Environmental practices
(Supply Chain)
Supply chain All significant environmental impacts observed or assessed
in the supply chain in relation to products and services
produced and/or offered
Compliance with laws and
regulations (Environmental)
Compliance
(Environmental)
Compliance identifies the adherence of an organisation’s
activities to relevant laws and guidelines
Sustainability Matters Social
Category Definition
Board, management and
employee diversitySocial Diversity
Diversity, specifically in the workforce, management and the
Board is characterized by the gender, age, etc.
Work-Life balance
Human Rights
the right to not be discriminated against
not be enslaved
be treated with dignity
have the right to rest and leisure, including reasonable
limitation of working hours and periodic holidays with
pay
the right to freedom of opinion and expression
Remuneration commensurate
with job responsibilities
Gender, race & religion
discrimination
Sexual harassment
Freedom of expression
Freedom of movement
Safe & healthy working
management and
environment
Occupational Safety and
Health
Anticipation, recognition, evaluation and control of hazards
arising in or from the workplace that could impair the health
and well-being of workers and stakeholders
Price fixingAnti-competitive
behaviour
Ethical business practices without affecting consumer choice,
pricing, and market efficiency
Corruption with government
official
Anti-corruption
Abuse of entrusted power for private gain. This theme
discusses activities that promote transparency and guard
against various forms of corruption
Corruption with suppliers/
contractors
Corruption with customers
Fair treatment of all
employeesLabour practices
Fair treatment of employees in regard to terms and
conditions of employment and developments of employee’s
skills and knowledgeCareer development
Skill development
Product Safety & health
Product and Services
Responsibility (Social)
The impact of products and services on the wellbeing of
society, including privacy, health and safetyLeakage of Sensitive/
confidential information
Private Data Protection
Illegal foreign workers
Supply Chain (Social)Significant and potential social impacts on society in the
supply chainExploitation of women &
under-aged labour
Compliance with laws and
regulations (Social)Compliance (Social)
The adherence of an organisation’s activities to relevant laws
and guidelines
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ANNUAL REPORT 2018 33
SUSTAINABILITY STATEMENTCont’d
MAJOR ECONOMIC, ENVIRONMENT AND SOCIAL ACTIVITIES UNDERTAKEN DURING FINANCIAL YEAR
A. Procurement, Spending & Employment Practices (Economic)
As far as possible, the Group strives to engage local suppliers and contractors in its effort to spur the growth of the local
economy in which it is operating in. The Group had been practicing the policy on the local sourcing of suppliers and
contractors as far as possible in the pursuit of the business, not only for the growth of local economy, but also the ease
of access and communication and response time. The Group had put in place a formal procurement standard operating
procedure whereby new suppliers are subjected to pre-qualification process to ensure only qualified suppliers with
acceptable materials and services are accepted to doing business with the Group while core materials with strict quality
requirements are subjected to internal buy-off. Approved suppliers of the Group are subjected to annual appraisal system
to ensure the suppliers is able to continue deliver materials and services with acceptable quality standard.
To date, the Company has more than 298 suppliers and contractors, direct and indirect, which consist of local and foreign
entities.
As At 31.12.16 As At 31.12.17 As At 31.12.18
Number of approved suppliers – local 275 290 298
Number of approved suppliers – foreign 16 17 18
Percentage of approved suppliers – local (%) 94.5 94.5 94.3
On the other hand, in order to improve the technical knowledge of locals, it is the policy of the Group that recruitment
of local employees shall be in priority of the foreign one. Employee’s referral system had been put in place by the
Management to encourage its employees to refer their competent family members and friends to the Group for
recruitment.
As At 31.12.16 As At 31.12.17 As At 31.12.18
Number of local employees 180 192 199
Number of foreign employees 1 1 1
Percentage of local employees (%) 99.45 99.48 99.50
B. Our Employees and Workforce
The Board believe the employees are a valuable resource and a key business success factor for the Group. The long-term
business success and sustainability of the Group lies in every employee and it is critical for the Board aim to treat them
equally, provide them with a safe and sustainable working environment and help them to further develop their skills. We
have developed Employee Handbook in that respect for transparency in employee’s benefits and entitlements.
We respect our people and strive to develop talented and motivated employees to support their performance delivery
and growth for our business operations. It is top priority to build a sense of purpose among our people in the work we
do throughout the Group. To this end, hence, our people are provided induction programme to equip them with the
basic knowledge and skill sets for their job requirements with continuous on-the-job trainings are provided to develop
their skills for career development. Furthermore, external trainings on technical knowledge and soft skills development
are identified by the Management through annual performance appraisal and planned for identified employees for their
personal and professional development and to prepare them for next level of long-term career with the Group.
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SIG GASES BERHAD (875083-W)34
MAJOR ECONOMIC, ENVIRONMENT AND SOCIAL ACTIVITIES UNDERTAKEN DURING FINANCIAL YEAR cont’d
B. Our Employees and Workforce cont’d
The Board acknowledges the efforts of the employees and remunerates our people with remuneration and benefits
commensurate with their duties and responsibilities, offers on-going opportunities for training and development, and
long-term career prospects. Firstly, it is the policy of the Group that the employees are to be reasonably rewarded based
on the efforts put in by them in delivering their duties and responsibilities and career scale with relevant salary range
is implemented to that respect. Furthermore, the Board is committed to build performance-based culture by allowing
the employees to demonstrate their capabilities by aligning the annual increment and bonuses/incentives based on
the results of the performance appraisal and expectation of future performance of the employees. Annual performance
appraisals are undertaken by the Management, not only for the performance-based remuneration, but also to have
effective two-way communication with our people whereby the past performance and expectations for the future years
by the Management on our people are communicated while our people’s commitment and concerns are conveyed
for future monitoring. As inclusive initiative to involve all employees in the growth of the Group, employee suggestion
program is implemented by the Group to encourage employees at all level to propose process improvement with
financial reward for successful suggestion.
FYE 31.12.16 FYE 31.12.17 FYE 31.12.18
Percentage of employees underwent performance appraisal 97.79 98.44 97.50
Number of employee suggestions proposed/proposed 8 10 21
The Board is also championing equal opportunity for all employees regardless of gender, race, religion, nationality,
age, marital status, or any other characteristic in line with the gender diversity championed by the Board. In response
to that, places of worship are established within the compound of the factory while working days and working hours
are structured to take into consideration of the ethnic and religious needs of the workforce while all foreign workers are
granted freedom of movement with policy of no withholding of passport/work permit implemented. In addition, equal
access and opportunities are provided to our employees in terms of recruitment, retention and training. This is evidenced
by the diversity profile of our group. Formal grievance procedure is established so that grievances at the ground are
properly addressed at appropriate level timely.
In order to accord our people with their rights as an employee of the Group, it is the policy of the Group to comply to all
applicable prevailing human resource laws and regulation, at the minimum. The employees are granted with additional
leave types, on top of the leave requirements specified under the laws and regulations, for their personal and family
commitment and medical benefits are provided to all employees of the Group. Needless to say, it is paramount for the
Group to also comply with the other relevant social laws and regulations, such as Federal Constitution, Minimum Wage Order, Competition Act, Personal Data Protection Act, Minimum Retirement Age Act and Child Act, just to name few important
ones.
There was no legal action taken against the Group nor any fine or monetary sanction imposed in relation to human
resource practices from financial year ended 31 December 2016 to financial year ended 31 December 2018.
