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PETRONAS

CHEMICALS
GROUP
BERHAD

T h e G rou p i s l e d by a s t ro n g a n d h i g h ly exper ienced

m a n a ge m e n t t e a m w i t h b ro a d e x p e r i e nce of var ious

a s p e c t s o f t h e o i l a n d ga s i n d u s t r y. T h ey a re in tur n guided

by a va l u e s - d r i ve n a n d d i ve r s e B o a rd o f Director s wi th

i n t e r n a t i o n a l i n d u s t r y e x p e r t i s e a s we l l as professiona l

ex p er i ence i n o t h er co r p o ra t e s ect o r s .

CONTENTS

THE 25

26
The Value Our Board Brings

Profile of Board Members

LEADERSHIP
34 Management Committee

36 Profile of Management Committee

* The cross-referencing icons refer readers to
information elsewhere in this report

THE VALUE OUR BOARD BRINGS
Our eight Directors on average represent more than 30 years of experience in the oil and gas
industry, covering various engineering disciplines, operations, corporate planning and
development, financial, global petrochemical consultancy, commercial, information technology,
human resource and economics. Their top-level management and technical skills combined
with regional as well as international corporate experience serve the Group well as we strive for
dynamic growth to achieve our vision of becoming the preferred chemical company in the region.

SKILLS MATRIX EXPERIENCE

ical Oil an
chem d Gas
Petro ancy I n du

MORE THAN
l lt
ba nsu str
Glo Co y

30
y
og
ol

Fi

*
hn

na
c

nc
Te

e/
on

Au
ati

dit
rm

10
Info
Human Resource

Economics

skills

YEARS OF
EXPERIENCE
lan ent
nin
e P pm

En
ra elo

gin
po ev

ee
t
or d D

rin
n

g

*on average
a
C

Co
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s rcia e
tion a l/Ma
Oper rketing

KEY FEATURES OF OUR BOARD

• The Board comprises a balance of Independent Directors

• The Chairman is a Non-Independent Non-Executive Director

• The role of the Chairman and Managing Director/Chief Executive Officer are distinct

BOARD COMPOSITION

8 directors 1 3 4
Executive Non- Independent
Director Independent Non-Executive
Non-Executive Directors
Directors

PROFILE OF BOARD MEMBERS PETRONAS
CHEMICALS
GROUP
BERHAD

26
Section
two

MD ARIF MAHMOOD
Malaysian, age 54, Male, Malay
Chairman, Non-Independent Non-Executive Director

Board Skills Matrix MD ARIF MAHMOOD BRINGS TO THE BOARD EXTENSIVE EXPERIENCE IN THE OIL AND GAS
INDUSTRY. HE HAS MORE THAN 30 YEARS OF ENGINEERING AND STRATEGIC MANAGEMENT
Engineering EXPERIENCE IN VARIOUS COMPANIES WITHIN THE PETRONAS GROUP.

Corporate Planning and Working Experience
Development
Operations Present Appointments:
• Chairman, PETRONAS Chemicals Group Berhad
Commercial/Marketing • Chairman, PETRONAS Dagangan Berhad
Industry Experience • Executive Vice President and Chief Executive Officer of the Downstream Business, PETRONAS
- Oil and Gas • Member, PETRONAS Executive Leadership Team
- Regional/International • Member, PETRONAS People Development Committee
• Member, PETRONAS Talent Council
Directorships • Member, Industry Advisory Panel of Universiti Teknologi PETRONAS (UTP)
• Chairman, various companies within PETRONAS
Listed Entities:
• PETRONAS Chemicals Group Past Experiences:
Berhad • Director, PETRONAS
• PETRONAS Dagangan Berhad • Senior Vice President of PETRONAS Corporate Strategy
• Vice President of PETRONAS Oil Business
Other Public Company: • Managing Director/Chief Executive Officer of ASEAN Bintulu Fertilizer Sdn Bhd
• Nil • Senior General Manager of Retail Business Division, PETRONAS Dagangan Berhad
• General Manager (Gas Processing Plant B), PETRONAS Gas Berhad
Qualifications
Declaration
• Bachelor of Science in Electrical
Engineering (summa cum laude), • No family relationship with any Director/Major Shareholder
Boston University, USA • No conflict of interest with PETRONAS Chemicals Group Berhad. He has never been charged for
any offence within the past 5 years other than traffic offences, if any
• Masters of Business Administration
from Massachusetts Institute of Date appointed Number of Board meetings Length of service
Technology, USA to Board attended in 2016 (as at 17 February 2017)
1 May 2015 6 out of 7 1 year and 10 months

Malaysian branch . if any Engineering. PETRONAS Chemicals Group Berhad . Male. Operations Working Experience Commercial/Marketing Present Appointments: Industrial Experience • Managing Director/Chief Executive Officer.Profile of Board Members (Cont’d) AR16 27 Section two DATUK SAZALI HAMZAH Malaysian. Malay Managing Director/Chief Executive Officer Board Skills Matrix DATUK SAZALI HAMZAH SPEARHEADS PCG'S OVERALL GROWTH AND EXPANSION STRATEGIES.Regional/International • Chairman. Project Management and Delivery PETRONAS Berhad • Various senior management positions through roles in the refinery and petrochemical business within PETRONAS Other Public Company: • Nil Declaration Qualifications • No family relationship with any Director/Major Shareholder • No conflict of interest with PETRONAS Chemicals Group Berhad. HE OVERSEES AND ENSURES A GOOD BALANCE BETWEEN DRIVING CORE EXCELLENCES AND Engineering STRONG GOVERNANCE TO DELIVER SUSTAINABLE LONG TERM VALUE. USA • Chartered Fellow of the Institution of Chemical Engineers (IChemE) . various companies within PETRONAS Directorships Past Experiences: • Managing Director/Chief Executive Officer. University of Pensylvania. The Wharton 8 May 2014 7 out of 7 2 years and 2 months School. age 50. Lamar University. Group Technology Solutions PETRONAS • PETRONAS Chemicals Group • Head. PETRONAS - Shipping/Logistics • Board of Institution of Chemical Engineers UK. USA Date appointed Number of Board meetings Length of service • Advanced Management to Board attended in 2016 (as at 17 February 2017) Programme. He has never been charged for • Bachelor of Chemicals any offence within the past 5 years other than traffic offences. PETRONAS Penapisan (Melaka) Sdn Bhd Listed Entities: • Senior General Manager.Oil and Gas • Vice President.

Finance and Corporate Affairs. Indian Senior Independent Director Board Skills Matrix IN ADDITION TO MORE THAN 30 YEARS' EXPERIENCE IN FINANCIAL AND CORPORATE PLANNING. Edaran Otomobil Nasional Berhad • Cycle & Carriage Bintang Berhad • Director. Indonesia Other Public Company: • Deloitte KassimChan • Nil Declaration Qualifications • No family relationship with any Director/Major Shareholder • Fellow of the Institute of • No conflict of interest with PETRONAS Chemicals Group Berhad. PETRONAS Chemicals Group Berhad - Banking and Finance • Chairman. PT Astra International Tbk. Cycle & Carriage Bintang Berhad . PETRONAS Dagangan Berhad - Commercial/Marketing • Chairman. Female. Nomination Committee. VIMALA V. Board Audit Committee. PETRONAS Chemicals Group Berhad Directorships • Member. She has never been charged for Chartered Accountants in any offence within the past 5 years other than traffic offences. Proton Holdings Berhad • PETRONAS Dagangan Berhad • Executive Director.Com Berhad • Member. MENON LEADS THE GROUP TO REFLECT AN UNWAVERING Finance/Audit COMMITMENT TO PROMOTING GOVERNANCE AND DEMONSTRATING A CULTURE OF INTEGRITY. Finance and Corporate Services. Board Audit Committee. age 62.Com Berhad • Director. MENON Malaysian. Corporate Planning and Development Working Experience Information Technology Present Appointments: Industrial Experience • Chairman. if any England and Wales • Member of the Malaysian Date appointed Number of Board meetings Length of service Institute of Accountants to Board attended in 2016 (as at 17 February 2017) 13 August 2010 7 out of 7 6 years and 6 months .R. EON Bank Berhad • DiGi. Nomination and Remuneration Committee. Profile of Board Members (Cont’d) PETRONAS CHEMICALS GROUP BERHAD 28 Section two VIMALA V. Cycle & Carriage Bintang Berhad Listed Entities: • PETRONAS Chemicals Group Past Experiences: Berhad • Director. Remuneration Committe.R. Board Audit Committee. Jardine Cycle & Carriage Limited • Director. Audit and Risk Committee. Digi.Regional/International • Member. Cycle & Carriage Bintang Berhad • Member.

