EXCELLENCE. DYNAMIC GROWTH - MalaysiaStock.Biz

ANNUAL REPORT 2016 PETRONAS CHEMICALS GROUP BERHAD (459830-K)

EXCELLENCE. DYNAMIC GROWTH

E X C E L L E N C E . D Y N A M I C G R O W T H

T H E P U R S U I T O F E XC E L L E N C E I S A D R I V I N G F O R C E AT P E T R O N A S C H E M I CA L S G R O U P B E R H A D ( P C G ) .

I T S PA R K S O U R C R E AT I V I T Y, E M B E D S O U R C O M M I T M E N T TO S A F E T Y, A N D F U E L S A D E S I R E TO C R E AT E

VA L U E I N E V E RY T H I N G W E D O. T H I S A L L OW E D U S TO R I D E OV E R Y E T A N OT H E R C H A L L E N G I N G Y E A R .

F O C U S I N G O U R E N E R G I E S O N S T R E N GT H E N I N G O U R B A S I C P E T R O C H E M I CA L S B U S I N E S S , W H I L E

D I V E R S I F Y I N G I N TO D E R I VAT I V E S , S P E C I A LT Y C H E M I CA L S A N D S O L U T I O N S , W E N OT O N LY OV E R CA M E

M A R K E T U N C E R TA I N T I E S , W E S E T N E W B E N C H M A R K S I N 2 0 1 6 . O P E R AT I O N A L E XC E L L E N C E R E S U LT E D I N

9 6 % P L A N T U T I L I S AT I O N , S U R PA S S I N G WO R L D - C L A S S S TA N DA R D S . T H I S , C O M B I N E D W I T H C O M M E R C I A L

A N D I N N OVAT I O N E XC E L L E N C E , L E D TO O U R H I G H E S T E B I T DA M A R G I N S I N C E O U R L I S T I N G. L E V E R AG I N G

O N O U R U N D E R S TA N D I N G O F M A R K E T D E M A N D, W E H AV E I N T H E P I P E L I N E A N U M B E R O F G R OW T H

P R OJ E C T S T H AT D R I V E O U R S T R AT E G I C V I S I O N . W I T H T H E P E N G E R A N G I N T E G R AT E D C O M P L E X ( P I C ) A S

A K E Y CATA LYS T, T H E S E P R OJ E C T S W I L L C R E AT E G R E AT E R VA L U E F O R O U R C U S TO M E R S , S H A R E H O L D E R S ,

E M P L OY E E S , B U S I N E S S PA R T N E R S A N D C O M M U N I T I E S . T H E H E X AG O N S O N T H E C OV E R R E P R E S E N T

T H E M O L E C U L A R S T R U C T U R E O F T H E C H E M I CA L S W E P R O D U C E . T H E I R L I N K AG E D E P I C T S T H E M A N Y

R E L AT I O N S H I P S W E H AV E B U I LT W I T H O U R VA R I O U S S TA K E H O L D E R S W H I C H C O N T R I B U T E TO O U R O N G O I N G

DY N A M I C G R OW T H .

E X C E L L E N C E . Efficiency, reliability and safety are at the heart of everything we do. Sound management

and the drive for excellence continues our pursuit for greater heights across all of our

operating units.

Customised value propositions and reliability are valuable differentiators to our success.

Leveraging on our marketing acumen, we are able to sustain as well as expand our

network and capabilities.

Innovation is an integral part of the company that differentiates and allows us to adapt

to changing market landscapes. We are able to connect the dots for our customers from

a wide range of industries and fortify our market position.

INNOVATIVE SOLUTIONS

• Connectwithourcustomers’specificbusinesschallengesandfortifyourmarket position through differentiation.

• Pursue collaborative efforts between customers and various innovation networks to deliver focused applications of products and process technologies.

INNOVATIVE CULTURE

• Cultivate innovation mindset to deliver breakthrough performance through establishment of ideas and innovation management platform accessible throughout the Group.

• Position innovation as a key leadership attribute.

PLANT RELIABILITY

• Performinternalreliabilityandefficiencyenhancementprogrammes.

• Invest in technical capabilities of our people.

• Maintain consistent top quartile world-class plant performance and Health, Safety & Environment (HSE) performance at all our operating units.

TURNAROUND MANAGEMENT

• Centralised our turnaround functions and installed tighter controls to deliver flawlessplantturnarounds;executedsafely,effectivelyandonschedule.

• Coordinate downtime plans of all our facilities at optimum level through centralised management.

SUPPLIER RELATIONSHIP MANAGEMENT

• Collaborate across the value chain through various improvement programmes resulting in higher feedstock volume and better feed composition from upstream with higher recovery and more reliable utilities supply.

CUSTOMER FOCUS

• Develop innovative customised solutions and channel towards high value applications.

• Offer effective technical support to serve our customers better.

SUSTAIN & ENHANCE MARKET POSITION

• FocusondomesticandkeymarketsintheAsiaPacificregionwherewehavegeographical advantage.

• Ensure unyielding reliability in delivery and product quality, as well as establish strategic collaborations with customers to develop solutions.

• Strengthen our regional presence with overseas marketing subsidiaries in Thailand, China and Indonesia.

CX CAPABILITIES

• Improve our market savviness capabilities with the right systems and tools to capture better value.

• Develop internal expertise to enhance our competitive edge and resilience.