C. Our Community Commitments
It is our strategy to be a responsible corporate citizen by giving back and investing in the community in which the
Group operates. Our strategy is to generate sustainable value for both the community and economic growth through
effective use of the Group’s capabilities and resources as well as sharing of financial resources with local community for
their developments. During the financial year, we have supported community causes through corporate donations for the
development of local community as well as industrial trainings for students pursuing undergraduate programmes. The
Group is committed to continue to invest in community programmes and other corporate social responsibility initiatives
to contribute towards the betterment of local communities.
Our commitment to the CSR agenda had remained intact and we believe that our pursuit of achieving our business
objectives will require a balance between financial stability and our contribution not only to society, but the environment
as well. Therefore, in the year under review, we have adhered to our sustainable CSR programme.
SUSTAINABILITY STATEMENTCont’d
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ANNUAL REPORT 2018 35
MAJOR ECONOMIC, ENVIRONMENT AND SOCIAL ACTIVITIES UNDERTAKEN DURING FINANCIAL YEAR cont’d
C. Our Community Commitments cont’d
As part of our environmental preservation efforts, we continued to evaluate the safety of our manufacturing plants and
the effects of the emissions to the environment. We have monitored our plants stringently and ensured that it is not
harmful to the environment.
In today’s society, the successful corporations are also measured in terms of their standing in the eyes of the community
and the wellbeing of the community. At our corporate level we have continued to encourage the children of our
employees in their studies and reward those who excelled in their public examinations from ‘Ujian Penilaian Sekolah
Rendah (UPSR) up to Sijil Tinggi Persekolahan Malaysia (STPM) via our yearly ‘SIG Academic Awards’.
To heed the call by the Malaysian Government to equip next generation with the necessary technical and management
knowledge to break free from middle-income trap Malaysia is facing, the Group is continuously collaborating with
local tertiary education centres and institutions on industrial training programme for their students in the areas, such
as, manufacturing/refilling, quality assurance, engineering, maintenance, finance, management information system and
human resources. Such initiatives had provided the Group a ready pool of trained and educated human resources for its
business operations and business expansion programme.
D. Other Social Activities
The Board believes that better results could be yield from implementing better practices. Therefore, the Company’s Code
of Ethics and Conduct sets out the explicitly defines the expectations of the Board on each employee to comply with the
terms of good business practices and high personal conduct. The Group has established a proper channel for whistle-
blowing to report any inappropriate ethical behaviours (such as, corruption, bribery, fraud, criminal offence, breach of the
laws, misuse/misappropriation of funds or assets, financial and operational impropriety, gross mismanagement, breach of
Code of Ethics and Conduct and safety and health concerns) and workplace grieves by employees. The confidentiality of
the identification of the whistle-blowers is to be strictly maintained, unless prohibited by law.
FYE 31.12.16 FYE 31.12.17 FYE 31.12.18
Number of Incident of whistleblowing reported 0 0 0
Number of Incident of whistleblowing resolved 0 0 0
E. Safe and Healthy
The Group’s long-term sustainability hinged heavily on the safety and well-being of the employees and not to a lesser
extent, the suppliers, customers and local community. A safe and healthy workplace are not only the fundamental right
of the employees but also relevant stakeholder groups. It is the Group’s priority to take the responsibility to maintain a
productive workplace by minimising the risk of accidents, injury and exposure to health hazards.
The safety and health management are managed by Safety, Health and Environment Committee (“SHE Committee”)
in compliance with the Occupational Safety and Health Act 1994, Occupational Safety and Health (Safety and Health Committee) Regulations 1996, Control of Industrial Major Hazard (“CIMAH”) Regulations 1996 and guided by the Occupational
Safety, Health and Environment Policy established by the SHE Committee. Safety and health rules and regulations are
established by the SHE Committee and included as part of the Employee Handbook to minimise industrial accidents
at the workplace. Safety, Health and Environment officer (“SHE Officer”) is employed by the Group to oversee due
observance of safety and health rules and regulations established by the SHE Committee and to promote safe and healthy
conducts at workplace, in compliance with Occupational Safety and Health Act 1994 and Occupational Safety and Health (Safety and Health Officer) Order 1997. Through routine inspections by the SHE Officer, incidents of non-compliance of
the safety and health rules by the employees are identified promptly for corrective actions to be implemented swiftly.
Furthermore, the Group is complying with the stringent requirements of CIMAH Regulations 1996 for its industrial activity
in relation to manufacturing and storage industrial gases in quantities which exceed the threshold quantity stipulated.
Furthermore, as part of the CIMAH Regulations 1996, the Group is required to perform hazard risk assessment and control
activities to be identified and implemented to reduce such hazard risks identified.
SUSTAINABILITY STATEMENTCont’d
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SIG GASES BERHAD (875083-W)36
MAJOR ECONOMIC, ENVIRONMENT AND SOCIAL ACTIVITIES UNDERTAKEN DURING FINANCIAL YEAR cont’d
E. Safe and Healthy cont’d
As safety measures, the surrounding of all sites of the Group are fully barricaded by fences to prevent unauthorised access
to the workplace. In addition, access to the workplace required all visitors to report to the security personnel for security
clearance and visitor registration. Access to the manufacturing, re-filling and storage area is restricted to the authorised
personnel only with personal protective gears. To promote safe and healthy culture among the employees, safety
and health induction training is conducted for newly joint employees and continuous safety and health trainings are
conducted by the SHE Officer to ensure the safety and health awareness is preserved. All employees working at highly risk
and sensitive areas and visitor required access to such areas are provided personal protective gears by the Group.
It is the Group’s important measure to put up safety notice and indicators at relevant and strategic areas within the
compound of the properties of the Group. It is the Group’s SHE policy that no mobile phone usage and smoking are
allowed at all manufacturing, re-filling and storage areas.
Fire detection and suppression equipment are tested at regular interval to ensure its functionalities are not compromised
over time and clear escape route plans are placed in strategic locations. Strategic locations at the at all manufacturing,
re-filling and storage areas are monitored through Closed-circuit television system. To ensure our readiness in the event
of unfortunate event, emergency plan and response team are established for all manufacturing, re-filling and storage
sites and drills and practice are conducted at regular intervals to ensure that such unlikely incident can be handled
satisfactorily and promptly to minimise damage to the properties and people, including the surrounding communities.
Furthermore, as part of the compliance with CIMAH Regulations 1996, the Group had put in place a notification system to
the regulatory office and local community in the event of major industrial event.
The operating of the plant and machinery at all manufacturing, re-filling and storage areas are guided by Factories & Machinery Act 1967 and relevant Factories & Machinery Regulations with the compliance thereof. All property, plant
and equipment within the Group are subjected to planned scheduled maintenance to ensure its functionality with any
defect or potential defect detected at earliest opportunity to reduce risk of unplanned machinery breakdown and risk of
industrial accident.
With the above controls put in place, the Group’s accident rate improved from 21 cases per 1,000 employees during
financial year ended 31 December 2016 to 5 cases per 1,000 employees during financial year ended 31 December 2018.
There was no fatal injury reported and notifiable industry events under CIMAH Regulations 1996 from financial year
ended 31 December 2016 to financial year ended 31 December 2018.
There was no legal action taken against the Group nor any fine or monetary sanction imposed related to occupational
safety and health aspects from financial year ended 31 December 2016 to 31 December 2018.
F. Our Environmental Conservation and Preservation Initiatives
The Group is committed to comply with the environmental laws and regulations of the jurisdictions the Group is
operating, i.e. Environmental Quality Act and its regulations. As a responsible group of companies in industrial gases
industry, the Group is committed wholeheartedly to ensure strict compliance of relevant environmental laws and
regulations in its business activities.
