MegaChem Limited

Management Online Q&A With Investors & Stakeholders

Dear Investors & Stakeholders

Thank you very much for your questions and the opportunities to respond to them.

We hope you have a better understanding of our business through this online exchange.

Your questions are reposted in blue followed by our replies in black.

Best Regards,
The Management Team
MegaChem Limited

Dear Puar Hai Kuan, you wrote:

How has the company coped with rising inflation and input costs in the period post COVID-19? Has it been able to raise prices to customers as well? Going forward, will the company be able pass on any future cost increases if inflation persists taking into account the need to stay competitive.

Inflationary pressure has led to an increase in our business cost. Most of it was due to higher energy, staff and warehousing cost. Aggressive interest rate hikes by global central banks has also raised our borrowing cost.

The impact of higher business cost is felt across the economy and industry. Therefore, we are not spared from this impact.

Even though the high inflation has put some pressure on our product cost, which led to a dip in our gross profit margin for FY2022, our gross profit margin has remained relatively stable over the years. This suggests that to some extent, we have been able to pass the higher input cost to our customers.

Moreover, the demand for specialty chemicals is less sensitive to price changes as compared to bulk commodity chemicals as specialty chemicals are more downstream products of which usage is in a smaller proportion in the finished products.

Has the company positioned itself for the possibility of ASEAN outperforming other regions in the world in view of the continued geopolitical landscape? If so, in what ways is she better positioned?

Our strategy has always been Asia-centric, given our strong presence in Asia. Out of the 12 countries in which we operate, 7 of them are in the ASEAN region. Outside of ASEAN, we have presence in China, India, UAE, UK and Australia. We will leverage on our extensive Asia footprint to ride on the opportunities in ASEAN and to accelerate our growth in years to come.

Dear William Chong, you wrote:

Did you install solar panels just to get sustainability-linked financing from UOB?

The decision to undertake the installation of solar panels is mainly driven by cost considerations and represents our commitment towards the reduction of global warming. The sustainability-linked financing from UOB is pegged to our overall achievement in Sustainability.

Dear Douglas Zheng, you wrote:

Do you intend to list your Thai associate on the Stock Exchange of Thailand?

Our Thai associate has been listed in the Stock Exchange of Thailand since 2017.

Dear Freddy Goh, you wrote:

How do you intend to manage your inventory with rising turnover days and dropping demand?

During the COVID-19 pandemic, we took a prudent approach in terms of managing our inventory. Post-COVID-19 lockdown, demand for chemical products surged. In order to maintain continuity of supply to our customers, we rebuilt our inventory. That resulted in a rise in our inventory level. As the euphoria in spending started to fade in the second half of FY2022, we reverted back to a more prudent approach.

Dear Investors & Stakeholders,

Thank you for all your questions and your interest in MegaChem Limited. We have come to the end of this Q&A session.

We have enjoyed the session and have learnt much from your questions. We hope that through this Q&A, you have gained better insights to our Company and our operations.

Best Regards,
The Management Team
MegaChem Limited