Commercial/Marketing Working Experience Finance/Audit Present Appointments: Industrial Experience • Chairman. PETRONAS Chemicals Group Berhad - Regional/International Past Experiences: Directorships • Managing Partner for the South Asia Region. University of London. Nomination and Remuneration Committee. Accenture PLC • Geographic Council Chairman-Asia. UK 13 August 2010 7 out of 7 6 year and 6 months . age 63. Male.Profile of Board Members (Cont’d) AR16 29 Section two CHING YEW CHYE Malaysian. Chinese Independent Non-Executive Director Board Skills Matrix AS A GLOBAL MANAGEMENT CONSULTANT WITH CLOSE TO 40 YEARS OF EXPERIENCE. if any Qualifications • Bachelor of Science Date appointed Number of Board meetings Length of service to Board attended in 2016 (as at 17 February 2017) (Honours). Accenture PLC • PETRONAS Chemicals Group • Scicon Consultancy. Board Audit Committee. PETRONAS Chemicals Group Berhad - Banking and Finance • Member. Accenture PLC Listed Entities: • Managing Partner of the Financial Services Industry Group-Asia. UK Berhad • Genting Plantations Berhad Declaration Other Public Company: • No family relationship with any Director/Major Shareholder • AIA Berhad • No conflict of interest with PETRONAS Chemicals Group Berhad. He has never been charged for any offence within the past 5 years other than traffic offences. CONTRIBUTING HIS EXPERTISE IN Information Technology CORPORATE STRATEGY AND ENHANCING BUSINESS PERFORMANCE. CHING YEW CHYE ENRICHES THE BOARD'S COMPETITIVE EDGE.

Operations Corporate Planning and Working Experience Development Present Appointments: Global Petrochemical • Member. DuPont Korea Other Public Company: • Various senior management positions within DuPont Korea • Nil Declaration Qualifications • No family relationship with any Director/Major Shareholder • Bachelor of Science in • No conflict of interest with PETRONAS Chemicals Group Berhad. Male. Korean Coaching Management Institute - Regional/International Past Experiences: Directorships • Advisor/Coach to PETRONAS Downstream Business • Advisor.I DuPont • Global Fluoroproduct Operation Director. E. age 70. Board Audit Committee. PETRONAS Chemicals Group Berhad Industry Experience • Advisor. THE CONVERGENCE OF HIS SKILLS. Nomination and Remuneration Committee. USA . any offence within the past 5 years other than traffic offences. if any University of California. USA Date appointed Number of Board meetings Length of service • Master of Science in to Board attended in 2016 (as at 17 February 2017) Chemical Engineering. 13 August 2010 7 out of 7 6 years and 6 months University of Idaho. DuPont Asia Pacific Listed Entities: • President. He has never been charged for Chemical Engineering. DuPont Asia Pacific • PETRONAS Chemicals Group • Vice President and General Manager. Global Non-Wovens Business. Korean Independent Non-Executive Director Board Skills Matrix DONG SOO KIM'S MORE THAN 30 YEARS CAREER IN THE CHEMICALS INDUSTRY HAS BEEN NOTHING LESS THAN STERLING. KNOWLEDGE AND Engineering EXPERIENCE IS WHAT LEADS THE BOARD TO STEP UP TO THE 'CALL TO ACTION' AND DRIVE OPERATIONAL EXCELLENCE. PETRONAS Chemicals Group Berhad Consultancy • Member. Samsung SDI Co Ltd - Oil and Gas • Partner-Coach. Profile of Board Members (Cont’d) PETRONAS CHEMICALS GROUP BERHAD 30 Section two DONG SOO KIM Korean.I DuPont Berhad • Corporate Officer of E.

age 59. British American Tobacco New Zealand Qualifications • Business Development Director China for British American Tobacco Asia Pacific North • Various senior management positions within Rothmans • Bachelor of Commerce. Badminton Association of Malaysia Listed Entities: • PETRONAS Chemicals Group Past Experiences: Berhad • Managing Director. Tien Wah Press Holdings Berhad • Council Member. He has never been charged for any offence within the past 5 years other than traffic offences. PETRONAS Chemicals Group Berhad - Regional/International • Chairman. Pakistan Tobacco Limited and Area Director South • Nil Asia Area • Managing Director. Tien Wah Press Holdings Berhad Directorships • Member. Risk & Finance Committee.Profile of Board Members (Cont’d) AR16 31 Section two DATUK TOH AH WAH Malaysian. Other Public Company: • Managing Director/Chief Executive Officer. Declaration Concordia University. Board Nomination Committee. Tien Wah Press Holdings Berhad • Member. Board Audit Committee. HIS COMMERCIAL FINESSE HELPS TO NAVIGATE THE GROUP TOWARDS BUILDING GREATER SYNERGY WITH CUSTOMERS AND ACCELERATE PROFITIBALITY FOR LONG TERM Corporate Planning and GROWTH. Canada • No family relationship with any Director/Major Shareholder • No conflict of interest with PETRONAS Chemicals Group Berhad. Hong Kong. if any Date appointed Number of Board meetings Length of service to Board attended in 2016 (as at 17 February 2017) 13 June 2014 7 out of 7 2 year and 8 months . Board Audit Committee. British American Tobacco Malaysia Berhad • Tien Wah Press Holdings Berhad • Area Director of the Indonesian Cluster and the Regional Project Manager of British American Tobacco Asia Pacific Region Limited. Chinese Independent Non-Executive Director Board Skills Matrix DATUK TOH AH WAH CONTRIBUTES A HIGH LEVEL OF EXPERTISE IN MARKETING AND REGIONALISATION DERIVED FROM 32 YEARS' EXPERIENCE WITH BRITISH AMERICAN Commercial/Marketing TOBACCO. Development Finance/Audit Working Experience Economics Present Appointments: Industrial Experience • Member. Male.

Project Delivery & Technology Industry Experience • Member. PETRONAS Group Delivery. He has never been charged for any offence within the past 5 years other than traffic offences. USA Date appointed Number of Board meetings Length of service to Board attended in 2016 (as at 17 February 2017) • Leadership Management. Downstream Business • Vice President. 31 July 2015 6 out of 7 1 years and 7 months Henley Business School. Malay Non-Independent Non-Executive Director Board Skills Matrix ZAKARIA KASAH'S ENGINEERING BACKGROUND AND EXTENSIVE PROJECT DELIVERY EXPERIENCE SET THE BOARD TOWARDS THE SUCCESSFUL DELIVERY OF OUR GROWTH Engineering STRATEGIES. Profile of Board Members (Cont’d) PETRONAS CHEMICALS GROUP BERHAD 32 Section two ZAKARIA KASAH Malaysian. Egyptian LNG and Malaysia LNG Berhad Group of Companies Other Public Company: Declaration • Nil • No family relationship with any Director/Major Shareholder Qualifications • No conflict of interest with PETRONAS Chemicals Group Berhad. PETRONAS Technology & Engineering. Malaysia LNG Group of Companies • PETRONAS Chemicals Group • Various senior management positions in PETRONAS Gas Berhad. age 52. Student Development Advisory Council for Universiti Teknologi PETRONAS - Oil and Gas • Director. if any • Bachelor of Mechanical Engineering. PETRONAS Upstream Business Listed Entities: • Chief Executive Officer. UK . various companies within PETRONAS - Regional/International Past Experience: Directorships • Vice President. Operations Working Experience Corporate Planning and Development Present Appointments: • Vice President. George Washington University. Male.

Other Public Company: • Various senior management positions within PETRONAS • Nil Declaration Qualifications • No family relationship with any Director/Major Shareholder • Bachelor of Science in • No conflict of interest with PETRONAS Chemicals Group Berhad. age 48. Board Audit Committee. Female. FINANCIAL REPORTING AND TREASURY. if any London School of Economics & Political Science. PETRONAS Chemicals Group Berhad Directorships • Senior General Manager of Finance & Accounts Services Department. STEERING THE GROUP TOWARDS EFFECTIVE CAPITAL Finance/Audit MANAGEMENT AND EFFICIENCY. PETRONAS • Director. Corporate Finance Department • General Manager. any offence within the past 5 years other than traffic offences. UK to Board attended in 2016 (as at 17 February 2017) 31 July 2015 7 out of 7 1 year and 7 months • Fellow of the Association of Chartered Certified Accountants (ACCA) . Finance & Accounts Services. Malaysian International Trading Corporation Sdn. University Date appointed Number of Board meetings Length of service of London. Bhd. Commercial/Marketing Working Experience Industry Experience - Oil and Gas Present Appointments: • Member. various companies within PETRONAS Listed Entities: • PETRONAS Chemicals Group Past Experience: Berhad • General Manager.Profile of Board Members (Cont’d) AR16 33 Section two FREIDA AMAT Malaysian. Malay Non-Independent Non-Executive Director Board Skills Matrix FREIDA AMAT LENDS THE BOARD A BROAD UNDERSTANDING OF CORPORATE FINANCE. She has never been charged for Accounting and Finance.

MANAGEMENT COMMITTEE PETRONAS CHEMICALS GROUP BERHAD 34 Section from right to left: two DATUK SAZALI HAMZAH Managing Director/Chief Executive Officer RASHIDAH ALIAS Chief Financial Officer from right to left: ABDUL AZIZ OTHMAN Head of Strategic Planning & Ventures AKBAR MD THAYOOB Head of Commercial IR MOHD YUSRI MOHAMED YUSOF Head of Manufacturing .