The management and monitoring of the environmental compliance is delegated to the SHE Committee and relevant
policies and procedures are established to manage such compliance. It is the practice of the Group that the policy in
relation to non-hazardous materials as well as other environmental preservation related activities shall be adhered by
all employees, suppliers and contractors. Hazardous chemicals or materials are also properly labelled by the suppliers
or contractors so that the employees are reminded of the danger of such hazardous chemicals or materials and of the
properly handling and disposal of such materials. The discharge of the effluent from the operations is such that such
effluent is to be treated in compliance with the relevant laws and regulation before discharge. All scheduled wastes
generated by the Group are collected and stored in compliance with Environmental Quality (Scheduled Wastes) Regulations 2005 and disposed to licensed scheduled waste operators for material recovery and proper handling and ultimate disposal
of such wastes. The scheduled wastes’ generation and movement are monitored by using Electronic Scheduled Waste
Information System under the Department of Environment of Malaysia.
SUSTAINABILITY STATEMENTCont’d
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ANNUAL REPORT 2018 37
MAJOR ECONOMIC, ENVIRONMENT AND SOCIAL ACTIVITIES UNDERTAKEN DURING FINANCIAL YEAR cont’d
F. Our Environmental Conservation and Preservation Initiatives cont’d
With the above efforts to stride for environmental excellence by the Group, the incidents of reported non-compliance by
Department of Environment decreased from financial year ended 31 December 2016 to financial year ended 31 December
2018 are as follow:
FYE 31.12.16 FYE 31.12.17 FYE 31.12.18
Number of Major Reported Non-Compliance 0 0 0
Number of Minor Reported Non-Compliance 0 0 0
Total Number of Reported Non-Compliance 0 0 0
Number of Safety & Health trainings conducted 13 20 24
The Group practices the “Reduce, Reuse and Recycle” policy to uphold its value on environmental proposition. The
followings are few of the practices of the policy:
Recycled wastes, such as used paper and plastic materials, are collected for disposal to recycling company
Electricity conservation practice
Practice to purchase of energy-efficient equipment and motor vehicle
Induction training is conducted for newly joint employees and continuous trainings are conducted by the SHE Officer to
instil environmental friendly mindset in all employees and the compliance requirements of Environmental Quality Act and
its regulations.
There was no legal action taken against the Group nor any fine or monetary sanction imposed related to environmental
aspects from financial year ended 31 December 2016 to 31 December 2018.
The Sustainability Statement was approved by the Board on 10 April, 2019.
SUSTAINABILITY STATEMENTCont’d
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SIG GASES BERHAD (875083-W)38
CORPORATE GOVERNANCE OVERVIEW STATEMENT
The Board of Directors (“the Board”) and Management of SIG Gases Berhad (“SIGGAS” or “the Company”) recognise the
importance of good corporate governance as a fundamental part of discharging its duties and responsibilities, to safeguard
and to protect shareholders’ and stakeholders’ value and to enhance the financial performance of SIGGAS and its group of
companies (“the Group”). The Board fully supports the Malaysian Code on Corporate Governance 2017 (“MCCG 2017”) which
sets out the basic principles and intended outcome for good corporate governance and best practices for listed companies.
The Board is committed and strives to apply the intended outcome of the MCCG 2017 to promote good corporate governance
through sustainability practices throughout the Group and effectively to discharge its responsibilities to protect and enhance
shareholders’ value.
This Statement sets out the overview of the manner in which the Group has applied the principles set out in the MCCG 2017 on
its compliances with the best practices except where stated otherwise, its compliance with the best practices and to manage
the business and affairs of the Group to promote Corporate accountability and shareholders’ and stakeholders’ value throughout
the Financial Year Ended 31 December 2018.
SIGGAS has disclosed on the application of each practice set out in the MCCG during the financial year in the Corporate
Governance Report (“CG Report”) prescribed by Bursa Malaysia Securities Berhad (“Bursa Securities”) and announced the
same together with the announcement of this Annual Report in accordance with paragraph 15.25 and Practice Note 9 of Main
Market Listing Requirement of Bursa Securities (“MMLR”). The CG Report is available for download at the Company’s website at
www.siggases.com.
Principle A – BOARD LEADERSHIP AND EFFECTIVENESS
BOARD RESPONSIBILITIES
The Group is headed by an experienced Board. The Board is responsible for the overall governance of the Group and plays
an active role in determining the long term direction, strategies and objectives of the Group in order to enhance the long-
term interests of its shareholders and other stakeholders. The Board strives to ensure that the Group is managed effectively. In
addition to fulfilling its commitment for increased shareholders’ and other stakeholders’ value, the Board endeavors to uphold
the interests of the Group’s customers, employees, suppliers and the communities where it operates, but bearing in mind the
circumstances and requirements for successful businesses.
The Chairman of the Company, Mr Peh Lam Hoh holds dual roles as Executive Chairman and Managing Director of the Group.
He is responsible for overseeing the management of the Company. The Board is aware that it is not in accordance with the best
practice on the separation of the roles of the Chairman and Chief Executive Officer. However, the Board is satisfied with the dual
roles held by Mr Peh in view of his extensive experience and his wide spectrum of entrepreneurship skills and business acumen
in industrial gas industry and with appropriate knowledge and competencies to address key risks and major issues concerning
the Group’s policies and strategies.
Mr Peh has the full co-operation of the Board and Management who provide the necessary check and balances. Mr Peh plays an
important role in developing the business of the Group and provides the Group with strong leadership and vision and is able to
discharge his duties effectively and competently and contributes to the continual success of the Group’s business.
The Board believed that Mr Peh is the person who is very capable with the operation and management of the Group and
believed that he is the right person to chair the Board with his qualification and working experience.
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ANNUAL REPORT 2018 39
CORPORATE GOVERNANCE OVERVIEW STATEMENTCont’d
Principle A – BOARD LEADERSHIP AND EFFECTIVENESS cont’d
BOARD COMPOSITION
The Company is committed to ensuring that the composition of the Board continues to include directors to bring an
appropriate mix of skills, experience, independence and expertise to Board’s decision-making.
The Board currently comprises six (6) directors and the details of the directors are set out as below:-
Name of director Term in office Position
Mr Peh Lam Hoh Director and Chairman since October 2009 Executive Chairman
Mr Lau Cheng Ming Director since October 2009 Executive Director
Datuk Syed Ahmad Bin
Alwee Alsree
Director since December 2009 Non-Independent Non-Executive Director
Mr Diong Tai Pew Director since December 2009 Senior Independent Non-Executive Director
Mr Lee Ting Kiat Director since March 2011 Independent Non-Executive Director
Mr Lim Tin Teng @ Lim Jit Teng Director since May 2014 Independent Non-Executive Director
The composition of the Board exceeds the minimum one-third requirement of independent directors as stipulated in the Listing
Requirements and meets the requirement of having at least 50% of the Board being independent directors as set out in the
MCCG 2017. The Board possesses an appropriate mix of skills, experience, independence, expertise to enable the Board to
discharge its duties and responsibilities and support the Group to deliver its strategic objectives with its current business in gas
industry and to enhance continual growth of the Group.
Independent Directors
The Independent Directors are the Directors who will bring independent views and judgement to Board’s deliberations that
are free from any business or other relationship that could materially interfere with the interest of the company as a whole. The
Independent Directors and also Non-Executive Directors are not members of management and they are free of any business or
other relationship that could materially interfere with the independent judgement.
