PETRONAS CHEMICALS GROUP BERHAD CHEMICALS GROUP PETRONAS 199801003704 (459830-K) www.petronaschemicals.com Integrated Report 2020 Report Integrated PETRONAS Chemicals Group Berhad Tower 1, PETRONAS Twin Towers Kuala Lumpur City Centre 50088 Kuala Lumpur, Malaysia Tel : +603 2051 5000 Fax : +603 2051 3888 RESILIENCE. SUSTAINABLE GROWTH. PETRONAS CHEMICALS GROUP BERHAD INTEGRATED REPORT 2020 Dear Stakeholders, We are glad to present to you our Integrated Report 2020. As a leading integrated chemicals producer in Malaysia, at PETRONAS Chemicals Group Berhad, we continue to demonstrate our ability to create value for you. During the reporting year, with our strong fundamentals; market presence in over 30 countries; vast industry experience; operational and commercial excellence; we remained resilient and committed to sustainable growth. WELCOME TO OUR INTEGRATED REPORT 2020 ABOUT THIS REPORT INTEGRATED REPORTING APPROACH As one of the largest companies on Bursa Malaysia Securities Berhad (Bursa Malaysia) by market capitalisation, our operations impact a network of diverse stakeholders. We strive to continuously deliver a coherent, transparent and credible assessment of our performance to these stakeholders. This is demonstrated in the PETRONAS Chemicals Group Berhad (PCG or the Group) Integrated Report 2020, in which we present our ability to utilise various capitals to create sustainable value to all stakeholders. 1 SCOPE AND BOUNDARY 4 MATERIALITY This Integrated Report (IR) covers the reporting period of 1 January The information presented in this report addresses matters that 2020 to 31 December 2020, unless otherwise stated. Information are most material to our business and stakeholder value. We presented relates to the activities of the Group comprising our identify, prioritise and validate our material matters via a four-step subsidiaries, joint operation, joint ventures and associates. Subsidiaries materiality assessment. included are based on the Malaysian Financial Reporting Standards (MFRS) 10 Consolidated Financial Statements. 5 FORWARD-LOOKING STATEMENTS 2 REPORTING FRAMEWORK This report contains certain forward-looking statements relating to future performance. These statements and forecasts are based Our reporting process is guided by the International Integrated on current assumptions and circumstances, which could change, Reporting Framework (IIRF) of the International Integrated Reporting hence involve uncertainty. Various factors could cause actual results Council (IIRC) as well as the Main Market Listing Requirements to differ materially from those expressed or implied by these (MMLR) of Bursa Malaysia, the Corporate Governance Guide forward-looking statements. (3rd Edition) issued by Bursa Malaysia, the Companies Act 2016 (CA 2016) and the Malaysian Code on Corporate Governance (MCCG 2017). 6 BOARD RESPONSIBILITY STATEMENT The Board of Directors (Board) acknowledges its responsibility 3 INDEPENDENT COMBINED ASSURANCE STATEMENT in ensuring the integrity of this Integrated Report, which in the Board’s opinion addresses all the issues that are material The credibility of this report is supported by strong governance to the Group’s ability to create value and fairly presents the practices. Assurance for this report is provided by our Board of integrated performance of PCG Group. This report has been Directors (Board), supported by external verification by KPMG PLT, prepared in accordance with the IIRC <IR> Framework. This our auditors for financial information and providers of limited report was approved by the Board on 23 February 2021. assurance on selected non-financial information. Read more on pages 164-165 for the Non-financial Assurance Report Datuk Md Arif Mahmood Datuk Sazali Hamzah Read more on pages 146-149 for the Independent Auditors’ Report Chairman Managing Director/ Chief Executive Officer NAVIGATION ICONS Our Capitals Material Matters Our Strategic Thrusts Innovation & Product Operational Financial Capital Cost Management Cybersecurity Stewardship Excellence Customer Relationship Supply Chain Manufactured Capital Price Volatility Commercial Management Management Excellence GHG Emissions & Climate Human Rights & Fair Market Growth Delivery Intellectual Capital Adaptation Employment Volatility Excellence Environmental Corporate Human Capital Talent Development Stewardship Governance Social & Relationship New Plastics Community Asset Reliability Capital Economy (NPE) Engagement Workplace and Occupational Natural Capital Safety & Health (OSH) Futher details of PETRONAS Chemicals Group Berhad can be found on www.petronaschemicals.com OUR REPORTING SUITE PCG is a global integrated chemicals company with a strong network of stakeholder relationships. These stakeholders are important to