Safety & Environment DR ROSS FORREST GILMOUR SITI AZLINA ABD LATIF Chief Innovation & Technology Officer Head of Corporate Affairs & Administration .Management Committee (Cont’d) AR16 35 from right to left: Section two MOHAMAD ISKANDAR BAKERI Head of Project Directorate NOOR LILY ZURIATI ABDULLAH Head of Legal & Corporate Secretariat from right to left: from right to left: DATIN ZARINA ZAKARIA @ MOHAMAD AHMAD ZAKI DAUD Head of Human Resource Management Head of Health.

Held several senior management positions companies at PETRONAS Penapisan (Terengganu) Sdn Bhd. and managing 2003 Selected as member of PETRONAS Corporate Strategic Study and Implementation. specialised assignments involving and led a change programme that enhanced plant performance and operational initial public offerings. supply chain management. providing technical services and support to all operating implementation and groupwide plants in PETRONAS. Australia - Bachelor of Chemicals Engineering.Sits on the Board of PCG and several PETRONAS Companies subsidiaries as well as risk management. age 44. PETRONAS Group Technology Solutions. corporate strategy 2010 Led a highly specialised team. PROFILE OF MANAGEMENT COMMITTEE PETRONAS CHEMICALS GROUP BERHAD Competency Accounting 36 Corporate governance TECHNICAL SKILLS AND EXPERIENCE Section two Finance Human Resource Industry experience Law Risk management Strategic marketing Strategy development and implementation DATUK SAZALI HAMZAH RASHIDAH ALIAS Technology Malaysian. Harvard - Advanced Management Program. bond issuance. Lamar University. PETRONAS Penapisan (Melaka) Sdn Bhd. 2010 PETRONAS - Senior General Manager. 2015 Appointed as Result Manager for the Technology Workstream of PETRONAS’ special Group Treasury initiative. corporate excellence.Sits on the Board of several PETRONAS the refinery and petrochemical business. USA - Advanced Management Program. Male. Texas. Melaka Refinery Revamp. and Co-Generation Power Plant. UK - Fellow of the Chartered Accountants Australia and New Zealand - Member of the Malaysian Institute of Accountants . and Project Management of Technology Employment history & Engineering Division of PETRONAS. of corporate planning. financial and sustainable management of PCG and - Responsible for the management of all its subsidiaries financial and fiscal aspects of PCG and its . Involved in the implementation and commercial 1994 Arthur Andersen - Audit & advisory operation of several major PETRONAS projects such as Kertih Aromatics Project. 1998 PETRONAS . Academic/Professional Qualifications University of New South Wales. Project CACTUS 2016 Appointed as PETRONAS VP and PCG MD/CEO Academic/Professional Qualifications - Bachelor of Commerce in Accounting. The Wharton School. subsequently heading Project Management Delivery Division and process transformation overseeing PETRONAS downstream projects of high capital value. Female.Various posts in areas Melaka Base Oil Plant. age 50. Malay Managing Director/Chief Executive Officer Chief Financial Officer Current role Current role - Responsible for the overall operational. 2012 Appointed as PETRONAS Penapisan (Melaka) Sdn Bhd - Managing Director/CEO Finance & Accounts Services 2014 Appointed as President/CEO of PETRONAS Chemicals Group Berhad 2013 PETRONAS - Senior General Manager. Malay Malaysian. accounting and shared services. investor Employment history relations and information systems 1990 Joined PETRONAS as process technologist and progressed through various roles in . University of Pennsylvania Business School - Chartered Fellow of the Institution of Chemical Engineers (IChemE).

Male. Plant Technical Services roles 2005 PETRONAS Gas Berhad - 2008 PETRONAS Group Strategic Planning 2004 Phu My Plastics & Chemicals Co Ltd. Business School - Advanced Management Program. Malay Malaysian. Malay Head of Manufacturing Head of Commercial Head of Strategic Planning & Ventures Current role Current role Current role - Responsible for PCG's overall operational - Responsible for PCG‘s overall - Responsible for PCG's overall strategic excellance commercial excellence planning. USA The Wharton School. Oklahoma State University. age 53. Institution of Chemical Harvard Business School Engineers (IChemE). age 51. Kong - Production engineer 1987 PETRONAS - Various project Strategy & Business Planning.Profile of Management Committee (Cont’d) AR16 37 Section two IR MOHD YUSRI MOHAMED YUSOF AKBAR MD THAYOOB ABDUL AZIZ OTHMAN Malaysian. business development and - Sits on the Board of several PETRONAS - CEO of PETRONAS Chemicals Marketing ventures management companies Sdn Bhd - Sits on the Board of several PETRONAS Employment history - CEO of PETRONAS Chemicals Marketing companies (Labuan) Ltd 1989 PETRONAS - HSE executive - Sits on the Board of several PETRONAS Employment history 1992 Ethylene & Polyethylene Malaysia - Various roles in project. USA - Premier Business Management Program. General Manager (Centralised - Manager of Strategy and Portfolio Vietnam - General Director/CEO Utilities Facilities) (Oil Business) 2008 PETRONAS Chemicals LDPE Sdn 2009 Vinyl Chloride Malaysia Sdn Bhd - 2009 PETRONAS Chemicals Ethylene Sdn Bhd - General Manager Bhd - CEO CEO 2012 PETRONAS Chemicals Olefins Sdn Bhd. Male. Gas 2006 Optimal Group of Companies - engineering and corporate planning Business Unit Manager. Head of the Office of the Executive and Ventures PETRONAS Chemicals Derivatives Vice President Sdn Bhd - CEO 2012 PETRONAS Dagangan Berhad - Academic/Professional Qualifications 2014 PCG - Head of Manufacturing Head of Retail Business - Bachelor of Science in Mechanical 2014 PCG - Head of Commercial Engineering. technical and companies 1987 PETRONAS Gas Berhad - operation Mechanical engineer 2004 Dow Chemicals (Pacific) Ltd. George Washington Academic/Professional Qualifications University. Hong Employment history 2000 PETRONAS - Head. Male. - Chartered Fellow. USA - Bachelor of Science in Civil Engineering. age 50. USA - Bachelor of Science in Chemical Academic/Professional Qualifications - Senior Executive Program. Malay Malaysian. University of West Virginia. London Engineering. Board of Engineers Malaysia . University of Pennsylvania. 2010 PETRONAS Downstream Business - 2011 PCG - Head of Strategic Planning PETRONAS Chemicals Glycols Sdn Bhd. UK - Registered Professional Engineer.

2002 PETRONAS Dagangan Berhad Leader 2006 PETRONAS Chemicals Fertiliser - Senior Legal Counsel. (Sabah) Sdn Bhd - Engineering Division - General Agricultural Biotechnology Head Pre-Operations/CEO Counsel/Head of Legal for 2013 PCG - Chief Innovation & Technology 2016 PCG - Head of Project Directorate Technology. plant operations.I du Pont de Nemours and 2012 PETRONAS Chemicals Fertiliser 2014 PETRONAS Technology & Company. Western Inspection. Caucasian Head of Project Directorate Head of Legal and Corporate Secretariat Chief Innovation & Technology Officer Current role Current role Current role - Responsible for the delivery and - Responsible for PCG's legal affairs and - Responsible for PCG's product execution of PCG’s key projects company secretarial services improvement. age 56. Employment history of Machinery. Male. plant constructions. age 58. project financing. University of Queensland. University of of Engineers Malaysia - Sijil Amalan Guaman Lembaga Kelayakan Queensland. USA - Programme Leader. Board - Bachelor of Laws. Reliability & Integrity time-charter party and LNG sales Australia - Research Programme and Plant Turnaround. Senior Engineer and 1991 PETRONAS - Legal services covering Section Head in various disciplines joint ventures. Malaysia. University of Arizona. Legal & Corporate Affairs 2003 BSES Limited (Australia) - R&D 2010 ASEAN Bintulu Fertilizer Sdn Bhd - 2011 PETRONAS Gas Business Unit - Manager MD/CEO Head Legal (Project) 2009 E. 1985 Department of Agriculture. University of London. - Sits on the Board of several PETRONAS regulatory and stewardship functions to Employment history companies deliver innovative customer solutions 1989 ASEAN Bintulu Fertilizer Sdn Bhd - Director of PETRONAS Research - Held various positions from Employment history Sdn Bhd Area Engineer. USA and Genetics. Malay Australian. age 50. - Management Programme. Malay Malaysian. Australia Profession Undang-Undang. technical support. Profile of Management Committee (Cont’d) PETRONAS CHEMICALS GROUP BERHAD 38 Section two MOHAMAD ISKANDAR BAKERI NOOR LILY ZURIATI ABDULLAH DR ROSS FORREST GILMOUR Malaysian. Male. Female. - Licensed Company Secretary . Maintenance. UK - PhD in Agricultural Science. Legal and 1995 ForBio Asia Pty Ltd (Malaysia) - (Kedah) Sdn Bhd - Senior Manager Corporate Secretariat Services Regional Director for SE Asia Engineering 2009 PETRONAS International 2000 Grains Research and Development 2008 ASEAN Bintulu Fertilizer Sdn Bhd - Corporation Limited (Egypt) - Corporation - Investment Manager General Manager Head. INSEAD Academic/Professional Qualifications Australia - Registered Professional Engineer. Engineering Services Officer and Intellectual Property Academic/Professional Qualifications 2016 PCG - General Counsel/Head Legal & Academic/Professional Qualifications - Bachelor of Science in Mechanical Corporate Secretariat - Bachelor of Agriculture in Plant Breeding Engineering.