The Board is satisfied with the level of independence demonstrated by all the Independent Directors and had assessed the
independence of the Independent Non-Executive Directors on an annual basis by taking into account the individual Director’s
ability to exercise independent judgement at all times and based on the criteria set out in the MMLR.
Board Committees
The Board has established Board Committees namely the Audit Committee, Nominating Committee and Remuneration
Committee to assist in the execution of Board functions. Although the Board may delegate powers and responsibilities to
these committees, the Board retains ultimate accountability for discharging its duties. Descriptions of the current roles and
responsibilities of these committees are set out in their respective Terms of Reference which are available on SIGGAS Group’s
website (www.siggases.com). The details of the current composition of each committee and meetings attendance for members
of each committee are set out below.
Audit Committee
The composition of the Audit Committee, Terms of Reference and the summary of activities are set out in pages 46 to 49
of this Annual Report.
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SIG GASES BERHAD (875083-W)40
CORPORATE GOVERNANCE OVERVIEW STATEMENTCont’d
Principle A – BOARD LEADERSHIP AND EFFECTIVENESS cont’d
BOARD COMPOSITION cont’d
Board Committees cont’d
Nominating Committee
The Nominating Committee comprises exclusively of Non-Executive Directors, a majority of whom are independent.
The Nominating Committee is primarily responsible for assessing and recommending for nomination to the Board and
assessing Directors standing for re-election and re-appointment at the forthcoming Annual General Meeting (“AGM”).
The Nominating Committee comprises the following Directors during the financial year and as at the date of this Annual
Report. The attendance details of each member at the Nominating Committee meetings are as follows: -
Composition of Nominating Committee
Number of
meeting
attended
Diong Tai Pew
(Chairman/Senior Independent Non-Executive Director) 1 / 1
Datuk Syed Ahmad Bin Alwee Alsree
(Member/Non-Independent Non-Executive Director)1 / 1
Lee Ting Kiat
(Member/Independent Non-Executive Director)1 / 1
Nomination / Recruitment Criteria
A clear and transparent nomination/recruitment process for the appointment of Directors of the Group has been
established by the Nominating Committee and approved by the Board. The nomination methodology involves the
following procedures: -
i) Identification of candidates;
ii) Evaluation on the suitability of candidates;
iii) Interview with the candidates;
iv) Final deliberation by Nominating Committee; and
v) Recommendation to the Board.
Remuneration Committee
The Remuneration Committee is primarily responsible for the development and review of the remuneration policy and
packages for the Board members. The remuneration policy aims to attract and retain Directors necessary for proper
governance and the smooth running of the Company. The Remuneration Committee comprises the following Directors
during the financial year and as at the date of this Annual Report. The attendance details of each member at the
Remuneration Committee meetings are as follows: -
Composition of Committee
Number of
meeting
attended
Peh Lam Hoh
(Chairman/Executive Chairman) 2 / 2
Diong Tai Pew
(Member/Senior Independent Non-Executive Director)2 / 2
Lee Ting Kiat
(Member/Independent Non-Executive Director) 2 / 2
Lim Tin Teng @ Lim Jit Teng
(Member/Independent Non-Executive Director)1 / 2
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ANNUAL REPORT 2018 41
CORPORATE GOVERNANCE OVERVIEW STATEMENTCont’d
Principle A – BOARD LEADERSHIP AND EFFECTIVENESS cont’d
BOARD COMPOSITION cont’d
Board Committees cont’d
Remuneration Committee cont’d
The Remuneration Committee consists of a majority of Independent Non-Executive Directors but is chaired by Executive
Director, Mr Peh Lam Hoh. The Board believed that Mr Peh is the person who is familiar with the operations and
management of the Group and believed that he is the suitable person to chair the Remuneration Committee with his
years of knowledge and relationship with the Senior Management and Staff.
Remuneration of Directors and Senior Management
The fees of Directors, including non-executive Directors, are determined by the Board with the approval from shareholders
at the AGM.
The objective of the Company’s policy on Directors’ remuneration is to attract and retain the Directors with the experience
and expertise needed to run the Group effectively. The Executive Directors’ remuneration is structured so as to link
rewards to corporate and individual performance whilst the remuneration of the Non-Executive Directors is determined in
accordance with their experience and the level of responsibilities undertaken by them.
Details disclosure on a named basis, for the Directors’ remuneration of the Company and the Group for the financial year
ended 31 December 2018 are as follow:-
The Company:
Directors
Salary and
Bonus
(RM)
Directors’
Fees
(RM)
Other
Emoluments
(RM)
EPF
Contribution
(RM)
Total
(RM)
Executive Directors
Peh Lam Hoh - 48,390 5,000 - 53,390
Lau Cheng Ming - 34,500 5,000 - 39,500
- 82,890 10,000 - 92,890
Non-Executive Directors
Datuk Syed Ahmad Bin Alwee Alsree - 55,125 4,000 - 59,125
Diong Tai Pew - 69,015 5,000 - 74,015
Lee Ting Kiat - 55,125 5,000 - 60,125
Lim Tin Teng @ Lim Jit Teng - 55,125 4,000 - 59,125
Total: - 317,280 28,000 - 345,280
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SIG GASES BERHAD (875083-W)42
CORPORATE GOVERNANCE OVERVIEW STATEMENTCont’d
Principle A – BOARD LEADERSHIP AND EFFECTIVENESS cont’d
BOARD COMPOSITION cont’d
Board Committees cont’d
Remuneration of Directors and Senior Management cont’d
The Group:
Directors
Salary and
Bonus
(RM)
Directors’
Fees
(RM)
Other
Emoluments
(RM)
EPF
Contribution
(RM)
Total
(RM)
Executive Directors
Peh Lam Hoh 1,398,110 60,390 546,998 167,781 2,173,279
Lau Cheng Ming 234,160 46,500 5,000 28,143 313,803
Dato Hajjah Hanifah Hajar Taib 162,380 12,000 - 19,496 193,876
1,794,650 118,890 551,998 215,420 2,680,958
Non-Executive Directors
Datuk Syed Ahmad Bin Alwee Alsree - 55,125 4,000 - 59,125
Diong Tai Pew - 69,015 5,000 - 74,015
Lee Ting Kiat - 55,125 5,000 - 60,125
Lim Tin Teng @ Lim Jit Teng - 55,125 198,673 - 253,798
Total: 1,794,650 353,280 764,671 215,420 3,128,021
Senior Management’s Remuneration
Details of the remuneration of the top four (4) Senior Management in each successive band of RM50,000 during the
financial year 2018 are as follows:
Total Remuneration Band (RM) Top Four Senior Management
50,000 and below -
50,001 – 100,000 -
100,001 – 150,000 -
150,001 – 200,000 -
200,001 – 250,000 -
250,001 – 300,000 -
300,001 – 350,000 Foo Beng Boon (Sales & Marketing Director)
Chong Joon Kiong (Cylinder Control and Distribution Director)
Koh Beng San (Finance Director)
Boo Chin Eng (Production Director)
GENDER DIVERSITY
The Board promotes and commits to ensuring gender diversity in its composition. The Board considers diversity from number
of different aspects including gender, age, competencies, skills, extensive experience and knowledge which are the paramount
consideration to the Group. The Board is putting effort to find suitable female candidate to join the Board who meets the
objective criteria.