us, and to strengthen the trust they have in PCG, we seek to provide clarity on our business direction, strategies and performance while articulating our business and material risks. This IR has been produced to satisfy that purpose. It provides a holistic and material assessment of our ability to create value in the short, medium and long-term. INTEGRATED REPORT (IR) 2020 GOVERNANCE AND FINANCIAL SUSTAINABILITY REPORT (SR) 2020 REPORTS (GFR) 2020 PCG’s IR has been produced with the primary PCG’s GFR presents detailed reporting of PCG’s Sustainability Report provides a clear objective of providing our stakeholders a Corporate Governance Statements, including assessment of the Environmental, Social and comprehensive overview and a balanced expanded information of our Corporate Governance (ESG) impact. The report assessment of our financial and non-financial Governance Overview Statement, Nomination demonstrates our commitment to creating performance. and Remuneration Committee Report, Board sustainable and responsible value that Audit Committee Report, Board Risk Committee contributes to People, Planet and Profit. Reading the report, our stakeholders are Report and Statement on Risk Management informed of our strategy, businesses and Reporting Framework: and Internal Control. Our GFR also includes performance, our approach to governance and our Audited Financial Statements consisting of • Global Reporting Initiative (GRI) Standards risks as well as our future goals. The report Directors’ Report, Audited Financial Statements (Core) demonstrates our accountability and strengthens and our Independent Auditors’ Report. The • MMLR issued by Bursa Malaysia on the trust of our stakeholders. GFR provides detailed governance and financial Sustainability Reporting Reporting Framework: disclosures to our shareholders, investors, • FTSE4Good Bursa Malaysia Index’s Environmental, Social and Governance (ESG) • MCCG 2017 issued by Securities Commission analysts and other interested parties. indicators Malaysia Reporting Framework: • International Petroleum Industry • MMLR issued by Bursa Malaysia • MCCG 2017 issued by Securities Commission Environmental Conservation Associations’ • IIRF issued by the IIRC Malaysia (IPIECA) Oil and Gas Industry Guidance on • CA 2016 • Corporate Governance Guide (3rd Edition) Voluntary Sustainability Reporting • MFRS issued by Bursa Malaysia • Dow Jones Sustainability Index (DJSI) • International Financial Reporting Standards • MMLR issued by Bursa Malaysia • The United Nations Sustainable Development (IFRS) • CA 2016 Goals (UN SDGs) • MFRS • IFRS Key Stakeholder Groups Key Risks Health, Safety and Employees Communities H CR Corruption Risk (New) Environment Risk Strategic Customers Media S M Market Risk Investment Risk Sustainable Suppliers & Vendors P Project Execution Risk O Operational Risk Development Goals (SDGs) Business Partners CY Cybersecurity Risk (New) F Feedstock Risk Shareholders & W War on Plastics Risk (New) R Regulatory Risk Investment Community Government & Regulators CO COVID-19 Risk (New) T Talent Risk The coloured goals represent PCG's priority SDGs. Inside This Report PC Methanol, Labuan ABOUT THIS REPORT 70-127 2 Integrated Reporting Approach 3 Our Reporting Suite MANAGEMENT DISCUSSION AND ANALYSIS Strategic Review 6-25 70 Operating Environment and Outlook 74 Material Matters OVERVIEW OF PCG 81 Risk Overview – Key Risks & Mitigation 6 Vision & Shared Values 89 Our Strategy 7 Who We Are 90 Strategic Performance 8 2020 Key Highlights 92 Growth Delivery Excellence 10 Awards and Recognitions 12 Group Structure Business Review 14 What We Do 16 Our Presence 98 Manufacturing 18 Integrated Product Value Chain 102 Commercial 20 Our Strengths 22 Index Representation & Strategic Alliances Financial Review 24 Key Milestones 108 Group Financial Results and Position 110 Analysis on Financial Results 112 Analysis on Financial Position 115 Cash Flow Analysis 116 Five-year Group Financial Summary 1 117 Five-year Group Financial Highlights 118 Five-year Group Financial Analysis 119 Group Quarterly Performance 120 Statement of Value Added and Value Distributed 28-47 121 Share Price Movement 123 Investor Relations KEY MESSAGES 127 Financial Calendar 30 Chairman’s Statement 4 34 MD/CEO’s Review 42 CFO’s Review 130-153 LEADERSHIP 130 Corporate Information 131 Board Composition 132 Board of Directors’ Profile 2 136 Management Committee Profile 142 Organisation Structure 143 Leading the Way for Value Creation 50-67 Through Good Governance 5 VALUE CREATION 50 How We Create Value 154-174 – An Integrated Approach to Value Creation 52 Our Business Model ADDITIONAL INFORMATION 53 Performance by Capitals 60 Stakeholder Engagement 154 List of Properties 64 Value We Create 159 Analysis of Shareholdings 162