as corporate branding. University of Southern University of Portsmouth. age 44. and implementation of all PCG’s performance. retail Sdn Bhd - Electrical Production 2009 PETRONAS Carigali Sdn Bhd - Head sales and brand communications Engineer of People Strategy and Planning 2007 PETRONAS Dagangan Berhad - 2009 PETRONAS Chemicals Derivatives 2012 PETRONAS Carigali Sdn Bhd - Head Head of Brand Communications Sdn Bhd - Utilities Manager of Human Resource Management 2013 PCG - Head of Corporate 2012 PETRONAS Chemicals Glycols (Malaysia Operation) Communications & Administration Sdn Bhd - Head of Ethylene Oxide 2014 PCG - Head of Human Resource 2016 PCG - Head of Corporate Affairs & Glycols Management Administration 2014 PCG - Head of Operation Work Process Academic/Professional Qualifications Academic/Professional Qualifications 2015 PCG - Head of HSE - Bachelor of Science in Business - Bachelor of Arts in Accounting. UK Academic/Professional Qualifications California. Female. age 45. - Bachelor of Science (Hons) in Electrical Cardiff University. USA - Masters of Business Administration. Malay Head of Corporate Affairs & Administration Head of Health. 2001 PETRONAS Chemicals Derivatives People Strategy Design and Pilot complementary business. UK . Malay Malaysian. Malay Malaysian. Administration. Safety & Environment Head of Human Resource Management Current role Current role Current role - Responsible for planning. process safety and talent development and management. development - Responsible for PCG's overall HSE - Responsible for PCG’s people strategies. age 49. Female. University of Brighton. communication and reputation management Employment history Employment history 1997 PETRONAS Second Ethylene 1992 PETRONAS Dagangan Berhad - Employment history Cracker Project - Electrical System Analyst 1997 PETRONAS Dagangan Berhad Maintenance Engineer 2008 PETRONAS - Senior Manager of - Finance and accounts. stakeholder and sustainable development well as human resource services media management. Male. UK Engineering.Profile of Management Committee (Cont’d) AR16 39 Section two DATIN ZARINA ZAKARIA @ SITI AZLINA ABD LATIF AHMAD ZAKI DAUD MOHAMAD Malaysian.

we also disclose how well w e p e r f o r m e d d u r i n g t h e y e a r. In the following pages. and discover the strategic direction we are taking to leverage on our strengths to maintain our leading edge.PETRONAS CHEMICALS GROUP BERHAD What is the state of the petrochemicals industry? What are the challenges and risks faced? Find out by reading this section. OUR CONTENTS 41 Management Discussion & Analysis STRATEGIC • Managing Director/CEO • Chief Financial Officer • Head of Manufacturing PERFORMANCE 53 • Head of Commercial Key Global Megatrends 54 Market Outlook 56 Strategic Intent * The cross-referencing icons refer readers to 58 How We Treat Risks information elsewhere in this report 60 Investor Relations and Share Performance 63 Financial Calendar 64 Our Achievements 66 PCG in the News 68 Calendar of Events .

PCG continued to focus on the Asia Pacific region to leverage on the benefits of reduced transport costs as well as hot spots of demand. WE CONTINUED TO FOCUS INTENTLY ON OUR OPERATIONAL. the price of ethylene was 6% lower in 2016 than it was in 2015. PCG continued to secure strategic markets in the Asia Pacific region with optimised cost. we pulled together an impressive performance for the year. THE END RESULTS HAVE BEEN VERY POSITIVE AS WE FURTHER CEMENTED OUR POSITION AS A LEADING PETROCHEMICALS PLAYER IN THE REGION. pushing down prices towards year end. CREATING ADDED VALUE FOR YOU. Within this scenario. The price of ethylene. It is by no means the best of times for the petrochemicals industry. However. a basic product which serves as a barometer of petrochemical commodities for Olefins and Derivatives (O&D) market. AND FORGED AHEAD WITH OUR GROWTH PLANS.MANAGEMENT DISCUSSION & ANALYSIS AR16 Managing Director/CEO 41 Section three DEAR SHAREHOLDERS. upon completion of these turnarounds. with low oil prices and soft global demand suppressing the margin of our products. Combined with improved feedstock supply and enhanced plant reliability. COMMERCIAL AND INNOVATION EXCELLENCE. IT GIVES ME GREAT PLEASURE TO PRESENT AN OVERVIEW OF PCG’S PERFORMANCE FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016. ethylene flooded the market once again. . increased in the first half of the year due to several plant shutdowns and turnarounds in the region. On average. FOR THE PERIOD UNDER REVIEW.

has negatively impacted the utilisation rate of many players. Years of truly valuing our customers and ensuring we meet their expectations at every single opportunity have gone a long way towards opening many doors for us. PCG could afford to run at its highest capacity. thus setting a solid foundation for our growth. we recorded a profit after tax (PAT) of RM3. surpassing world-class benchmark of 85%. We achieved 100% utilisation rate in the third quarter and averaged 96% for the year. I am proud that in areas where we can make a difference.000 existing customers. PCG continued to persevere with our two-pronged strategy of strengthening basic petrochemicals while selectively diversifying into derivatives. ON TRACK IN OUR JOURNEY TO EXCELLENCE Operational excellence is imperative for the success of our business. Management Discussion & Analysis (Cont’d) PETRONAS CHEMICALS Managing Director/CEO GROUP BERHAD 42 Section three PC MTBE Demand was noticeably softer in comparison with supply in the Fertilisers and Methanol (F&M) market.7 billion to RM5. This was especially significant as increased capacity globally. Underpinned by our focused efforts to enhance our operational and commercial efficiencies.9 billion. were rewarded with exceptional results. depreciation and amortisation (EBITDA) grew markedly from RM4. For further discussion on our fiscal policies and recognition of our financial risks please turn to pages 46 to 47. we recorded our highest plant utilisation of 96% since incorporation.3 billion. . Most significantly for our shareholders. specialty chemicals and solutions. While such macro-economic factors and the dynamics of supply and demand are beyond our control. Our efforts to achieve world-class benchmark in plant performance through effective implementation of internal reliability and efficiency enhancement programmes. combined with subdued demand. While strengthening our relationship with more than 1. providing us an EBITDA margin of 38%.2 billlion and a higher return on average capital employed (ROACE) (3 years average) of 12% for the year. because of effective sales and marketing initiatives. we have done so. riding on PCG’s established reputation. our team has been proactive in leveraging sales channels for high-value applications. the results were gratifying in terms of key financial and operational parameters. secure in the knowledge of a ready market for our products. The accompanying decrease in price of products was reflected in those for urea and methanol which dropped by 25% and 16% respectively in 2016 compared to 2015. With record production and sales volumes as well as various measures to enhance efficiencies.5 billion in 2015 to RM13. the Group’s revenue increased 2% from RM13. Meanwhile earnings before income tax. Operationally. supported by reliable feedstock and utilities supply.

All these efforts have resulted accommodate customers’ needs.2 RM RM RM billion billion billion Looking at things from our customers’ lens has enabled us to offer To further elevate our regional presence and increase understanding compelling value proposition ranging from innovative customised of our customers’ needs and requirements. we have incorporated a solutions to effective sales support in delivering the right customers marketing subsidiary in Indonesia to add to our existing marketing experience.3 3.Management Discussion & Analysis (Cont’d) AR16 Managing Director/CEO 43 REVENUE EBITDA PROFIT AFTER TAX Section three 13. in the achievement of our highest EBITDA margin and strong cash generation amidst a challenging market.9 5. . PCG has also been continuously improving our logistics subsidiaries in Thailand and China as well as regional representative efficiencies by using the most appropriate logistic arrangements to offices in Vietnam and the Philippines.