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ANNUAL REPORT 2018 43
CORPORATE GOVERNANCE OVERVIEW STATEMENTCont’d
Principle A – BOARD LEADERSHIP AND EFFECTIVENESS cont’d
DIRECTORS’ TRAINING
The Board acknowledges the importance of continuing education for its Directors to ensure that they are equipped with the necessary skills and knowledge and to keep abreast with new developments for the furtherance of their duties and to meet the challenges.
During the financial year ended 31 December 2018, all Directors had attended appropriate training programs to equip themselves with the knowledge to discharge their duties. The Trainings and courses attended by each Director are as follows:-
Director Training/courses attended
Peh Lam Hoh The Annual Report of Tomorrow-Guide to Forward Looking Information by Bursatra
Sdn Bhd on 30 October 2018
Lau Cheng Ming The Annual Report of Tomorrow-Guide to Forward Looking Information by Bursatra
Sdn Bhd on 30 October 2018
Datuk Syed Ahmad Bin Alwee Alsree 1) Tawarruq - Islamic Banking & Finance Institute Malaysia (IBFIM) by Kenanga
Investment Bank Berhad on 24 January 2018
2) Purification: Zakat and Cleansing (IBFIM) by Kenanga Investment Bank Berhad on
25 July 2018
Diong Tai Pew 1) Overview of Five-step revenue recognition model by KPMG
2) MIA Public Pracice Program 2018 by MIA
3) Managing an effective Whistle-blowing Committee by Malaysian Integrity Academy
Lee Ting Kiat Tax and Business Submit 2018 by KPMG on 15 November 2018
Lim Ting Teng @
Lim Jit Teng
Practical Approach and Guidelines for Risk Management and Internal Control by
Bursatra Sdn Bhd on 27 November 2018
SUCCESSION PLAN
The Group has in place a Succession Planning Structure to identify the primary and secondary officers for key management positions. The Board ensures that Senior Management has the necessary skills and experience, and there are measures in place to provide for the orderly succession of Board and Senior Management.
BOARD CHARTER
The Board is guided by the Board Charter approved by the Board to promote the standards of Corporate Governance and defines clear functions reserved for the Board and those delegated to Management to enhance accountability. The objective of the Board Charter shows that the Board remains fully resolved and committed to employing the principles of integrity, transparency and professionalism to ensure the practice of good corporate governance that will safeguard and enhance shareholders’ value and at the same time protect the interests of the stakeholders. The Board Charter provides guidance for Directors and Management regarding the responsibilities of the Board, its Committee and Management. The Board Charter is subject to review by the Board annually to ensure that it remains consistent with the Board’s objectives and responsibilities. The Board Charter is also available on the Company’s website at www.siggases.com
CODE OF CONDUCT
The Board has formalised a Code of Conduct for Directors and Employees of the Group, setting out the standards of conduct and behaviour expected from Directors and employees to inculcate good ethical conduct and is available on the Company’s website at www.siggases.com. The Board is ultimately responsible for the implementation of this Code of Conduct. Directors and Management of SIGGAS Group are committed to adhering to the best practices in corporate governance and observing the highest standards of conduct, integrity and behaviour in all activities conducted by the Group, including the interaction with its customers, suppliers, shareholders, employees and business partners, and within the community and environment in which the Group operates. All employees of the SIGGAS Group play an important role in establishing and enhancing the reputation, image and share a serious responsibility for the good public relations of the SIGGAS Group and ensuring the observance to and compliance with the standards of integrity and behaviour and Company’s value that the SIGGAS Group is committed to. It is required that employees display the highest levels of professionalism in all aspects of their work and comply with this Code of Conduct and Ethics of the Group as set out in the Employees Handbook, and must at all times, comply with all applicable laws, regulations and other policies applicable within the SIGGAS Group.
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SIG GASES BERHAD (875083-W)44
CORPORATE GOVERNANCE OVERVIEW STATEMENTCont’d
Principle A – BOARD LEADERSHIP AND EFFECTIVENESS cont’d
WHISTLE-BLOWING POLICY
The Board has formalised a Whistle-Blowing Policy with the aim of providing an avenue for raising concerns. Employees of the
Group are expected to be vigilant about any wrongdoings, malpractices or irregularities at the workplace and report promptly
such instances through designated channel for immediate rectification or other necessary measures in minimizing potential
financial or reputational loss. The Whistle-Blowing Policy provides employees of the Group with accessible avenue to report on
suspected fraud, corruption, dishonest practices or other similar matters. It aims to encourage the reporting of such matters in
good faith, with the confidence that employees making such reports will, to the extent possible, be protected from
reprisal. The Whistle-Blowing Policy is available on the Company’s website www.siggases.com.
ANTI-CORRUPTION & BRIBERY POLICY
The Board has formalised an Anti-Corruption & Bribery Policy which governs the prevention of corruption and unethical
practices within the Group. The Anti-Corruption & Bribery Policy sets forth the policy statement and procedures on how to
deal with improper solicitation, bribery and other corrupt activities and outline the roles and responsibilities of Directors and
Employees of the Group. The Group must undertake continuous efforts to ensure that they counter the risks of corruption
effectively. Anti-corruption demonstrates the Group’s broader belief in the value of being open and accountable and how these
principles relate to operating a sustainable business. Companies need to commit to anti-corruption and corporate transparency
policies. The Anti-Corruption & Bribery Policy is available on the Company’s website www.siggases.com.
COMPANY SECRETARIES
The Company has two (2) Company Secretaries who are qualified under Section 235(2) of the Companies Act 2016. One of
them is licensed by the Registrar of Companies and an Affiliate Member of the Malaysian Institute of Chartered Secretaries
and Administrators (“MAICSA”) whilst the other is an Associate member of MAICSA. The Company Secretaries provide support
to the Board in fulfilling its fiduciary duties. The Company Secretaries also advise the Board on issues relating to the corporate
governance and compliance with laws, rules and regulatory requirements. The Company Secretaries attend and ensure that all
Board meetings and Committee meetings are properly convened, and that accurate and proper record of the proceedings and
resolutions passed are taken and maintained in the statutory records of the Company. The Directors have unrestricted access to
the advice and services of the Company Secretaries.
Principle B – EFFECTIVE AUDIT AND RISK MANAGEMENT
Audit Committee (“AC”)
The AC of the Board consists of a majority of Independent Non-Executive Directors and is chaired by an Independent Non-
Executive Director, Mr Diong Tai Pew.
The key features underlying the relationship of the Board via the AC with the External Auditors are included in the Audit
Committee Report as detailed in this Annual Report. The Company, through the AC maintains a transparent relationship with
the External Auditors. The External Auditors attended all the Audit Committee meetings which deliberated on the Audit Plan,
Quarterly financial results and the Annual Financial Statements. From time to time, the External Auditors highlight significant
matters to the AC and the Board that require the AC and Director’s attention. The External Auditors are required to declare their
independence annually to the AC and have provided the declaration in their annual audit plan and the report on their audit of
the financial statements of the Group for the year ended 31 December 2018 presented to the AC of the Company.
All members of the AC shall be financially literate and at least one of them shall be a member of the Malaysian Institute of
Accountants or a person who fulfills the requirements under Paragraph 15.09(1)(c)(ii) and (iii) of the Main Market Listing
Requirements. No alternate Director shall be appointed as a member of the Audit Committee.
All members of AC attend continuous professional development trainings to keep themselves abreast on updates and
requirements of the relevant laws and regulations.
The AC has incorporated in its Terms of Reference on the observation of a cooling-off period of at least two (2) years for a former
key audit partner prior to the appointment as a member of AC.