O P E R A T I O N A L E X C E L L E N C E I N N O V A T I O N E X C E L L E N C E C O M M E R C I A L E X C E L L E N C E

H I G H LY R E AC T I V E

P O LY I S O B U T E N E

( H R - P I B )

D Y N A M I C G R O W T H

S A B A H A M M O N I A

U R E A ( S A M U R )

P E N G E R A N G

I N T E G R A T E D

C O M P L E X ( P I C )

INTEGRATED

AROMA

INGREDIENTS

COMPLEX

/LOCATION/

Sipitang, Sabah

/LOCATION/

Pengerang, Johor

/LOCATION/

Gebeng, Pahang

/LOCATION/

Gebeng, Pahang

/LOCATION/

Gebeng, Pahang

/CUMULATIVE CAPACITY/

5.1 million mtpa primarily contributed by SAMUR and PIC

/PRODUCT APPLICATION/

Granular urea fertiliser for agriculture and industrial applications such as adhesives and moulding powder


Polymers - Feedstock for manufacturing plastic products, including packaging films, wires, cables and ducting

Glycols - Feedstock for manufacturing polyester fibres, resins and oil & gas chemicals


Aroma ingredients are sold to the flavour and fragrance industry, mainly in home and personal care products and in the food industry as well as pharmaceutical applications


Chemical intermediate used as a compound, in the production of synthetic lubricants, as well as oil additives, functional fluids like automotive coolants and other applications in various industries


Intermediate product for the manufacturing of high-performance fuel and lubricant additives

/PROGRESS STATUS/

Successfully produced on-specification urea and in the process of ramping up for full commercial operations in 2017

/PROGRESS STATUS/

The project is progressing on schedule. Achieved the final investment decision (FID) for flexi polyethylene (Flexi PE) plant

/PROGRESS STATUS/

Within the range of start-up schedule and expect Citral production in 2017. The production units for Citronellol and L-Menthol will come on-stream in phases in 2017

/PROGRESS STATUS/

The plant came on-stream as planned with the successful production of on-specification 2-EHAcid in late 2016

/PROGRESS STATUS/

Construction underway and expected to start production in the fourth quarter of 2017

/POSITION/

PCG becomes second largest urea producer in Southeast Asia

/POSITION/

PCG becomes the largest glycols and polypropylene (PP) producer as well as the second largest HDPE producer in Southeast Asia

/POSITION/

First plant in Asia Pacific to produce intermediates for flavours and fragrances, marking PCG’s foray into derivatives, specialty chemicals and solutions

/POSITION/

The first and only 2-EHAcid plant in Southeast Asia paving the way for PCG to diversify into specialty chemicals

/POSITION/

The first and only HR-PIB plant in Southeast Asia allowing PCG to further diversify into specialty chemicals

/EMPLOYMENT OPPORTUNITIES/

Some 400 high-value direct jobs are created from this investment, in addition to spin-off opportunities for local support and services providers


An approximately 50,000 - 60,000 workers at peak project phase


Some 140 high-value direct jobs are expected to be created from these three investments, in addition to providing spin-off opportunities for over 1,000 local contractors

UREA 2-EHACIDPOLYMERS

& GLYCOLS

CITRAL,

CITRONELLOL

& L-MENTHOL

HR-PIBSAMUR PIC Integrated Aroma Ingredients Complex 2-EHAcid HR-PIB

2 - E T H Y L H E X A N O I C

AC I D ( 2 - E H AC I D )

OUR VISION

1

2

LOYALTY

INTEGRITY

SHAREDVALUES

3

4

PROFESSIONALISM

COHESIVENESS

The preferredCHEMICAL COMPANY

providing innovativecustomer solutions

PETRONAS CHEMICALS

GROUP BERHAD

AR16

1

Sectionone

02 THE LEADERSHIP

25 The Value Our Board Brings 26 ProfileofBoardMembers34 ManagementCommittee36 ProfileofManagementCommittee

OUR STRATEGIC PERFORMANCE 03

41 ManagementDiscussion&Analysis • ManagingDirector/CEO • ChiefFinancialOfficer • HeadofManufacturing • HeadofCommercial53 KeyGlobalMegatrends54 MarketOutlook56 StrategicIntent58 HowWeTreatRisks60 InvestorRelationsandSharePerformance63 FinancialCalendar64 OurAchievements66 PCGintheNews68 CalendarofEvents

01 ABOUT PETRONAS CHEMICALSGROUP BERHAD

3 AboutThisReport4 OurReportingSuite5 ALeadingChemicalPlayerintheRegion6 WhyInvestinUs8 OurPerformanceHighlights12 OurMilestones14 OurOperations16 OurReach18 GroupStructure20 CorporateInformation21 OrganisationalStructure22 ProductPortfolio

04 OUR RESPONSIBILITIES

75 SustainabilityatPETRONASChemicalsGroupBerhad • TheBoundariesatOurReporting • HowSustainabilityisGoverned • IdentifyingourSustainabilityFocusAreas • ReportingonOurFocusAreas • OurWayForward

05 HOW WE ARE GOVERNED

90 StatementonCorporateGovernance • BoardAuditCommitteeReport • NominationandRemunerationCommitteeReport116 StatementonRiskManagementandInternalControl

128 Directors’Report132 StatementbyDirectors133 StatutoryDeclaration134 StatementsofFinancialPosition135 StatementsofProfitorLossandOtherComprehensive

Income136 StatementsofChangesinEquity139 StatementsofCashFlows141 NotestotheFinancialStatements197 IndependentAuditors’Report201 ListofProperties205 AnalysisofShareholdings209 CorporateDirectory211 NoticeofAnnualGeneralMeeting(AGM)214 AdministrativeDetailsofPETRONASChemicals

GroupBerhad19thAGM• ProxyForm

06 OUR NUMBERS

WHAT’S INSIDE

T h i s s e c t i o n p r o v i d e s a c o m p r e h e n s i v e a c c o u n t o f

w h o w e a r e , h o w w e c r e a t e v a l u e f o r o u r v a r i o u s

s t a k e h o l d e r s , a n d t h e d o m a i n s w h e r e w e o p e r a t e .

I t a l s o e x p l a i n s w h a t w e i n t e n d t o a c c o m p l i s h

t h r o u g h t h i s a n n u a l r e p o r t a n d p r o v i d e s d e t a i l s

o f w h e r e s u p p l e m e n t a r y i n f o r m a t i o n o n t h e

C o m p a n y c a n b e f o u n d .