upon acquisition of PRPC Polymers and PRPC Glycols in November 2015. play from higher margin products. which will add achieved the final investment decision (FID) and awarded EPCC for flexi 5. Management Discussion & Analysis (Cont’d) PETRONAS CHEMICALS Managing Director/CEO GROUP BERHAD 44 HSE: ALWAYS A PRIORITY Section three In a competitive industry. Malaysian Society for Occupational Safety and Health (MSOSH) and Royal Society for the Prevention of Accidents (RoSPA). We were facility for HR-PIB is progressing well. Work on the production to set procedures at every stage along the operational chain. promoting a greater sense of well-being through a high level within the range of start-up schedule and expect Citral production in of job satisfaction. and we expect this facility to be deeply saddened by the incident. we are Our focus on growth is finely balanced by our commitments to the also deepening our footprints in the derivatives. Zero incident and zero injury. and enhancing these for career advancement. at its plant in Gebeng. Through the two plants. Demand is expected As an employer. These projects will produce aroma ingredients. specialty engineering. The two fatalities during the year involving contractors’ workers at the Sabah Ammonia Urea (SAMUR) project were a stark reminder of the high level of risk that face personnel at our plants throughout an operating day. Our HSE procedures are guided by global best practices and have been recognised with accolades from both local and international organisations such as Chemical Industry Council of Malaysia (CICM). With this in mind. we recognise the need to keep reinforcing strict adherence of on-specification 2-EHAcid in late 2016. PCG aims to create a dynamic work environment to continue to increase in the long term driven by global economic that truly engages our people and inspires them to develop their true growth.8 million a further 20%. Our HR focuses on identifying individual talents and 2017. Johor. on-specification urea and we are now in the process of ramping up the plant for full commercial operations. But when it comes to HSE. BASF PETRONAS Chemicals Sdn which we operate. The production units for Citronellol and L-Menthol will come skills. We are well potential. We were very excited to see SAMUR successfully producing our presence in the derivatives and specialty chemicals sectors. which was unacceptable. construction and commissioning (EPCC) chemicals and solutions which in turn will allow us to harness value. our total production capacity will increase by Sipitang. Finally. Pahang. which will increase our current capacity of 10. we will spearhead the petrochemicals component of PIC. Complex (PIC) in Pengerang. we have awarded the regional player. establishing us firmly as a leading supplier of fertiliser in diversify our feedstock source for business sustainability while pursuing the region. located within the same complex. Our investments in PIC provide us a solid foundation to mtpa by 18%. specialty products people whose lives we impact in ways that may not be directly related and solutions portfolio. We invest significantly in creating a strong HSE culture among all our employees and our contractors’ employees. SERVING OUR PEOPLE & COMMUNITY While SAMUR strengthens our basic petrochemicals portfolio. communiques and training. redoubled our HSE and risk management efforts to safeguard everyone at work and around the areas where we operate. as planned. and selectively diversifying into derivatives. This year itself. We are undertaking three projects with BASF to our business. PCG aims for zero. and increasing wealth in the Asia Pacific region. Every employee . Although we have the best safety systems and on-stream in phases in 2017. PCG has invested and linear low-density polyethylene (LLDPE) plants.1 million mtpa to our nameplate capacity. and have commissioned in 2017. we in five key projects with a total CAPEX of RM10. procurement. Sabah. polyethylene (Flexi PE) plant. enjoying the benefits GROWING INTO A DYNAMIC FUTURE of integrated feedstock supply from PRPC’s refinery and cracker. an ammonia and urea plant in Once completed in 2019. ethylene oxide/ethylene glycol (EO/EG).1 billion. achieving top numbers is a priority. for the polypropylene (PP). PCG is proud to be part of the Pengerang Integrated Find out more about our HSE practices in our Sustainability Statement from pages 82 to 84. and keep reinforcing safe behaviours via programmes. We also saw the successful production processes. Bhd. Our two-pronged growth strategy focuses on strengthening basic petrochemicals to increase our volume-play advantage as a competitive This project is progressing well whereby to date. The investments include SAMUR. as well as 2-EHAcid and HR-PIB. namely our employees and the larger communities in through our associate company.

we have set my colleagues on the Management Committee. 45 serve also to reinforce our sustainability by strengthening our Section stakeholder relationships. Although the by formal training programmes that include leadership development. At the same time. of preserving mangrove habitats. We believe these efforts. Science and Mathematics. For a fuller account of our ESG considerations. we would like to say a collective ‘terima kasih’. as you will observe from our Sustainability Statement. of the mangrove forest have been replanted with more than 10. particularly our Chairman. PCG is dedicated to developing meaningful programmes that have a sustainable impact on the lives Within this environment. and which runs various activities to rehabilitate the mangrove ecosystem all our employees who truly are the engine of growth of PCG. and all other stakeholders for helping to create the company that we are today. together with robust financial performance. Through Asia. who have continued Nature Society (MNS) that seeks to create awareness of the importance to guide PCG with great industry insight and entrepreneurial wisdom.5% in the same period. on behalf of the management. we have a number of people. which stem from a deep desire to operate ethically. our customers. whom I would like to acknowledge. As part of our corporate social responsibility (CSR) we also get involved Our steady performance in these trying times is the combined result of with the community to conserve the environment. by 3. we remain optimistic of continuing to bring we touch. .000 square metres for your commitment and dedication to PCG. Another is to continue to focus on our growth plans while strengthening our signature outreach programme is Sentuhan Kasih. They include been running an ecoCare programme together with the Malaysian our Board of Directors. Under this programme. will contribute to enhanced investors’ confidence. Within our local communities. price of oil and global economy are expected to pick up. for their trust in our products. This year. and demand for petrochemicals is likely to offer a measure of flexibility in working hours and annual leave while continue to be dwarfed by supply. which serves to fundamentals. one of the fastest growing regions in the world. Most important for us in core subjects such as English. will stand us on (PSIP). please refer to our Sustainability Statement on pages 75 - 88. Program Sentuhan Ilmu PETRONAS world-class operational and commercial excellence. as well as our one of our flagship initiatives. the increase At the same time. To date. and our value to and activities. we are adopting a more strategic approach in terms of engaging with our stakeholders and creating greater transparency in our operations.Management Discussion & Analysis (Cont’d) AR16 Managing Director/CEO These initiatives. It gives me pride to see our efforts to sustain three our financial performance with a healthy environmental. over 11. These will continue to be key driving forces at PCG and empower marginalised pockets of the community through donations will enable us to further enhance our inherent value.000 seedlings. Our strategic position in the centre of Southeast gap as well as elevating the well-being of the underprivileged. you. From the number of projects planned providing our female staff with various facilities to help them manage between 2016 and 2020.7% annually while demand is expected to average 3. OUTLOOK receives comprehensive on-the-job training which is supplemented All indicators point to another challenging year in 2017. we respect the need for good work-life balance and is forecast to be slight. Thank you along the banks of Kertih River. I would like to thank our shareholders for your continued support. social and governance (ESG) scorecard gain momentum. many of whom have up an ecoCare Environmental Education Centre (ecoCare EEC) in Kertih put in time beyond their call of duty to ensure we achieve our goals. world ethylene capacity is anticipated to grow their professional and family commitments. Most of our efforts are centred on narrowing the education added value to you. Since 2005. we adopt schools where we help to improve student capabilities a strong footing to face the soft environment. All your contributions are highly valued and. I am pleased to share that our ESG efforts have been recognised with PCG being named one of the top 10 companies as ranked by market capitalisation listed in the FTSE4Good Bursa Malaysia (F4GBM) Index.

2 billion. Depreciation charges for the year. Excluding the elastomers write-off. the billion. This has been further supported by reduced repair and CHIEF FINANCIAL maintenance expenses.8 the propane dehydrogenation (PDH) and aromatic plants. Complemented by the strong US Dollar.9 billion.9 billion along with an increase in our we still achieved 100% utilisation rates in the Olefins Property. Accordingly. Plant and Equipment (PPE).6 billion as a result of lower trade and other payables. from 80% to 93%.4 capacity.4 billion. The value of our PPE and Derivatives segment. INDUSTRY PLAYERS HAVE HAD TO TIGHTEN THEIR BELTS.5 billion and RM60 million or for growth projects. marking an increase of 21% from the RM2.5 billion with RM3. The efficiencies brought about by increased production volume and lower unit cost. to higher dividends paid to shareholders and non-controlling interest. up from 85% in 2015. to RM3. The increase in production more than compensated for the price decrease of methanol due to as lo lower demand for fuel additives. Cash flow from operating activities for 6% to RM999 million respectively on lower spreads. we saw an increase in production and sales volumes.0 billion in additions year.3 billion. the year remains strong at close to RM4 billion. billion to RM31.8 billion.8 billion. Management Discussion & Analysis (Cont’d) PETRONAS CHEMICALS Chief Financial Officer GROUP BERHAD 46 Section IN THE CURRENT ENVIRONMENT OF LOW CRUDE OIL PRICES AND SUBDUED three DEMAND FOR PETROCHEMICAL PRODUCTS. Our total liabilities decreased by 14% from RM4.5 billion to RM9. Cash flow from investing activities. Our Group revenue surged by RM324 million or 2% to RM13. it remained at a very healthy RM7. This. or RM131 million. ertilisers and et anol The group has minimal borrowings as at 31 December 2016 Plant utilisation rate similarly grew in the Fertilisers and of RM23 million relating to a facility taken for working capital Methanol segment. and RM337 million for other plant or 19% to RM3. Along with higher plant utilisation. up from 93% in the previous grew by 12% to RM18.3 billion. Excluding the assets write- off amounting to RM244 million (or USD59 million) due to cancellation of the elastomers project during the year. PAT at RM1. Segmental PAT grew by 8% to operational CAPEX.5 billion. for the segment would have amounted to RM2.2 billion.0 billion otal ia ilities achieved in 2015. enabled us to record an increase in revenue despite lower prices of products on average. which is a 12% increase from the previous year. EBITDA and PAT were slightly lower by stood at RM2. methane supply. as well as that for urea Although the Group’s cash and cash equivalents was lower and ammonia due to oversupply in the market from new by 15% from 2015. RASHIDAH ALIAS not least of which has been our focus on operational excellence which has significantly increased our plant utilisation thus reducing our unit production cost. meanwhile Nevertheless. stood RM2. comprising RM1. This contributed to a 3% increase in revenue from during the year under review. together with a favourable foreign exchange environment.8 billion for RM9. RM557 million strengthening US Dollar. our total assets grew by 4% from RM30. mainly due to better purposes by one of its subsidiaries. profit after tax (PAT) increased by 4%. due largely to improved ethane and methane supplies as well as a lower level of turnaround activity across the Group. depreciation and amortisation (EBITDA) by RM631 million to RM5. We have had some significant successes on this score for 2016. SEGMENTAL REVIEW FINANCIAL POSITION lefins and eri ati es otal Assets While there were scheduled turnarounds undertaken at During the year. AND PCG HAS BEEN NO DIFFERENT.8 billion mainly reflecting investments made RM19 million or 1% to RM1. Our plant utilisation hit a record level of 96%. . thanks to various cost optimisation initiatives. EBITDA grew by RM596 million for the SAMUR Project. allowed us to mitigate the impact of thinner spreads to record 14% growth in earnings before income tax. our PAT would have been RM3. together with a stronger US Dollar against the Malaysian Ringgit. Further supported by a petrochemical projects under the PIC project. We incurred a higher cash outflow for financing due segment recorded slight increase of 1% in revenue. efficiencies in our supply and distribution and a keen eye on optimising our day-to-day OFFICER operating expenses.2 billion to RM3.