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ANNUAL REPORT 2018 45
CORPORATE GOVERNANCE OVERVIEW STATEMENTCont’d
Principle B – EFFECTIVE AUDIT AND RISK MANAGEMENT cont’d
Risk Management and Internal Control Framework
The Group’s Internal Audit works and functions are out-sourced to Axcelasia Columbus Sdn Bhd at fee of RM[ ] per annum.
The Board recognises the importance of good risk management practices and sound internal controls as a platform to good
corporate governance. The Board acknowledges its overall responsibility for maintaining a sound system of risk management
and internal control, and for reviewing its adequacy and integrity. The Board through its Audit Committee has established an
ongoing process for identifying, evaluating and managing the significant risks faced by the Group and this process includes
enhancing the risk management and internal control system as and when there are changes to the business environment and
regulatory requirements. The process is reviewed by the Board and the Audit Committee on a periodical basis. The Statement
on Risk Management and Internal Control as set out in pages 50 to 53 of this Annual Report provides an overview of the
management of risks and state of internal control within the Group.
The Directors acknowledge their responsibilities for the Group and the Company to maintain a sound system of internal controls
covering financial, operation and compliances and to safeguard shareholders’ investment and the Company’s assets. The
Activities of the Internal Auditors during the financial year are set out in the Audit Committee Report on page 48.
Principle C – INTERITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS
Communication with Stakeholders
The Board recognises the importance of maintaining an effective communications policy that enables both the Board and the
Management to communicate effectively with investors, stakeholders and the general public. The Board endeavours to provide
timely and accurate disclosure of all material information of the Group to the shareholders and investors. Shareholders and
investors are kept informed of all major developments within the Group by way of announcements through the Bursa Link,
the Company’s Annual Reports, Website, announcements and other circulars to shareholders with an overview of the SIGGAS
Group’s financial and operational performance on timely basis.
Stakeholders are given the opportunity to speak and to seek clarifications during the Company’s Annual General Meeting.
Timely and Accurate Disclosure
The Board will provide timely and accurate information to the shareholders in compliance with the disclosure requirements
as set out in the Main Market Listing Requirements of Bursa Securities. The Company has also established websites at
www.siggases.com to which the shareholders can obtain information on the Company. Shareholders are also able to access the
latest corporate, financial and market information of the Company via Bursa Securities’ website at www.bursamalaysia.com.
Conduct of General Meeting ("GM")
The GMs of the Company represents the principal forum for dialogue and interaction with all shareholders wherein the
shareholders are given opportunities to raise questions. Shareholders are notified of the meeting and provided with a copy of
the Company’s Annual Report before the meeting. The Board welcomes questions and feedback from shareholders during and
at the end of shareholders’ meeting and ensures their queries are responded in a proper and systematic manner.
Notice of GMs and Annual Report are sent out to shareholders at least 28 days before the date of the meeting. In the case of
re-election of Directors, the Board will ensure that full information is disclosed through the notice of meeting regarding
Directors who are retiring and who are willing to serve if re-elected. Each item of special business included in the notice of
the meeting will be accompanied by an explanatory statement for the proposed resolution to facilitate full understanding and
evaluation of issues involved.
Pursuant to the paragraph 8.29A(1) of the Listing Requirements of Bursa Securities, the Company is required to ensure that any
resolution set out in the notice of general meeting is to be voted by poll. All resolutions put forth for shareholder’s approval at
the 10th Annual General Meeting to be held on 21 June 2019 are to be voted by way of poll voting.
The Corporate Governance Overview Statement was approved by the Board on 10 April, 2019
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SIG GASES BERHAD (875083-W)46
AUDIT COMMITTEE REPORT
MEMBERSHIP AND MEETINGS
The Audit Committee comprises the following Directors during the financial year and as at the date of this report. The
attendance details of each member at the Audit Committee meetings held during the year are as follows:-
Composition of Committee
Number of
meeting
attended
Diong Tai Pew
(Chairman/Senior Independent Non-Executive Director) 5 / 5
Datuk Syed Ahmad Bin Alwee Alsree
(Member/Non-Independent Non-Executive Director)5 / 5
Lee Ting Kiat
(Member/Independent Non-Executive Director)5 / 5
Lim Tin Teng @ Lim Jit Teng
(Member/Independent Non-Executive Director)4 / 5
The meetings were appropriately structured through the use of agenda and board papers containing information relevant to
the matters for deliberation, which were distributed to members with sufficient notice.
The Audit Committee was established on 15 December 2009 and its Terms of Reference are set out below:-
TERMS OF REFERENCE
1. Composition
The Audit Committee shall be appointed by the Board of Directors from amongst the directors of the Company and shall
consist of not less than three (3) members, all of whom shall be Non-Executive Directors, with a majority of them being
Independent Directors.
All members of the Audit Committee shall be financially literate and at least one of them shall be a member of the
Malaysian Institute of Accountants or a person who fulfills the requirements under Paragraph 15.09(1)(c)(ii) and (iii) of the
Main Market Listing Requirements. No alternate Director shall be appointed as a member of the Audit Committee.
The Chairman of the Audit Committee shall be an Independent Director.
2. Secretary
The Secretary to the Audit Committee is the Company Secretary.
3. Frequency of Meetings
Meetings shall be held not less than four (4) times a year. The External Auditors may request a meeting if they consider
that one is necessary.
The Audit Committee may convene meetings with the External Auditors, the Internal Auditors or both, without the
executive board members and the employees of the Company, whenever deemed necessary, but at least twice a year.
4. Quorum of Meetings
The quorum for each meeting shall be two (2) members, all of whom must be Independent Directors.
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ANNUAL REPORT 2018 47
AUDIT COMMITTEE REPORT Cont’d
TERMS OF REFERENCE cont’d
5. Authority
The Audit Committee is authorised by the Board to investigate any activity within its Terms of Reference. It shall have
full and unrestricted access to any information pertaining to the Company and the Group and is authorised to seek any
information it requires from any employee and all employees are directed to cooperate with any request made by the
Audit Committee.
The Audit Committee shall have direct communication channels with the External Auditors and the Internal Auditors and
is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance
of outsiders with relevant experience and expertise if it considers this necessary.
6. The Duties of the Audit Committee shall be:
i. To consider the appointment of the External Auditors, any questions of resignation or dismissal. To discuss with the
External Auditors before the audit commences, the nature and scope of the audit, and the assistance given by the
Company’s officers to the auditors and ensure coordination where more than one audit firm is involved;
ii. To discuss problems and reservations arising from the interim and final audits, and any matter the External Auditors
may wish to discuss (in the absence of management where necessary);
iii. To review the quarterly and annual financial statements before submission to the Board, focusing particulars on:
any change in accounting policies and practices;
significant adjustments resulting from the audit;
the going concern assumption; and
compliance with accounting standards and other legal requirements.
iv. To review the External Auditors’ management letter and management’s response;
v. To do the following, in relation to the internal audit and risk management functions:
review the adequacy of the competency and the relevance of the scope, functions and resources of the
internal audit function, and that it has the necessary authority to carry out its work;
review the internal audit programme and results of the internal audit processes and, where necessary, ensure
that appropriate actions are taken on the recommendations of the internal audit and risk management
functions;
review any appraisal or assessment of the performance of members of the internal audit functions;
take cognisance of resignations of internal audit staff members and provide the resigning staff member an
opportunity to submit his reasons for resigning; and
ensure that the internal audit and risk management function reports directly to the Audit Committee and
shall have access to the Chairman of the Committee.
vi. To consider any related party transaction that may arise within the Company or Group;
vii. To consider the major findings of internal investigations and management’s responses;
viii. To observe a cooling-off period of at least 2 years for a former key audit partner prior to the appointment as a
member of Audit Committee; and
ix. To consider other topics as defined by the Board.