CONTENTS

3 AboutThisReport

4 OurReportingSuite

5 ALeadingChemicalPlayerintheRegion

6 WhyInvestinUs

8 OurPerformanceHighlights

12 OurMilestones

14 OurOperations

16 OurReach

18 GroupStructure

20 CorporateInformation

21 OrganisationalStructure

22 ProductPortfolio

*Thecross-referencingiconsreferreadersto

informationelsewhereinthisreport

ABOUT

PETRONAS

CHEMICALS

GROUP

BERHAD

PETRONAS CHEMICALS GROUP BERHAD

AR16

3

Sectionone

ABOUT THIS REPORT

AS THE LEADING INTEGRATED CHEMICALS PRODUCER IN MALAYSIA AND ONE

OF THE LARGEST IN SOUTHEAST ASIA, PCG HAS AN EXTENSIVE NUMBER OF

STAKEHOLDERS WHO ARE IMPACTED BY OUR BUSINESS, NOT ONLY BY OUR

FINANCIAL PERFORMANCE BUT ALSO THE WAY WE CONDUCT OUR BUSINESS.

WE APPRECIATE THAT THIS LARGE AND VARIED GROUP NEEDS TO UNDERSTAND

OUR COMMITMENTS AND POLICIES, OUR DIRECTIONS AND STRATEGIES, AND

OUR CURRENT AS WELL AS FUTURE PROSPECTS TO BE ABLE TO PLACE THEIR

TRUST IN US.

FORWARD-LOOKING STATEMENTS

Certain statements in this document are

forward-looking.Typically,theycontainwordssuch

as ‘anticipates’, ‘estimates’, ‘expects’, ‘projects’,

‘believes’,‘intends’,‘plans’,‘may’,‘will’and‘should’,

or similar expressions. Such statements relate

to the plans, objectives, goals, strategies, future

operationsandperformanceofPCG.Theyarenot

guarantees of future operating, financial or other

results and involve certain risks, uncertainties

and assumptions. Actual results and outcomes

may therefore differ materially from those

expressed or implied. We make no express or

impliedrepresentationorwarrantythattheresults

anticipated by such forward-looking statements

willbeachieved.Thesestatementsrepresentoneof

manypossiblescenariosandshouldnotbeviewed

asthemostlikelyorstandardscenario.Wearenot

obligated to update the historical information or

forward-lookingstatementsinthisdocument.

Althoughweprovidevariousreportsthroughouttheyear[see‘OurReportingSuite’onpage4],ourAnnualReport is intended topresentaclearandcomprehensivesummaryofthewayinwhichwehavecontinuedtocreatefinancialandnon-financialvalue forour stakeholdersover the12months.This year’sAnnualReportmarksasharpdeparture fromourpreviousreportsaswehavestrivedtocreategreatertransparencyinthecontentdisclosedaswellasthemannerinwhichitispresented.ThisisinlinebothwiththelatestreportingguidelinesforlistedcompaniesbyBursaMalaysiaSecuritiesBerhad(BursaMalaysia),aswellasourowndesiretoproduceareportthatisrelevant,readableandresponsible.

We have introduced a new section 'How We Treat Risks' see page 58 whichprovides an insight into our efforts to contain andmanage current risks.Wehave also restructured what was previously our Sustainability Report intodisclosureof‘OurResponsibilities’seepages75to88thatismorealignedwithourstakeholders’interests,focusingonareasthatarerelevanttothem.

Our financial statements, audited by KPMG PLT, have been prepared inaccordance with the Malaysian Financial Reporting Standards (MFRS),International Financial Reporting Standards (IFRS) and requirements of theCompanies Act, 1965 in Malaysia. Our non-financial statements reflect localandinternationalreportingguidelines,namelyMainMarketListingRequirement(MMLR)ofBursaMalaysia,theMalaysianCodeonCorporateGovernance2012(MCCG2012),BursaMalaysiaSustainabilityReportingGuidelines,InternationalIntegratedReportingFramework,aswellastheFTSE4Goodrecommendations.

WehavemadeeveryefforttoensurethisAnnualReportpresentsabalancedandaccessibleassessmentofourstrategy,performance,governanceandprospects.The issues and developments included were determined by quantitativeand qualitative considerations that have an impact on our current and futureperformance.

PETRONAS CHEMICALS

GROUP BERHAD

4

Sectionone

OUR REPORTING SUITE

Ourannualreportservesasthemostcomprehensivereportweproduceforourshareholdersandotherstakeholders.Inadditiontoprovidinganaccountofourfinancialperformance,italsodescribesthewayinwhichweupholdcorporategovernanceandsafeguardoursustainability.Itissupplementedwithonlinedisclosuresofourquarterlyfinancialresults,analystbriefings,Bursaannouncementsandmediareleases.

Report Reporting frameworks Assurance/Approval

ANNUAL REPORT

Ourprimaryreportforcommunicatingtoourshareholdersandotherstakeholders

� CompaniesAct,1965inMalaysia� MalaysianFinancialReportingStandards

(MFRS)� InternationalFinancialReporting

Standards(IFRS)� MainMarketListingRequirements(MMLR)

ofBursaMalaysia� MalaysianCodeonCorporateGovernance

2012(MCCG2012)� InternationalIntegratedReporting

Framework� BursaMalaysiaSustainabilityReporting

Guidelines� FTSE4Goodrecommendations

� Internalcontrolsandmanagementassurance

� Complianceandinternalauditreviews� ExternalauditbyKPMGPLTonfinancial

statements� Boardapprovalongovernanceand

financialinformation

QUARTERLY FINANCIAL STATEMENTS

Financialstatementsonourperformanceeveryquarter

� CompaniesAct,1965inMalaysia� MalaysianFinancialReportingStandards

(MFRS)� InternationalFinancialReporting

Standards(IFRS)� MainMarketListingRequirements(MMLR)

ofBursaMalaysia


� Complianceandinternalauditreviews� LimitedreviewbyKPMGPLTonfinancial information*� Boardapprovaluponendorsementbythe

BoardAuditCommittee

ANALYSTS AND STAKEHOLDERS BRIEFINGS

PresentationsontheGroup’sperformanceandkeyactivities


BURSA ANNOUNCEMENTS

AnnouncementsmadetoBursaMalaysiaonmaterialinformation

� MainMarketListingRequirements(MMLR)ofBursaMalaysia


� Boardapproval

MEDIA RELEASES

Announcementsmadetothemediaonkeycorporate,social,environmentalandfinancialeventsandactivities


Toaccessmoreinformationonourannouncements,logontowww.petronaschemicals.comorscantheQRcode

