Investor Relations:

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 Tan B.C., you wrote:

Referring to the fire on 5 July 2023, did Megachem or the appropriate authorities establish the reason as to why the fire broke out? What are the lessons learnt from this incident and what are the action taken by the Management to prevent this from happening again?

Based on investigation by the relevant authority so far, the probable cause of the fire incident is determined as accidental.

With safety as a core objective in the design of the new warehouse, professional consultants have been engaged to conduct risk analysis and provide recommendations to enhance the safety level of the new warehouse.

The FY2023 financial report showed that an amount of S$3.15 million (other income) was claimed under Insurance due to the fire. Is this the full claim? Does Management expect any more claims to be made in 2024 or thereafter? If so, what is the estimate?

We apologise for not being able to provide further information on this matter as our insurer has not completed their investigation and assessment. The Company will provide updates to the shareholders of the Company as and when we receive any further information.

The FY2023 financial report showed that customers claimed an amount of S$0.8 million from Megachem due to the fire. Is this amount covered by the Insurance since it is caused by the fire?

Megachem indicated that the rebuilding of the warehouse will commence sometime in the middle of FY2024. What is the estimate of the rebuilding costs and how does Megachem plan to finance these costs? Can any claims be made under the Insurance?

We are in the process of assessing the tenders from various contractors and are unable to provide the estimated cost at this point in time. The rebuilding is likely to be funded from a mix of internal funds, insurance and bank loan. This property is also covered under our insurance.

The sales revenue decreased by 14.4% between FY2022 & FY2023. The decrease is recorded in all the geographic segments. What are the plans from the Management to turn around the business so that shareholders can enjoy dividend payout again?

The broad-based fall in sales is a reflection of weakness in the overall market conditions and lower chemical prices. We believe that our sound business model, strong base of customers and suppliers as well as our Asia-centric strategy will position us for future growth when market condition improves.

pg.7 Presentation FY2023 (Sales;- Sales in H2 2022 still higher than H1 2023 despite the fire incident in July), does this mean no profit lost due to the fire incident? If yes, what is the estimated profit lost pertaining to the fire incident?

Our immediate priority at the time of the fire was to minimise disruption of product supply to our customers. About 60-70% of the Company's inventory was stored in third party warehouses which enabled us to continue a major part of our business. As for the products which were destroyed during the fire, we took immediate steps to replenish them in accordance with customers' requirement so that our inventory level could return to the optimal level. The impact of the fire on our profit and loss statement was disclosed on page 24 of our FY2023 result announcement.

pg.10 Presentation FY2023 (Sales Breakdown), out of 11 Country, how many Country Operation is still at Negative NTA as of FY2023?

NTA of 2 of our subsidiaries are currently negative.

pg.13 Presentation FY2023 (Gross Profit;- Excluding the write-off of inventory, approximately S$5.9 million due to the fire, GP margin would be 23.1%), will this Profit Impact claimable via Insurance coverage?

Our insurance covers inventory loss. Our insurer has not informed us the amount of insurance compensation as they have not completed their evaluation.

pg.17 Presentation FY2023 (NPAT;- 1H & 2H), will this Profit Impact be claimable via Insurance coverage?

We will update the shareholders once our insurer has finalised its report and determined the insurance compensation.

pg.27 Presentation FY2023 (Dividend, Since IPO), such a record in FY2023 for zero dividend declared. What is the Management Comments;

Total Dividend since IPO 22.5 cts/share, average is 1.071 cts/year.
dividend yield at IPO price 28 cts. is 3.825%
dividend yield at 20 Feb'24 price 48.5 cts. is 2.208%

FY2023 is the first year we are not paying dividend to the shareholders. Considering the uncertain external environment and the capital expenditure required for rebuilding of the warehouse, we think it is prudent to conserve cash and be financially disciplined.

In regard to the Marina Claim on Seawater Contamination, what are the updates? Who is liable for this claim? How much is the claim amounting?

We have not received any claim from them so far.

Announcement dated September 13, 2023, Investment in JIOS Aerogel Holdings Pte Ltd for USD1 million. What is Megachem's projection for the next 3-5 years on return?

Due to price sensitivity of this information and the confidentiality obligation to the JIOS Aerogel Holdings Pte Ltd, we apologise for not being able to provide the projection.

Announcement dated October 11, 2022, Sustainability-Linked Financing of USD10 million from UOB,

is this amount fully drawn down?
area of used & amount?

This Sustainability-Linked financing is used for funding trade and working capital and is not fully drawn down. The amount of drawdown varies from time to time.

Dear Yvonne Loo, you wrote:

The fire incident resulted to a net impact of S$7.7 million, but only S$3.2 million was covered by the insurance, why was the remaining amount not covered?

Dear Daniel Tan, you wrote:

There is no dividend declared for FY2023 due to the rebuilding of the warehouse. Will you resume dividend in FY2024 if the company remains profitable?

We have been paying dividend every year since IPO except for FY2023 due to the fire incident. We have to take into consideration the factors such as profitability, cash position and future funding needs as well as our net gearing level before deciding when to resume dividend payment.

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