7. Reporting Procedures
The Audit Committee shall report to the Board of Directors.
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SIG GASES BERHAD (875083-W)48
SUMMARY OF ACTIVITIES OF AUDIT COMMITTEE
During the financial year ended 31 December 2018, the Audit Committee held a total of five (5) meetings. The principal activities
undertaken by the Audit Committee were summarised as follows:-
a) Administered SIGGAS financial reporting, the Audit Committee reviewed the quarterly unaudited financial results for the
4th quarter of 2017, 1st, 2nd, 3rd, 4th quarters of 2018 at its meeting held on 21 February 2018, 18 May 2018, 16 August
2018, 15 November 2018 and 21 February 2019 respectively together with the Management and External Auditors before
recommending them for the Board’s consideration and approval for announcement to the public through Bursa Link.
b) On 10 April 2018 and 10 April 2019, the Audit Committee had reviewed and discussed with the Management and External
Auditors on the audited financial statements of the Group for the year ended 31 December 2017 and 31 December 2018
prior to submission to the Board for their consideration and approval, respectively. The review was to ensure that the
audited financial statements were drawn up in accordance with the provision of the Companies Act 2016 and applicable
Financial Reporting Standards in Malaysia.
c) On 21 February 2019, the Audit Committee reviewed the External Auditors’ scope of work and the audit plans for year
2018 prior to the commencement of audit. The External Auditors had also declared their independence in relation to their
audit for the financial year ended 31 December 2018 to the Audit Committee.
d) Reviewed the External Auditors’ management letter and the Management’s response.
e) Reviewed the Related Party Transactions (both new and recurrent) at its meeting held on 21 February 2018, 18 May 2018,
16 August 2018, 15 November 2018 and 21 February 2019 respectively together with the Management.
f ) Discussed with the Internal Auditors on the conduct of the audit activities according to the Proposed Internal Audit
Plan for year 2018 approved by the Audit Committee. The Internal Auditors had presented their reports to the Audit
Committee on 18 May 2018, 16 August 2018, 15 November 2018 respectively. The reports contained:-
The findings, status and progress of the Internal Audits including summaries of the audit reports issued;
Audit recommendations provided by the Internal Auditors; and
Management’s responses to those recommendations and actions for the recommendations.
g) The Audit Committee had reviewed the Internal Audit Reports, which highlighted the risk profiles and assessments,
recommendations and management responses. The following identified business processes/ areas of focus were covered
by the Internal Auditors in year 2018:-
Sales and Collection
Credit Control
Production and Refilling Process
Treasury Management
Fire, Safety and Environment Regulations
Inventory and Distribution Management
h) The Audit Committee had reviewed the Risk Assessment Report, whereby the Internal Auditors were required to facilitate
the risk assessment update at the SIG Group level for the financial year ended 31 December 2018. The key elements of risk
assessment were as follows:-
Identify key risks associated with the SIG Group’s Mission, Vision and Strategies, based on a list of sources of risks;
Identify the existing controls that manage the identified risks;
Confirm ownership and time lines for managing and monitoring the identified risks;
Rating of the identified risks in terms of likelihood of occurrence and the resulting Impact on the organisation. The
rating takes into account the effectiveness of existing controls put in place to manage the risks;
Decision on the risk treatment and develop risk response to manage residual risks (if any); and
Continuous monitoring and updating to ensure compliance of the SIG Group’s existing key risk profile.
i) Reviewed the related party transactions entered into by the Company and the Group. The Audit Committee had on
21 February 2019 reviewed the Circular to Shareholders in relation to the Proposed Renewal of Shareholders’ Mandate
for Recurrent Related Party Transactions of a Revenue or Trading Nature before recommending them for the Board’s
consideration and approval.
AUDIT COMMITTEE REPORT Cont’d
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ANNUAL REPORT 2018 49
SUMMARY OF ACTIVITIES OF AUDIT COMMITTEE cont’d
j) The Audit Committee had also conducted meetings with the External Auditors and Internal Auditors without the presence
of the Executive Directors and Employees of the Company on 16 August 2018 and 10 April 2019.
RISK MANAGEMENT AND INTERNAL AUDIT AND FUNCTIONS
The Company has outsourced its risk management and internal audit functions to Axcelasia Columbus Sdn Bhd, which was
tasked with the aim of providing assurance and assisting the Audit Committee and the Board in reviewing the adequacy and
effectiveness of the risk management and internal control systems of the Company. The internal auditors also act as a source to
assist the Audit Committee and the Board to strengthen and improve current management and operating procedures in pursuit
of best practices.
The internal audit activities carried out for the financial year ended 31 December 2018, included the following:
Prepared the Annual Internal Audit Plan for approval of the Audit Committee.
Reviewed the system of internal control over the business processes/areas in accordance with the Group’s risk based
internal audit plan approved and adopted by the Audit Committee.
Followed up review on the status of previous issues on audit findings and recommendations.
The Risk Management and Internal Audit Reports incorporating the audit observations, potential implications, audit
recommendations and management’s responses and action plans were issued to the Audit Committee.
AUDIT COMMITTEE REPORT Cont’d
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SIG GASES BERHAD (875083-W)50
STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROL
Pursuant to Paragraph 15.26(b) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements, the Board of
Directors (“the Board”) of SIG Gases Berhad (“SIGGAS”) is pleased to report on its Statement on Risk Management and Internal
Control, which provides an overview of the nature and state of risk management and internal controls of SIGGAS and its group
of companies (“the Group”) during the financial year under review and up to the date of approval of this statement by the
Board. This statement is guided by the latest Statement on Risk Management and Internal Control: Guidelines for Directors of
Listed Issuers.
BOARD’S RESPONSIBILITIES
The Board recognises the importance of good risk management practices and sound internal controls as a platform to good
corporate governance. The Board acknowledges its overall responsibility for maintaining a sound system of risk management
and internal control, and for reviewing its adequacy and integrity. Due to the inherent limitations in any risk management and
internal control system, such system is designed to manage risks that may impede the achievement of the Group’s business
objectives rather than eliminate these risks. Therefore, the risk management and internal control system can only provide
reasonable and not absolute assurance against fraud, material misstatement or loss.
The Board through its Audit Committee has established an ongoing process for identifying, evaluating and managing the
significant risks faced by the Group and this process includes enhancing the risk management and internal control system
as and when there are changes to the business environment and regulatory requirements. The process is reviewed by the
Board and the Audit Committee on a periodic basis. The Management assists the Board in the implementation of the Board’s
policies and procedures on risk and control by identifying and assessing the risks faced by the Group, and in the design and
operation of suitable internal controls to mitigate these risks identified. The Board is of the view that the risk management and
internal control system in place for the year under review and up to the date of issuance of the annual report is adequate and
effective to safeguard the shareholders’ investment, the interests of customers, regulators, employees and the Group’s assets.
Notwithstanding the above, the Board has also received assurance from the Executive Chairman and Senior Finance Manager
that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects.
KEY FEATURES OF THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM
Key elements of the Group’s risk management and internal control system that have been established to facilitate the proper
conduct of the Group’s businesses are described below:
1. Risk Management System
The Board is dedicated to strengthening the Group’s risk management framework to manage its key business risks within
the Group and to implement appropriate risk management and internal control system to manage its significant risks.