* ReportedtotheBoardanddoesnotcoverPartB,OtherExplanatoryNotesofQuarterlyReporttoBursaMalaysia

AR16

5

Sectionone

A LEADING CHEMICAL PLAYER IN THE REGION

PCG OPERATES A NUMBER OF WORLD-CLASS PRODUCTION SITES, WHICH ARE FULLY VERTICALLY INTEGRATED FROM FEEDSTOCK TO DOWNSTREAM END PRODUCTS.Withatotalcombinedproductioncapacityof10.8millionmetrictonnesperannum(mtpa),itisinvolvedprimarilyinmanufacturing,marketingandsellingadiversifiedrangeofchemicalproducts,includingolefins,polymers,fertilisers,methanolandotherbasicchemicalsandderivativeproducts.ListedonBursaMalaysiaandwiththreedecadesofexperienceinthechemicalsindustry,PCGisestablishedaspartofthePETRONASGrouptomaximisevaluefromMalaysia’snaturalgasresources.

PCGisoneofthetop10companiesintheFTSE4GoodBursaMalaysia(F4GBM)Index,outof200largestcompaniesrankedbymarketcapitalisation.ItiscommittedtoensuringthatitsbusinesspracticesareinlinewithgloballyrecognisedstandardsforEnvironment,Social&Governance(ESG)practices.

A TOTAL COMBINED PRODUCTION CAPACITY OF

10.8 MILLIONMETRIC TONNES PER ANNUM

THE LEADING INTEGRATED

CHEMICALSPRODUCER

IN MALAYSIA

OPERATES A NUMBER OF

WORLD-CLASS PRODUCTION SITES

DIVERSIFIED RANGE OF

CHEMICALPRODUCTS

OVER

THREE DECADESOF EXPERIENCE IN THECHEMICAL INDUSTRY 30

YEARS

PETRONAS CHEMICALS

GROUP BERHAD

6

Sectionone

WHY INVEST IN US

PCG IS THE INDUSTRY LEADER FOR HIGHLY ATTRACTIVE VALUE CREATION OPPORTUNITIES

FOR INVESTORS. WE HAVE MARKET LEADERSHIP ACROSS PRINCIPAL PRODUCTS BESIDES

GAS FEEDSTOCK ADVANTAGE AND FULLY INTEGRATED PRODUCTION FACILITIES. OUR CLOSE

PROXIMITY TO KEY GROWTH MARKETS HAS ENABLED US TO FORGE STRONG PARTNERSHIPS

WITH LEADING CHEMICALS AND ENERGY MAJORS.

BackedbytheparentageandsupportofPETRONASGroup,ourcompetitivestrengthsalsoincludeanattractivefinancialprofileandanexperiencedleadershipteam.

SECURE AND COMPETITIVE GAS BASED FEEDSTOCK SUPPLY

PC FERTILISER KEDAH, GURUNMethanebased KERTIH IPC

Ethane&methanebased

PC METHANOL, LABUANMethanebased

PC FERTILISER SABAH, SABAH Methanebased

ABF, BINTULUMethanebased

GEBENG IPCPropane&butanebased

PeninsularGasUtilisationpipelinenetwork

Gasfields

FULLY INTEGRATED FACILITIES AND INFRASTRUCTURE RESULTING IN LOWER COST, OPTIMUM YIELDS AND GREATER FLEXIBILITY

l Minimisemoleculeloss

l Maximisesproductionefficiency&margins

PCG VALUE CHAIN

Feedstock DerivativesBasicProducts

DownstreamDerivatives

IncreaseMarginCapture

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Sectionone

Why Invest in Us (Cont’d)

MARKET LEADERSHIP WITH ATTRACTIVE GROWTH MARKETS AND RETURNS

3RD

1ST

2ND

MTBE, BUTANOL, BGE &ETHANOLAMINES PRODUCER IN SEA*

AMMONIA, UREA & BUTYL ACETATE PRODUCER IN SEA*

ETHOXYLATES, MEG & LDPE PRODUCER IN SEA*

LARGESTMETHANOL PRODUCERIN ASIA PACIFIC AND4TH LARGEST INTHE WORLD

CAPACITYGROWTHWITH WORLD-SCALE PLANTS

PORTFOLIOEXPANSIONWITH LEADING EDGE TECHNOLOGY

LARGE-SCALE ANDDIVERSIFIED PRODUCT PORTFOLIO LEADING TO ECONOMIES OF SCALE AND SPREADING MARKET RISKS

* by capacity

PROXIMITY TO KEY GROWTH MARKETS WHICH ENABLES US TO OPTIMISE INVENTORY AND HAVE COMPETITIVE STORAGE AND DISTRIBUTION

l Closetokeygrowth marketsinAsiaPacific

19days

6days

PETRONAS CHEMICALS

GROUP BERHAD

8

Sectionone

l HIGHEST PLANT UTILISATION OF 96% SINCELISTING

l IMPROVED PLANT RELIABILITY RESULTINGFROMEFFECTIVEASSETMANAGEMENT

l IMPROVEDFEEDSTOCKSUPPLYTHROUGHCLOSE RELATIONSHIP WITH SUPPLIERS

PLANT UTILISATION RATE

2014

2014

1.9

2015

2015

2.6

3.3

1.8

2013

2013

2016

2016

2012

2012

0.5

83%78% 80%

85%

CAPITAL EXPENDITURE ALLOCATED FOR EXISTING ASSETS AND FUTURE GROWTH

CapitalExpenditure(RMBillion) OPERATIONS CAPEX consistsofreliabilityandintegrityprojects,turnaroundactivities,valueimprovementprojectsandotheroperationalrequirements

GROWTH CAPEX mainlyforSAMUR,IntegratedAromaIngredientsComplex,2-EHAcid,HR-PIBandPIC

1.1

0.7 0.7

0.3

0.7

OUR PERFORMANCE HIGHLIGHTS

96%85%WORLDCLASS

REVENUE

billion

2016

RM13.9

EBITDA MARGIN

38%TOTAL DIVIDENDEBITDA

19senper ordinary share

RM5.3 billion

PROFIT AFTER TAX

RM3.2 billion

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9

Sectionone

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ITEMS:

