sig gases berhad - malaysiastock.biz industrial gas sdn bhd 2012 acquired 40% in the equity of a...

55
(Company No. 875083-W) a n n u a l r e p o r t 2 0 1 8

Upload: others

Post on 04-Apr-2020

0 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 2: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 3: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 4: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 5: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 6: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 7: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 8: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 9: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 10: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 11: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 12: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 13: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 14: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 15: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 16: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 17: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 18: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 19: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 20: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 21: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 22: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 23: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 24: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 25: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 26: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 27: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 28: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 29: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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]

Page 30: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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]

Page 31: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 32: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 33: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 34: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 35: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 36: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 37: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 38: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 39: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 40: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 41: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 42: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 43: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 44: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 45: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 46: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 47: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 48: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 49: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 50: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 51: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 52: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.

Page 53: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 54: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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

Page 55: SIG GASES BERHAD - Malaysiastock.biz Industrial Gas Sdn Bhd 2012 Acquired 40% in the equity of a joint venture to produce and supply liquids and compressed gases in Samalaju Industrial

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.