As part of this policy. REGULATORY The Group keeps abreast of regulatory changes CORPORATE FINANCIAL POLICY CHANGES by PETRONAS and statutory bodies. our mid-term goals will entail further enhancing our cash capital requirements. we have been able to execute our plans more efficiently and quickly than we did previously whilst ensuring proper governance is in place. is guided by TAX RISKS The Group has adopted PETRONAS’ Corporate our Corporate Financial Policy. The policy takes into consideration a number of factors. and payables including short term financing with overall direction and oversight at Group level. respective working capital needs.3 billion was invested in five ongoing Board proposes payment of dividends through cash generated from growth projects namely SAMUR. Today.Management Discussion & Analysis (Cont’d) AR16 Chief Financial Officer TOWARDS STRONGER GOVERNANCE 47 Section During the year. The guidelines cover corporate income information flow for proactive and integrated financial risk management. DIVIDEND POLICY The Group’s tax administration. is monitored and reported to The Group has a dividend policy that is subject to the discretion of the PETRONAS Group Tax Division. the Group's operations after setting aside necessary funding for capital and three further projects with our partners. This has the dual benefits of enhancing efficiencies in our decision-making process as well as enabling our Board to focus on more strategic and high-impact matters. The management of our cash flows. the polymers and glycols plants in PIC. The guidelines we are gearing for growth. which help us identify. expenditure and working capital needs. we undertook a review of PCG's Group Limits of Authority three to delegate greater responsibility to members of our senior management in terms of making operational decisions. With a sound foundation. as well as that of our subsidiaries. managed and mitigated. This will ensure we are able to efficiently reserves and other factors considered relevant by the Board. tax. general financial condition. as RISKS Financial Policy. transfer pricing and tax planning. our subsidiaries prepare regular and We also conduct forex exposure analysis prior to robust cash flow forecasts which is then used to manage all receivables making decisions on any business with forex risk. Board and final approval from the Shareholders. the Group's earnings. Looking ahead. as well as other financial aspects of the Group’s operations that could pose a risk to our business. withholding tax and improves the quality of decision-making throughout the Group. . currency matching and hedging. as the holding company for ongoing and future projects. As a result. which include. tax audit and investigation. and complies with these. we strive to maintain optimal level of working capital at our subsidiaries to enable the repatriation of dividends to PCG encompass functional currency considerations. a solid provided that such distribution would not be detrimental to the Group's balance sheet and prudent cash management. The Board intends to adopt a policy of active capital management. cash needs or to any plans approved by the Board. measure and manage our forex exposure. The policy promotes effective planning. licence and contractual obligations and business. The During the year. which is underpinned by multiple growth engines. subject to the confirmation of the growth and financial market volatility. the Group targets a payout ratio of around 50% of its consolidated PAT under Our performance in 2016 was achieved in the midst of slower economic Malaysian GAAP in each calendar year. its distributable and liquidity management. we will be able to face 2017 from a position of strength. service our growth projects. KEY FINANCIAL RISKS AND UNCERTAINTIES AFFECTING OUR PERFORMANCE RISKS HOW ARE WE MANAGING IT? FOREIGN We adhere to the foreign exchange (forex) CASH FLOW GENERATION AND UTILISATION EXCHANGE management guidelines in PETRONAS’ Corporate We are rigorous in monitoring cash flow throughout the Group. This serves as a foundation upon which Financial Policy which details guidelines on tax our financial risk management is built and the resultant risk exposures administration in respect of tax compliance and identified. Based on their currency netting. and indirect tax. a total of RM3. It attests to the resilience of our Board and to any applicable law.

984 DISTRIBUTION To employees Employment costs 817 862 127 100 To government Taxation 742 888 14 50 To shareholders Dividends 1.471 5.650 3.536 13.360 1.864 6.401 Purchase of goods and services (8.446 6.796 4.337 3 3 Retained profit 1.860 2.279 1. amortisation and impairment 1.984 Value Added Available for Distribution (RM Million) 14% 14% 13% 14% 49% GROUP 38% GROUP 2015 2016 24% 34% • To Employees • To Government • To Shareholders • Retained for Reinvestment and Future Growth . Management Discussion & Analysis (Cont’d) PETRONAS CHEMICALS Chief Financial Officer GROUP BERHAD Group Company 2015 2016 2015 2016 48 RM mil RM mil RM mil RM mil Section three Revenue 13.152 2.090) (7. - Value added available for distribution 5.280 1.074 4.864 6.074 4.360 Minority Interest 146 815 Retained for reinvestment and future growth Depreciation.280 1.600 1.309 3.309 3.331 Other Expenses (391) (196) (6) (267) Other Income 733 289 346 860 Financing costs (11) 47 2 60 Share of profit after tax of equity accounted associate and jointly controlled entity 87 17 .047 1.708) (64) (70) Value added by the companies 5.732 4.

By engaging more closely with suppliers of feedstock as well as utilities in planning and operations. adding to supply from Kikeh. cooperation. TOTAL PRODUCTION OF THIS PL ANT INCREASED 45% COMPARED TO 2015. COLLABORATIVE EFFORTS TO ENHANCE OUR PERFORMANCE LED TO OUR HIGHEST EVER PRODUCTION VOLUME.Management Discussion & Analysis (Cont’d) AR16 Head of Manufacturing 49 IT HAS BEEN A VERY ENCOURAGING YEAR FOR THE MANUFACTURING Section three DIVISION. Plant utilisation is dependent on a number of factors. With Dalak feeding methane to our methanol facility in Labuan. key amongst which are reliability of the plants and feedstock IR MOHD YUSRI supply as well as the ability to conduct turnarounds with minimum disruption to operations. as well as utilities supply. focusing on items that impact plant reliability ensures our plants are available throughout the year. AT THE SAME TIME. and collective decision making across the value MANUFACTURING chain. WITH DAL AK FEEDING METHANE TO OUR METHANOL FACILITY IN L ABUAN. we were able to reap the benefits of greater security in the volumes of methane and ethane received. I am pleased to share MOHAMED YUSOF that PCG made marked improvements in these areas as a result of rigorous operational excellence practices HEAD OF and modus operandi that facilitates collaboration. . At the same time. Improvement in asset management practices such as preventive maintenance and effective Bad Actor management. ethylene production grew by 15% as a result of more reliable gas plants and crackers performance throughout the year. total production of this plant increased 45% compared to 2015. Methane supply was further secured by commissioning of the Dalak pipeline in the first quarter of the year. ETHYLENE PRODUCTION GREW BY 15%.

we also exceeded our targets by 7%. Similarly. members of the management The pursuit of operational excellence encompasses having a strong team regularly conduct walkabouts and audits. programmes. As examples. I am pleased to share that these initiatives have had a increases every year. ramp up operations at SAMUR to full capacity. PC Aromatics in Kertih. We also reinforced our process safety assurance by conducting various emergency readiness exercises and upskilling our employees Integral to our efforts to achieve operational excellence is to to the required technical standards in managing our fire protection optimise production at the lowest cost. . Safety is our top priority and is reinforced by our leadership’s commitment to build on our safety framework. with better coordination among the parties involved. We ensure all our employees beyond the world-class benchmark. foundation on safety. Pahang. With the benefit of experience. Looking ahead. executed systematically. Sarawak – all of which were planned in great detail and safe behavior and cultivate the generative HSE mindset. This involves minimising system. including safety. To ensure safety requirements are adhered to. Terengganu and ABF abide by our Zero Tolerance (ZeTo) Rules which serve to inculcate in Bintulu. while flaring of surplus fuel at PC Olefins during high our HSE expectations and requirements. we will strive to maintain existing plant utilisation guided by PETRONAS’ HSE Policy. to ensure they meet expected levels of competency in and buntings carrying safety messages in strategic places at our all functional areas. we were able to shorten the duration of the positive effect in terms of compliance with the ZeTo rules. In 2016. we appointed ZeTo ambassadors to ensure understanding of running these programmes. Management Discussion & Analysis (Cont’d) PETRONAS CHEMICALS Head of Manufacturing GROUP BERHAD 50 Section three PC EPE There were three scheduled turnarounds – at PC MTBE (PDH Plant) adhere to the standards and operating practices of this Policy and in Gebeng. and managing our compliance with all ZeTo Rules. not only did we have more compressed turnaround schedules. feedstock loss and being energy efficient. our internal team has a clear During the year. and plants. excess steam generated by the plant is re-routed to complement this by regular briefings on safe work procedures. we level of energy efficiency as compared to 2015. any excess ethane from Gas Processing Kertih to PC Ethylene is re-routed to Our safety culture is extended to contractors with whom we share PC Olefins. while focusing further on operational efficiencies. As a our butanol plant. As our turnaround competency plants. We also provide trainings plant loading is reduced by exporting the surplus fuel to surrounding to their workers on our safety systems and technical standards. These initiatives helped us to operate at a higher large number of contractors are involved in our plant turnarounds. We also placed numerous banners contractors. continuously strengthen our HSE plan specifically for this.