RMMillion(unlessotherwisestated)12monthsended

2012 2013 2014 2015 2016

Revenue 16,599 15,202 14,597 13,536 13,860

ProfitBeforeTax 4,550 4,547 3,551 3,833 4,110

ProfitBeforeTaxas%Revenue 27% 30% 24% 28% 30%

ProfitAfterTax 3,837 3,504 2,726 3,091 3,222

ProfitAfterTaxas%Revenue 23% 23% 19% 23% 23%

EarningsperShare(sen)-Basic 44.0 39.3 30.8 34.8 36.7

EBITDA 5,778 5,076 4,644 4,660 5,291

EBITDAMargin 35% 33% 32% 34% 38%

STATEMENT OF FINANCIAL POSITION ITEMS:

RMMillion(unlessotherwisestated)Asat31December

2012 2013 2014 2015 2016

TotalAssets 25,920 27,731 28,463 30,833 31,948

TotalEquity 21,906 23,389 24,477 26,590 28,313

TotalLiabilities 4,014 4,342 3,986 4,243 3,635

NetTangibleAssetperShare(RM) 2.54 2.72 2.84 3.10 3.38

Our Performance Highlights (Cont’d)

PETRONAS CHEMICALS

GROUP BERHAD

10

Sectionone


PROFIT (RM Million) & MARKET PRICE (USD/MT)

2012ProfitBeforeTax

12monthended

ProfitAfterTax AverageMarketPrice(USD/MT)2013 2014 2015 2016

4,550 4,547

3,5513,833

4,1103,837

3,504

2,7263,091 3,222

PROFIT AS % REVENUE

12monthended

2012 2013 2014 2015 2016

27%30% 30%

24%

28%

23% 23%

19%

23% 23%

ProfitBeforeTax ProfitAfterTax

REVENUE (RM Million)

16,599

2012 2013

15,202

2014

14,597

2015

13,53613,860

2016

12monthended

12monthended

EARNINGS PER SHARE-BASIC (SEN)

2012 2013 2014 2015

36.7

44.0

39.3

30.8

34.8

2016

REVENUE INCREMENT

comparedto2015

2016 2%+PROFIT AFTER TAX INCREMENT

comparedto2015

2016 4%+

809 820 759

557 467

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Sectionone


TOTAL ASSETS (RM Million)

25,92027,731 28,463

30,83331,948

2012

Asat31December

2013 2014 2015 2016

Asat31December

TOTAL EQUITY (RM Million)

21,90623,389

24,47726,590

28,313

2012 2013 2014 2015 2016

TOTAL LIABILITIES (RM Million)

4,014

4,342

3,986

4,243

3,635

Asat31December

2012 2013 2014 2015 2016

NET TANGIBLE ASSETS PER SHARE (RM)

2.542.72

2.843.10

3.38

Asat31December

2012 2013 2014 2015 2016

TOTAL ASSETS INCREMENT

comparedto2015

2016 4%+TOTAL EQUITY INCREMENT

comparedto2015

2016 6%+

PETRONAS CHEMICALS

GROUP BERHAD

12

Sectionone

1992 Commencedproductionof

propylene,polypropyleneandMTBEatGebengComplex.

AcquisitionofmethanolplantinLabuan.

1999 Commencedproductionofurea,ammoniaandmethanolinGurun.

2004 ExpandedproductioncapacitiesofureaandammoniainBintulu.

2006 ExpandedproductioncapacitiesofureaandammoniainGurun.

2000 CommencedproductionofacrylicacidatBASFPETRONASChemicals

SdnBhd,Gebeng.Commencedproductionofbenzene,paraxylene,ammonia,vinylchloridemonomer,polyvinylchlorideandaceticacidat

KIPC.

1995 Commencedproductionofethyleneandpolyethyleneat

KertihIntegratedPetrochemicalComplex(KIPC).

2009 CommissioningofmegamethanolplantinLabuan.

AcquiredinterestinPETRONASChemicalsOlefinsSdnBhd,

PETRONASChemicalsGlycolsSdnBhdandPETRONAS

ChemicalsDerivativesSdnBhdfromDowChemicals.

2002 Commencedproductionof

olefins,glycolsandderivativesatKIPC.CommencedproductionofpolyvinylchlorideinBaria-Vung

Tau,Vietnam.

1997 CommencedproductionofstyrenemonomerinPasir

Gudang.

1985 Commencedproduction

ofureaandammoniain Bintulu.

OUR MILESTONES

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Sectionone

Our Milestones (Cont’d)

2012 TookovermarketingofchemicalsandperformancechemicalsinIndonesiaandSingaporefromDowChemicals.Decisiontodiscontinuevinylbusiness.

2014 CompleteddivestmentofPhuMyPlastics&ChemicalsCoLtdpursuanttodecisiontodiscontinuevinylbusiness.

2016 Producedon-specificationureafor

SAMUR.Producedon-specification2-EHAcid

atBASFPETRONASChemicalsSdnBhd.

Sanctioneddevelopmentandconstruction

ofFlexiPEprojectatPRPCPolymersSdn

BhdinPengerang.Incorporatedoverseas

marketingsubsidiaryinIndonesia-PT

PCMKimiaIndonesia.

2014 SecuredlicenseforPETRONAS

ChemicalsMarketing(Labuan)LtdasLabuanInternationalCommodityTradingCompany.Incorporated

overseasmarketingsubsidiariesinThailand-PCM(Thailand)CoLtdand

China-PCM(China)CoLtd.

2015 Sanctioneddevelopmentand

constructionof2-EHAcidandHR-PIBprojectsatBASFPETRONASChemicalsSdnBhdinGebeng.Acquired100%equityinPRPCPolymersSdnBhd,PRPCGlycols

SdnBhdandPRPCElastomersSdnBhdwhichwillundertakepetrochemical

projectsaspartofPengerangIntegratedComplexin

Pengerang.

2013 SanctioneddevelopmentandconstructionofAsiaPacific'slargestIntegratedAroma

IngredientsComplexatBASFPETRONASChemicalsSdnBhd

inGebeng.