Whilst the Board maintains ultimate control over risk and control issues, it has delegated to Executive Management
the implementation of the system of risk management and internal control within an established parameters and
framework. The responsibility for identifying and managing the risks of each department lies with the respective Heads of
Department.
The key risk of the group is explained in the Management Discussion and Analysis on page 13.
2. Internal Control System
Key features of the internal control system are as follows:
The Board of Directors and the Audit Committee
The Board and Audit Committee meet at least four (4) times during the financial year to ensure that the Directors
maintain full and effective control on all strategic and operational areas of the Group. The Chairman of the meetings
would lead the presentation of the Audit Committee and Board papers that cover the Group’s pertinent and
significant issues.
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ANNUAL REPORT 2018 51
STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROLCont’d
KEY FEATURES OF THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM cont’d
2. Internal Control System cont’d
Organisation Structure & Authorisation Procedures
The Group maintains a formal organisational structure that includes clear delegation of responsibilities and
accountability. It sets out the roles and responsibilities, appropriate authority limits, review and approval procedures
within the internal control system of the Group’s various business units.
Periodical and/or Annual Budget
An annual budget is prepared by management and is tabled to the Board for approval. Periodic monitoring is
carried out to measure the actual performance against budget in order to identify any significant variances arising
and to facilitate the formulation and implementation of remedial action plans.
Group Policies and Procedures
Documented policies and procedures are in place and are regularly reviewed and updated so as to ensure that it
maintains its effectiveness and continues to support the Group’s business activities as the Group continues to grow.
Certain business units within the Group are ISO accredited.
Human Resource Policy
Comprehensive guidelines on employment and retention of employees are in place to ensure that the Group has
a team of employees who are well trained and equipped with the necessary knowledge, skills and abilities to carry
out their responsibilities effectively.
Information and Communication
Information critical to the achievement of the Group’s business objectives are communicated through established
reporting lines across the Group. This is to ensure that matters that require the Board and Management’s attention
are highlighted for review, deliberation and decision on a timely basis.
Monitoring and Review
Scheduled operational and management meetings are held to discuss and review the business plans, budgets,
financial and operational performances of the Group. Monthly management accounts containing key financial
results, operational performances and comparison of actual performances against budgets are presented to the
management team for monitoring and review. The quarterly financial statements are presented to the Board for
their review and approval. The Board also plays an active role in deliberating and reviewing the business plans,
strategies, performance and risks faced by the Group.
3. Internal Audit Function
The Group’s internal audit function is outsourced to a professional services firm, Axcelasia Columbus Sdn Bhd to assist the
Board and Audit Committee in providing an independent assessment on the adequacy, efficiency and effectiveness of the
Group’s internal control system.
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SIG GASES BERHAD (875083-W)52
KEY FEATURES OF THE GROUP’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM cont’d
3. Internal Audit Function cont’d
During the financial year ended 31 December 2018, the outsourced internal audit function carried out audits in
accordance with the risk-based internal audit plan which was reviewed and approved by the Audit Committee.
The internal audit plan was developed taking into consideration the Group’s risk profiles and concerns of Executive
Management and the Audit Committee. The entities and business processes reviewed were as follows:
Entity Business Processes
Southern Industrial Gas Sdn Bhd Sales and Collection
Credit Control
Treasury Management
Financial Statement Close Process
Production
Refilling Process
Fire, Safety and Environment Regulations
Inventory Management
Distribution Management
Findings from the internal audit reviews, including the recommended corrective actions, were discussed with
Management prior to presenting to the Audit Committee at their scheduled meetings. In addition, follow up reviews were
also conducted to ensure that corrective actions have been implemented in a timely manner. Based on the internal audit
review conducted, none of the weaknesses noted have resulted in any material losses, contingencies or uncertainties that
would require a separate disclosure in this annual report.
The Group’s system of risk management and internal control applies principally to SIGGAS and its subsidiaries. The
associated company has been excluded because the Group does not have full management control in the associated
company. Nevertheless, the Group’s interest is secured through Board’s representation at the associated company.
REVIEW OF STATEMENT
The External Auditors have performed limited assurance procedures on this Statement on Risk Management and Internal
Control pursuant to the scope set out in Audit and Assurance Practice Guide 3, Guidance for Auditors on Engagements to
Report on the Statement on Risk Management and Internal Control included in the Annual Report (“AAPG 3”) issued by the
Malaysian Institute of Accountants (“MIA”) for inclusion in the Annual Report of the Group for the year ended 31 December
2018, and reported to the Board that nothing has come to their attention that causes them to believe the statement intended
to be included in the Annual Report is not prepared, in all material respects, in accordance with the disclosures required by
paragraph 41 and 42 of the Guidelines, nor is the Statement factually inaccurate.
AAPG 3 does not require the External Auditors to consider whether the Directors’ Statement on Risk Management and Internal
Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management
and internal control system including the assessment and opinion by the Directors and management thereon. The report from
the External Auditors was made solely for, and directed solely to the Board of Directors in connection with their compliance with
the listing requirements of Bursa Malaysia Securities Berhad and for no other purposes or parties. The External Auditors do not
assume responsibility to any person other than the Board of Directors in respect of any aspect of this report.
STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROLCont’d
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ANNUAL REPORT 2018 53
CONCLUSION
The Board is of the view that the Group’s system of risk management and internal control is adequate to safeguard shareholders’
investments and the Group’s assets. However, the Board is also cognizant of the fact that the Group’s system of internal control
and risk management practices must continuously evolve to meet the changing and challenging business environment.
Therefore, the Board will, when necessary, put in place appropriate action plans to further enhance the system of internal
control and risk management framework.
This statement was approved by the Board of Directors on 10 April 2019.
STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROLCont’d
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SIG GASES BERHAD (875083-W)54
ADDITIONAL COMPLIANCE INFORMATION
1. AUDIT AND NON-AUDIT FEES
The amount of audit and non-audit fees paid or payable to the external auditors and its affiliates for the financial year
ended 31 December 2018 were as follow:
Audit Fee
(RM)
Non-Audit Fee
(RM)
Listed Issuer 38,000 19,500
Group 105,000 19,500
2. MATERIAL CONTRACTS
Save as disclosed below, there were no material contracts entered into or subsisting by the Company and its subsidiaries
involving the interest of Directors’ and Major Shareholders’ of the Company during the financial year ended 31 December
2018:
(a) Proposed Disposal of the Company’s 100% Equity Interest in Southern Industrial Gas Sdn Bhd (“SIGSB”)
(“Proposed Disposal”)
SIGGAS had received an offer letter dated 25 March 2019 from Air Liquide Malaysia Sdn Bhd (“ALM”) to acquire
23,000,000 ordinary shares in SIGSB, representing 100% equity interest therein (including the 40% minority
shareholding owned and held by SIGSB in Iwatani-SIG Industrial Gases Sdn Bhd) from SIGGAS for a purchase
consideration of RM226,586,000.
On 28 March 2019, SIGGAS had accepted the offer from ALM. Further announcement(s) will be made upon the
execution of the sale and purchase agreement pursuant to the offer, detailing the terms, effects and all relevant
disclosures in relation to the offer as required under the Main Market Listing Requirements.
3. RECURRENT RELATED PARTY TRANSACTIONS (“RRPT”) OF REVENUE NATURE
The details of the recurrent related party transactions of revenue or trading in nature undertaken by the Company and its
subsidiaries during the financial period are disclosed in Note 27 of the financial statements.