and even greater effort to meet them. Whenever possible. This has a strong basis on the fact that customers truly come first at PCG. One of the key functions of the team is to monitor the global petrochemicals market and keep track of fluctuations in the supply demand situation. We have more than 1. AIDED BY EFFICIENT DELIVERY PLANNING AND CHANNEL MANAGEMENT. . shipments were planned to utilise larger vessel to take advantage of co-loading or co- mingling opportunities to lower our logistics cost. Our location at the heart of Southeast Asia gives us a natural edge. AS Section three WE CELEBRATED OUR HIGHEST SALES VOLUME TO DATE.Management Discussion & Analysis (Cont’d) AR16 Head of Commercial 51 2016 WAS CERTAINLY A GOOD YEAR FOR THE COMMERCIAL DIVISION. We make an effort to understand our customers’ needs.000 active customers around the world. IT IS PARTICULARLY GRATIFYING TO SEE OUR SALES AND MARKETING EFFORTS BEAR FRUIT AT A TIME WHEN THE MARKET WAS VERY CHALLENGING. Logistics cost is a significant component in our cost structure. and as an indicator of their loyalty. We further enhanced our profitability by optimising our cost-to-serve. Our company also created new sales channels during the year by incorporating a new subsidiary in Indonesia in August. especially for long distance deliveries. more than 80% of our business comes from customers who have been with us for more than 10 years. THERE CAN BE NO DOUBT THAT THE 17% INCREASE IN SALES ACHIEVED WAS A DIRECT RESULT OF HARD WORK A A A AND DETERMINATION BY THE ENTIRE TEAM TO ATTAIN OUR ‘GOLD STANDARD’ – HEAD OF COMMERCIAL EXCELLENCE – WHICH IS ONE OF THE THREE DRIVING FORCES OF COMMERCIAL PCG AS WE SEEK DYNAMIC GROWTH. while commencing full operations at our subsidiaries that had been set up earlier in Thailand and China. resulting in greater need for our products. These efforts had contributed to a better overall commercial performance. we were able to shave off 11% from our cost-to-serve as compared to 2015. we were able to channel our additional volume into Southeast Asia where manufacturing activity was more intense than other regions. one which we are further enhancing by optimising effective vessel arrangements. Smaller vessels were deployed to Southeast Asia destinations that have limitation to accommodate large parcel size. WE WERE ABLE TO SHAVE OFF 11% FR OM OUR COST-TO-SERVE AS COMPARED TO 2015. We were also able to strategically shift some volume to a higher value market and increase our sales to end users by 4%. Last year. Aided by efficient integrated delivery planning and channel management. These establishments enable us to strengthen our relationships with key customers and enhance our presence in the focus markets.

Thus far. To further reinforce our providers to increase awareness of our HSE requirements and relationships. During the year. Perlis in March. we strenghtened our capability three consistently achieved top class order fulfilment reliability throughout development efforts. We also conducted a product stewardship session in the Philippines. This is to thrive in delivering the best value to our stakeholders. our company is building capabilities to ensure our people CX as our guiding principle. we are determined to keep the momentum going and have outlined our next course of action to achieve our 2017 goals. the emphasis was inhibitor in oil and gas applications. we collaborate closely with CICM to develop these innovative products timely. At both events. unique proposition that we are able to offer is to adapt our product specifications to suit customers’ changing needs. namely forum in Padang Besar. leading Our company also engages with vendors and third-party service to new applications to our product slate. we engage regularly with our customers. our company and programmes. Both solutions have been well received. and held a similar event in low freezing grade glycol (LFG MEG) which serves as a hydrate Kertih. This was supported by an efficient management of Steering Committee and Working Committee to spearhead our inventory which allowed us to consistently keep an optimum level training initiatives. work. On our own effort. Another system experts this year on top of the 20 certified in 2015. but have the knowledge and skills to support business expansion. our mission is not merely to survive. and international. use in brake fluids. Backed up by the Health and safety continue to be given top priority. Management Discussion & Analysis (Cont’d) PETRONAS CHEMICALS Head of Commercial GROUP BERHAD 52 Recognising the importance of prompt and efficient delivery being achieved through enhanced professional development training Section to enable a smooth flow of customer operations. we work closely with customers to commitment to ensure the highest safety standards in our sales and determine the solutions they require and are able to commercialise distribution activities. we have certified another 32 pricing of stock and enhance our reputation as a reliable supplier. our company produced two new solutions. and a special chemical blend for on safe behaviours of the truck drivers to prevent road incidents. industry guidelines for safe transportation of petrochemicals. Terengganu in November. we gathered our transport providers for a safety During the year. and enhanced our Capability Development the year. With Internally. . both domestic procedures. where we have just started exporting glycols in Now that we have savoured a measure of success from our hard bulk and container. Underlining our Innovation and Technology team.

KEY GLOBAL MEGATRENDS AR16 WE HAVE ALIGNED OUR MID TO LONG-TERM STRATEGIES TO CAPITALISE ON MALAYSIA’S STRATEGIC LOCATION IN ASIA PACIFIC. WHICH PROVIDES US AN ADDED EDGE TO LEVERAGE ON GLOBAL MEGATRENDS.0 Pacific 36% 22% 14% 4 28% 0. FORECASTING A SURGE IN THE GLOBAL MIDDLE CLASS Billion of people 9 Poor 8 MALAYSIA 7 6 Middle Class 5 4 3 2 Open here 1 for more Rich 0 ASIA PACIFIC 2005 2010 2015 2020 2025 2030 MALAYSIA IS Global rise in the middle class predominantly from Asia Pacific STRATEGICALLY Middle class: size and distribution (millions of people.0 POPULATION GROWTH IN ASIA PACIFIC 2.0 Billion 54% of people 1. global share) LOCATED IN ASIA PACIFIC Centrally located within the region with: Billion 2030 • more than 4 billion population of people 66% 2020 ASIA 2010 • growing middle class 3.5 PACIFIC 3.5 5 Asia 1.5 EXCEEDS OTHER REGIONS 2.5 18% 10% 7% 6% 8% 5% 10% 5% 2% 6% 2% 2% 3 0 North America Europe Central & South America Asia-Pacific Sub-Saharan Africa Middle East & North Africa Middle East & 2 North Africa Europe 1 Latin America North America Central Africa 1980 1990 2000 2010 2020 2030 .

PCI Wood Mackenzie.000 TRANSPORTATION Personal Care Consumption 374 453 530 770 (USD Bil) PACKAGING Sources: Organization for Economic Cooperation and Development 1960 1980 2000 2050 The World Bank.9 from (Bil) Lower resources FRESHWATER Availability (m3/capita) 1.5 3.600 2. Population 1.500 people (2010) to 4.000 4.5 6. PlasticsToday.27 0.100 FOOD Packaging Sales 211 283 375 574 (USD Bil) 1960 1980 2000 2050 PERSONAL Motor Vehicle CARE PRODUCTS Sales (Mil Unit) 1. 2010 2015 2020 2030 53 Section three Increase in population Less arable LAND (hectares/capita) from Global 6..600 3.8 8.5 BILLION 1960 1980 2000 2050 people (2030) Middle Class More middle class population...amidst less arable land and less resources . Higher AGRICULTURE WATER withdrawal (km 3/year) Plastic 1.9 BILLION Polyester people (2030) Production 53 66 82 117 1960 1980 2000 2050 (Mil MT) Leading to higher demand for.500 2.9 BILLION 0.8 2.. Euromonitor.45 0.Key Global Megatrends (Cont’d) AR16 Focusing on addressing global Increasing global population and affluent consumers The growing population amidst KEY MEGATRENDS and CHALLENGES drive the demand for various manufactured goods decreasing arable land and resources necessitates effective food production The world will face challenges..19 Population (Bil) people (2010) to 8. Platts.100 2....000 7.600 3.8 BILLION 13.2 4.4 7.400 1.400 2.33 0. .200 2. World Resources Institute and Food and Agriculture Organization of the United Nations (FAO).000 VS Higher Food Consumption (kcal/person/day) EFFICIENT 2.9 7.500 10..000 1.