2010 AcquiredinterestinPETRONAS

ChemicalsEthyleneandPETRONASChemicals

PolyethylenefromBP.ListedonMainMarketofBursaMalaysia.

2011 Sanctioneddevelopmentandconstructionofanewworld-

scalefertiliserplantinSipitang,Sabah(SAMUR).

PETRONAS CHEMICALS

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Sectionone

OUR OPERATIONS

FEDERAL TERRITORYOF LABUANFederal Territory of Labuan• Methanol

SABAHSipitang• Ammonia• Urea

SARAWAKBintulu• Ammonia• Urea

KEDAHGurun• Ammonia• Methanol• Urea• NPKFertilisers*

JOHORPasir Gudang• StyreneMonomer*

PAHANGGebeng IntegratedPetrochemical Complex• MethylTertiaryButylEther(MTBE)• n-Butane• Propylene• Acrylics*• Butanediol*• Oxo-alcohols*• 2-EHAcid*

TERENGGANU Kertih Integrated Petrochemical Complex• Ammonia• Benzene• Butanol• ButylAcetate• CarbonMonoxide• Ethanolamines• Ethoxylates

• Ethylene• EthyleneGlycols• GlycolEthers• Oxogas• Paraxylene• Polyethylene• Propylene• AceticAcid*

PETRONAS CHEMICALS GROUP is headquartered in the

PETRONAS TWIN TOWERSKualaLumpurCityCentre.TheGroupcomprises30subsidiaries,jointventuresandassociatecompanies,producingandmarketingawiderangeofchemicalproducts.

*Productsproducedbyjointventureandassociatecompanies

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Our Operations (Cont’d)

4.9PRODUCTION OFOLEFINS & DERIVATIVESFROM

5.9PRODUCTION OFFERTILISER & METHANOL FROM 11 5PLANTS PLANTS

CURRENT TOTALPRODUCTION CAPACITY OF

MILLIONMETRIC TONNES PER ANNUM (MTPA)10.8

MILLIONMTPA

MILLIONMTPA

• PCMTBE• PCDerivatives• PCGlycols• PCPolyethylene• PCOlefins• PCEthylene• PCAromatics

• PCMethanol• ABF• PCFertiliserKedah• PCAmmonia• MalaysianNPKFertilizerSdnBhd

• PCLDPE• BASFPETRONAS ChemicalsSdnBhd• IdemitsuSM(Malaysia)SdnBhd

• BPPETRONASAcetylsSdnBhd

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OUR REACH

WearephysicallypresentinThailand,China,Indonesia,India,VietnamandthePhilippinesthroughouroverseassubsidiariesandrepresentativeoffices.

Intotal,41%ofourvolumeissold inSoutheastAsia(excludingMalaysia)marketswhile30%isbeingconsumedbytheMalaysianmarket.TheremainingofourtotalvolumearebeingchanneledtootherkeygrowthchemicalmarketsinNortheastAsiasuchasChina,Japan,SouthKorea,TaiwanandHongKong.

WE MARKET A WIDE RANGE OF CHEMICAL

PRODUCTS TO CUSTOMERS IN 30 COUNTRIES

WORLDWIDE PARTICULARLY IN ASIA PACIFIC. BESIDES

MALAYSIA, OUR KEY MARKETS INCLUDE THAILAND,

INDONESIA, SINGAPORE, VIETNAM, THE PHILIPPINES,

NORTHEAST ASIA, INDIA SUBCONTINENT, NORTH

AMERICA AND AUSTRALASIA.

USA

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OURREACH

Our Reach (Cont’d)

INDIA

THAILAND

MALAYSIA

SINGAPORE

INDONESIA

AUSTRALIA

NEWZEALAND

VIETNAM

PHILIPPINES

CHINA

SOUTHKOREA JAPAN

TAIWAN

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Wholly-ownedsubsidiaries Majority-ownedsubsidiaries Jointventuresandassociates

* Wholly-ownedsubsidiaryasremainingshareholdingisheldthroughothersubsidiarieswithinPCG** SubsidiarypursuanttoMalaysianFinancialReportingStandard10

64.35%

100%PETRONASChemicalsMethanolSdn Bhd(PCMethanol)

100%PETRONASChemicalsMTBESdn Bhd (PCMTBE)

100%PETRONASChemicalsDerivativesSdn Bhd(PCDerivatives)

100%PETRONASChemicalsGlycolsSdn Bhd(PCGlycols)

100%PETRONASChemicalsPolyethyleneSdn Bhd(PCPolyethylene)

100%PETRONASChemicalsAmmoniaSdn Bhd(PCAmmonia)

100%PETRONASChemicalsFertiliserSabahSdn Bhd(PCFertiliserSabah)

20%MalaysianNPKFertilizerSdn Bhd

PETRONAS CHEMICALS GROUP BERHAD

Manufacturing

GROUP STRUCTURE

88%PETRONASChemicalsOlefinsSdn Bhd(PCOlefins)

87.5%PETRONASChemicalsEthyleneSdn Bhd(PCEthylene)

70%PETRONASChemicalsAromaticsSdn Bhd(PCAromatics)

63.5%ASEANBintuluFertilizerSdn Bhd(ABF)

60%PETRONASChemicalsLDPESdn Bhd(PCLDPE)

100%PETRONASChemicalsFertiliserKedahSdn Bhd(PCFertiliserKedah)

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100%PRPCPolymersSdn Bhd(PRPCPolymers)

100%PRPCElastomersSdn Bhd(PRPCElastomers)

100%PETRONASChemicalsMarketingSdn Bhd(PCMarketing)

100%KertihPortSdn Bhd(KPSB)

100%VinylChloride(Malaysia)Sdn Bhd(VCMSB)

100%PolypropyleneMalaysiaSdn Bhd(PPMSB)

0.01%PCMChemicalIndiaPrivateLimited**

100%PETRONASChemicalsMarketing(Labuan)Ltd(PCMarketingLabuan)

100%PCM(China)CompanyLimited(PCMarketing China)

99.99%*

PCM(Thailand)CompanyLimited(PCMarketing Thailand)

40%BASFPETRONASChemicalsSdn Bhd

30%IdemitsuSM(Malaysia)Sdn Bhd

30%BP PETRONASAcetylsSdn Bhd

40%KertihTerminalsSdn Bhd

Marketing & Sales Services

Group Structure (Cont’d)

99.67%*

PTPCMKimia(Indonesia)(PCMarketingIndonesia)

100%PRPCGlycolsSdn Bhd(PRPCGlycols)

PETRONAS CHEMICALS

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CORPORATE INFORMATION

* BankingrequirementsaremanagedcentrallybyPETRONASIFSSCtoenablemoreefficientbankingmanagementfortheGroupandtheCompany

DIRECTORS

MD ARIF MAHMOOD

(Chairman)

DATUK SAZALI HAMZAH

(ManagingDirector/ChiefExecutiveOfficer)

VIMALA V.R. MENON

CHING YEW CHYE

DONG SOO KIM

DATUK TOH AH WAH

ZAKARIA KASAH

FREIDA AMAT

BOARD AUDIT COMMITTEE

Vimala V.R. Menon (Chairman)

Ching Yew Chye

Dong Soo Kim

Datuk Toh Ah Wah

Freida Amat

NOMINATION & REMUNERATION COMMITTEE

Ching Yew Chye (Chairman)

Vimala V.R. Menon

Dong Soo Kim

COMPANY SECRETARIES

Noor Lily Zuriati Abdullah

Kang Shew Meng

REGISTRAR

SymphonyShareRegistrarsSdnBhdLevel6,SymphonyHousePusatDaganganDana1JalanPJU1A/4647301PetalingJayaSelangor,DarulEhsanMalaysiaTel:(+603)78418000Fax:(+603)78418151

REGISTERED OFFICE

Tower 1PETRONASTwinTowersKualaLumpurCityCentre50088KualaLumpurMalaysiaTel:(+603)20515000Fax:(+603)23311747

BUSINESS ADDRESS

Level15,Tower1PETRONASTwinTowersKualaLumpurCityCentre50088KualaLumpurMalaysiaTel:(+603)20515000Fax:(+603)20513888

BANKING SERVICES PROVIDER

PETRONASIntegratedFinancialSharedServiceCentre(IFSSC)*

STOCK EXCHANGE LISTING

MainMarketofBursaMalaysiaSecuritiesBerhad

AUDITORS

KPMGPLT

WEBSITE

www.petronaschemicals.com

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ORGANISATIONAL STRUCTURE

BOARD AUDIT COMMITTEE

NOMINATION AND REMUNERATION COMMITTEE

COMPANY SECRETARY

BOARD OF DIRECTORS

CHAIRMAN

MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER

MANAGEMENT COMMITTEE

PETRONAS CHEMICALS

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PRODUCT PORTFOLIO

Withinnovation,moreusesarebeingfoundforpetrochemicals

tomakelifebetter.Theykeepenrichingtheworldwelivein.And

weareproudtobeapartofthisevolution.

OUR PRODUCTS ARE ALL

AROUND YOU – IN AND OUT OF

YOUR HOME, IN THE OFFICE, THE

MALL AND CINEMA. BECAUSE

OF THEIR COMPOSITION AND

PROPERTIES, PETROCHEMICALS

HAVE APPLICATIONS IN A WIDE

RANGE OF ITEMS THAT WE USE

DAILY. THEY’RE FOUND IN WHAT

WE WEAR, OUR SKIN AND HAIR

PRODUCTS, AND IN ALMOST ALL

PACKAGING OF GOODS WE BUY.

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OLEFINS,GLYCOLS & DERIVATIVES

AR OMATICS & MTBE

AMMONIA & FERT IL ISERS

POLYMERS

METHANOL

Product Portfolio (Cont’d)

PETRONAS CHEMICALS

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PRODUCT PORTFOLIO

KEY PRODUCTS DESCRIPTION FEEDSTOCK APPLICATION

Ethylene A two carbon molecule colourless gas converted from natural gas

Ethane Feedstock for production of polyethylene, ethylene glycol, ethylene oxide (EO) and derivatives of EO

Propylene A three carbon moleculecolourless gas converted from natural gas

Propane Feedstock for the production of acrylic acids, acrylic esters and oxo-alcohols

MonoethyleneGlycol (MEG)

A colourless hygroscopic liquid derived from ethylene glycol

Ethylene Oxide

Feedstock for manufacturing polyester fibers, polyethylene terephthalate resins (PET) and an ingredient of antifreeze products

Diethylene Glycol (DEG)

A colourless hygroscopic liquid derived from ethylene glycol

Ethylene Oxide Ingredient in printing ink, pigments and dyes

PerformanceChemicals

Colourless liquids derived from ethylene oxide

Ethylene Oxide,Ammonia,Fatty Alcohol

Surfactants, gas treating solvents and personal care products

OLEFINS, GLYCOLS& DERIVATIVES

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Petrochemicals are found in a wide range of cleaning agents, from shampoos and soaps to dishwashing liquids, and detergents used to wash your clothes. They remove grit and grime from your home, keep your clothes spotless, and your own body feeling fresh and clean.

WE KEEP YOU AND YOUR SURROUNDINGS CLEANPetrochemicals are found in a wide range of cleaning agents, from shampoos and soaps to dishwashing liquids, and detergents used to wash your clothes. They remove grit and grime from your home, keep your clothes spotless, and your own body feeling fresh and clean.

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POLYMERSKEY PRODUCTS DESCRIPTION FEEDSTOCK APPLICATION

Polyethylene(LLDPE, HDPE,LDPE)

Solid resins produced from the polymerisation of ethylene

Ethylene Feedstock for manufacturing plasticproducts, including packaging films, wires, cables and ducting

AR OMATICSKEY PRODUCTS DESCRIPTION FEEDSTOCK APPLICATION

Paraxylene A six-carbon ring structure molecule, which is a colourless, flammable liquid

Naphtha Production of terephthalic acid, used in the manufacture of polyester for packaging applications, drink bottles and textiles

Benzene A six-carbon ring structure molecule, which is a colourless, flammable liquid

Naphtha Feedstock for manufacturing polystyrene used for packaging


Methyl TertiaryButyl Ether (MTBE)

A five-carbon molecule colourless liquid

Butane,Methanol

Gasoline additive to boost octane level to improve burning of fuels and reduce emissions

MTBE

PRODUCT PORTFOLIO

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Not only do we produce fertilisers that enhance food production, our petrochemicals are also used in the manufacture of plastics and packaging materials that ensure fresh food maintains all its goodness until it reaches your table, and that cooked or processed food can be kept till needed.