3 C Middle East & Africa Japan Industrial Chemical Industrial Chemical Real GDP Production Production Real GDP Production Production 2.6 6.3 4.6 1. MARKET OUTLOOK PETRONAS CHEMICALS GROUP BERHAD Economic indicators point to another challenging year in 2017 particularly in Asia Pacific.5 3.2 4.0 6.1 2.7 1.7 4.8 6.5 1.3 0.5 5.7 -0.4 1. 54 Section three B C D A % change YoY (2017 vs.4 1.3 1.9 India Industrial Chemical Real GDP Production Production 7.3 2.5 1.3 2.8 A Latin America & Carribean United Kingdom China Industrial Chemical Industrial Chemical Industrial Chemical Real GDP Production Production Real GDP Production Production Real GDP Production Production 1.2 0.3 4.3 1.4 . 2016) Down No Change Up United States B Eurozone D Asia Pacific Industrial Chemical Industrial Chemical Industrial Chemical Real GDP Production Production Real GDP Production Production Real GDP Production Production 2.

128 3.821 1.7 3.097 1.782 2.7 Bulk Petrochemicals & 2.095 8.304 5.047 453 665 665 500 204 40 146 -39 -47 0 0 0 Asia Pacific Asia Pacific Europe North South Africa Asia Europe Middle North South America America Pacific East America America Source: IHS and Fertecon .104 9.183 2.6 3.8 2016 1.360 1.273 2.4 Organics 2.183 2.228 1.0 3.881 2.047 2.641 12.064 2.152 500 675 85 120 157 0 0 -117 Asia Pacific Europe Middle East North Asia Pacific Europe Middle East North Asia Pacific Middle East North America America America MEG Totals 2016 Total 2017 Total Methanol Totals 2016 Total 2017 Total Urea Totals 2016 Total 2017 Total 1.232 1.656 2.9 Other Chemicals (excluding 2.291 2.640 1.1 2.391 2.1 Basic Chemicals 2.213 1.9 Agricultural Chemicals 2.471 3.379 9.529 3.831 3.236 11.429 2.6 2017 Consumer Products 1.914 1.2 pharmaceuticals) 2.3 2.983 6.241 1.490 5.7 Specialties 2.Market Outlook (Cont’d) AR16 Petrochemical market will continue to be challenging despite improving demand as capacity additions continue to be strong. 55 Section Global Chemical Production Outlook by Segment (% change YoY) three 1.2 Total Chemicals 2.534 13.4 2.1 Plastic Resins 2.0 Man-made Fibers 3.9 0 2 4 Net Capacity Expansion by Region (in thousands of metric tonnes) Olefins Totals 2016 Total 2017 Total Polyolefins Totals 2016 Total 2017 Total Paraxylene Totals 2016 Total 2017 Total 9.967 2.5 Coatings 2.

8 BILLION IN 2009 TO increasing health consciousness 3. textiles. with the region 8. In China BILLION alone. BANK. Our strategy allows us to leverage on the economies of scale from the increased Selectively Regional diversifying volume of basic petrochemicals and enables us to derive greater margins from value-added products. healthcare.7 billion by 2050. The growth projects under Global Strengthen basic implementation today will further cement our regional petrochemicals market leadership position. which will into derivatives.9 billion by 2030. chemicals and Local solutions Basic Specialty Derivatives Petchem Chemicals . preference for quality for light and smart growing population. the TO REACH ABDUL AZIZ OTHMAN global middle class will expand from 1. The growing consumption of food amidst decreasing arable land 9.2 BILLION BY 2020 AND More vehicles ownership due to affordability and higher mobility requirements 4. STRATEGIC INTENT PETRONAS CHEMICALS GROUP BERHAD PETROCHEMICAL LANDSCAPE 56 The petrochemical industry is a growing industry driven by increased demand for plastics.5 HEAD OF STRATEGIC representing 66% of the global middle-class population by 2030. packaging.9 BILLION Changes in lifestyle and health trends BY 2030 towards higher consumption of personal care OUR UNIQUE STRATEGIC POSITIONING METHANOL. world population is expected to reach 8. Most of this growth will come from Asia.7 BILLION BY 2050 and resources necessitates effective food production. GLOBAL MIDDLE CLASS WILL EXPAND FROM Safer and durable packaging due to the 1. our ethoxylates capture in the automotive in the production the robust growth urea contributes to the huge demand industry fueled of polyester in of automotive increased crop yields growth from the by the increased textiles industry to industry and the which supports expanding middle affluence of cater for increasing growing higher more efficient food class for cosmetics consumers in this urban consumers mobility requirement production for the and other personal region. the number of upper middle-class and affluent households is forecast BY 2030 AND PLANNING & VENTURES to double to 100 million by 2020. OUR TWO-PRONGED STRATEGY CORPORATE VISION The Preferred Chemical Company Providing Innovative Customer Solutions Our two-pronged strategy is about further solidifying the intent to meet these needs. care products. In line with this growth. Furthermore. WORLD POPULATION three According to the World Bank.8 billion in 2010 to 3.2 billion by 2020 and 4. automotive.5 billion IS EXPECTED by 2030. clothes. food and agriculture in tandem ACCORDING TO THE WORLD Section with population growth and increasing affluence of developing nations. GLYCOLS AND UREA ETHANOLAMINES MTBE POLYMER AND ETHOXYLATES PARAXYLENE In the face of Our methanol. The result is increasing consumption of food INCREASE FURTHER TO per capita. also serve as a buffer against market cyclicality and specialty volatility. Our MTBE caters Our glycols and Our polymers can be increasing shortage ethanolamines and well to the rapid rise paraxylene are used customised to meet of arable land. and increase further to 9. the rise of middle class income population leads to higher end-customer preference towards high quality and luxury products.

PCG capacity to over 15 million mtpa. CF S1 Tergitol 26L-1. especially in food and agriculture. we have successfully developed ten (10) LOOKING AHEAD Innovative Customer Solutions. Innovation Excellence will be key to strengthening our capabilities in view of offering tailor-made applications and solutions to meet our customers’ needs. the key focus will be to execute activities. C170X enhancement REMCOAT Extrusion coating grade Insulation for for packaging & lamination application pipe coating Provide synergy with our existing products with large scale for Echoing this success. embarking on several initiatives such as optimizing product mix. underpinned by as follows: three sustainable best practice of HSE Excellence. This is part of our strategy to be closer to our markets and gain insights in order to enhance our market position. Moving forward. to become the largest producer for mono ethylene glycols (MEG) & polypropylene (PP) and Our Commercial Excellence has enabled us to gain additional value by 2nd largest producer for HDPE in Southeast Asia. We continue to explore other significant growth opportunities in the production of ethylene. chemicals. This will ensure Collaboration with BASF will diversify PCG's portfolio that we strengthen our market leadership position. such as route-to-market for chosen products from PIC. producer in SEA. we will be able to pursue growth opportunities in line with our two. we have constantly pursue collaborative efforts with our customers in view of meeting their needs. Moving forward. will be selected to meet the trend as mentioned in the megatrends. we are continuously identifying and developing our commodity and niche for specialty customers’ needs and requirements. Since 2013. propylene CF45 B-260 BF and butadiene derivatives. we will be able to develop more specialised solutions. Fundamental to our two-pronged strategy is the continued efforts to strengthen PCG will add about 47% of additional capacity bringing our Operational Excellence. into niche specialty chemicals. Processability improvement for Processability improvement blow molding jerry can for for blown film for carrier bags & palm oil industry thin counter bags Integrated business model. .6 These efforts are in line with PCG's aspirations to pursue Enhancement of solar panel Non-ionic surfactant for household cutting fluid & personal care application dynamic growth projects to keep ourselves at par with our peers. thus truly setting PCG apart in the industry. As we expand our innovation capabilities. To date. The potential product slate automotive and personal care. With our strong cash generation. logistics & inventory and focusing on higher value markets. and specialty chemicals at Solar panel Brake fluid cutting fluid application PIC. The completion of 57 the projects will also further strengthen PCG's position Operational Excellence has reached world-class levels in 2016. HD5201 HD5301 pronged strategy.Strategic Intent (Cont’d) AR16 By 2019. In addition. upon completion of our sanctioned projects. Section we look to sustain the utilisation of assets at 90% and above. We have successfully operationalised our overseas subsidiaries in Thailand and China and have SAMUR will position PCG as the 2nd largest urea recently incorporated a subsidiary in Indonesia. The continuous strengthening and internalising of HSE values amongst all our employees and contractors are Petrochemical projects in PIC will propel PCG prerequisite in building a strong HSE culture. Commercial Excellence and Innovation Excellence. whilst taking into consideration the availability of excess ethylene. propylene and butadiene molecules. we are constantly assessing further LFG MEG 90 & 95 C170X Low freezing grade MEG for LDPE extrusion coating grade for downstream opportunities for our polymers and glycols oilfield chemical application packaging & lamination application that not only would enhance PCG's product offerings but also complement our existing product slates.