WE MAKE SURE YOU HAVE FRESH, NOURISHING FOOD


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PRODUCT PORTFOLIO

METHANOLKEY PRODUCTS DESCRIPTION FEEDSTOCK APPLICATION

Methanol Simplest organic alcohol and is a colourless flammable liquid

Methane Production of formaldehyde, acetic acid, chloromethanes and methyl methacrylate, which in turn are used in the production of resins, adhesives, paints, plastics, flavourings, silicones and plexiglass


Ammonia A nitrogen and hydrogencompound colourless gas with a characteristic pungent odour

Methane,Hydrogen,Nitrogen

Feedstock for the production of urea and other industrial applications, including use as refrigerant and latex anti-coagulant

Urea A high nitrogen-content organic solid

Ammonia,Carbon Dioxide

Fertiliser used for the supply of nitrogen to crops and raw material for manufacturing adhesives, moulding powders, varnishes and foams


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WE ADD COLOURTO YOUR LIFE All the colours you see around you – the paint on walls and works of art; the interesting patterns on garments; hair dyes and even cosmetics – they contain petrochemical products that have been refined and are safe to use.

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Acrylics Crude Acrylic Acid (CAA): Colourless liquid with a strong smell. It is flammable and corrosive

Glacial Acrylic Acid (GAA): Clear, colourless liquid with a pungent odour. It is corrosive and is flammable Butyl Acrylate (BA): Flammable, colourless liquid with a "fruity" smell 2-Ethylhexyl Acrylate (2-EHA): Clear, colourless liquid with a "fruity" smell

Propylene Primarily used in the production of superabsorbent polymers (SAP) used in diapers, in the production of acrylic esters and in the manufacturing of plastic resins, coatings and adhesives Primarily used in the production of superabsorbent polymers (SAP) used in diapers, in the production of acrylic esters and in the manufacturing of plastic resins, coatings and adhesives Mainly used in the manufacture of resins, coatings, adhesives and plastics

Mainly used in the manufacture of resins, coatings, adhesives and plastics

Oxo-Alcohols 2-Ethylhexanol (2-EH): Flammable, clear liquid with a distinctive smell n-Butanol (n-Bol): Flammable, colourless liquid with an alcoholic smell iso-Butanol (i-Bol): Flammable, colourless liquid with an alcoholic smell Iso-butyraldehyde (i-BA): Toxic, flammable, colourless to yellow liquid with a strong smell Oxo Oil: Flammable, yellowish liquid with pungent odour

Propylene Mainly used for the production of plasticisers

Mainly used as a solvent in the paint industry and for the production of PVC plasticisers

Mainly used as a solvent in the paint industry and for the production of PVC plasticisers Chemical intermediate or raw material used to make different types of solvents and resin intermediates for the paint and ink industries Mainly used as an auxiliary in floatation processes in the mining industry (coal, copper, silver, gold and phosphorus, etc) and as a defoamer in the aluminium industry

JOINT VENTURE & ASSOCIATE PRODUCTS

PRODUCT PORTFOLIO

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Butanediol 1,4-Butanediol (BDO): Colourless and almost odourless liquid

Tetrahydrofuran (THF): Colourless, water-miscible liquid with an ether-like odour

gamma-Butyrolactone (GBL): An industrial chemical with excellent solvency, little toxicity and few environmental hazards

n-Butane Butanediol and its derivatives are used in a broad spectrum of applications in the chemical industry; amongst others in the manufacturing of technical plastics, polyurethanes, solvents, electronic chemicals and elastic fibres Mainly used in the production of a polymer used to manufacture elastomers and fibers. THF is also a versatile solvent with applications in areas such as adhesives, vinyl films and cellophanes, industrial resins, elastomers, coatings and printing inks Used in the production of clinical needs, for filtering beverages and cleaning auxiliaries. GBL is also used for applications in conductor wafer cleaning in the electronics industry or high-tech industry as well as an intermediate for the synthesis of other chemicals

2-EHAcid Colourless to yellow liquid with a faint odour

2-ethylhexenal (2-EHol)

Chemical intermediate used in esters for Polyvinylbutyral (PVB) film plasticisers and synthetic lubricants, in metal salts for paint dryers, in automotive coolants, PVC stabilisers, cosmetics and various other applications. In cosmetics, 2-EHAcid is used to produce emollients. Other applications include corrosion inhibitors in automotive coolants, catalyst for polymer production, raw material for acid chloride and fragrances

Styrene Monomer A clear, colourless, flammable liquid with a distinctive aromatic odour

Benzene,Ethylene

Production of polystyrene which is used in packaging containers and high impact plastic such as acrylonitrile butadiene styrene (ABS), latex paints and most synthetic rubber

Acetic Acid Chemical intermediate in theform of colourless liquid

Methanol,CarbonMonoxide

Precursor for making various vinyl acetate, metal acetate and cellulose acetate. Vinyl acetate is used for coatings and adhesives, metal acetate is used in printing, and cellulose acetate is used to make film for photography. Also used in the production of esters used as solvents in many commercial products, such as inks and paints

Various NPK Grades of Fertilisers

Clear colourless granules with a characteristic odour

Urea, Ammonia, Phosphates, Potassium

End fertilisers of high yield growth for paddy fields and oil palms


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WE’RE ALL AROUND YOU

ENRICHING YOUR LIVESEVERYDAY, IN EVERY WAY

PRODUCT PORTFOLIO

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ENRICHING YOUR LIVESEVERYDAY, IN EVERY WAY


PETRONAS CHEMICALS

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www.petronaschemicals.com

PRODUCT PORTFOLIO

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AR OMATICS & MTBE


POLYMERS

METHANOL


OLEFINS,GLYCOLS & DERIVATIVES

EXCELLENCE. DYNAMIC GROWTH - MalaysiaStock.Biz

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