MegaChem Limited

Management Online Q&A With Investors

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

1. Dear Andrew Lim, you wrote:

Do you expect the sales in China to be affected in the long term due to COVID-19 disruption?

From our past experience in 2020 at the onset of the COVID-19 pandemic and more recently during the resurgence of the COVID-19 virus, the impact on our Group's sales has been minimal. In the first half of this year, the sales impact was felt mainly in April when our operations as well as that of some of our customers were not allowed to operate in China . Since operations have been allowed to resume, our sales have recovered.

2. Dear Brandon Chong, you wrote:

How is the company affected by the situation in Sri Lanka besides the impairment of doubtful trade receivables?.

Our sales and business exposure to Sri Lanka is minimal and all trade receivables owing from our Sri Lanka customers have been fully impaired in the first half of financial period ended 30 June 2022. Nonetheless, this has been partially repaid subsequently.

3. Dear Douglas Kwek, you wrote:

Interest rate has risen a lot, will the company borrow more or raise funds from shareholders to expand operations?

We entered the post-COVID-19 lockdown from a position of strength which has enabled us to take advantage of opportunities that arose from the economic recovery. Our sales in 2021 and in the first half of 2022 grew to levels higher than pre-COVID-19 and in tandem with that, our borrowings have increased. However, our gearing remains at fairly comfortable level. We are mindful that rapid increase in interest rates will lead to higher finance cost and will continue to be prudent in our financial management.

4. Dear Simon Goh, you wrote:

Do you have plans to manufacture other type of products for your Thailand associate as COVID-19 becomes endemic when demand of cleaning chemicals normalized or even fall due to oversupply?

Our associated company, Megachem (Thailand) Public Company Limited ("Megachem Thailand"), has been exploring opportunities to grow its business.

In early 2021, Megachem Thailand incorporated a joint venture known as Mega Fuji Graphite Limited ("Mega Fuji Graphite") in Thailand with an equity interest of 49%. The balance 51% equity interest is held by Fuji Graphite Works Co., Ltd ("Fuji Graphite"). The principal activities of Megachem Fuji Graphite consists of production and sales of expandable graphite. This joint venture seeks to derive synergistic value by tapping on Fuji Graphite's deep expertise in production of expandable graphite and our extensive distribution network in Asia.

In September 2021, Megachem Thailand purchased 55% of Green Leaf Chemical Co., Ltd ("GLC"). GLC is in the business of importing and distributing chemical materials for the manufacturing of personal care products such as cosmetics and nutraceuticals as well as providing service for clinical testing of such products. This acquisition will enhance the Group's product portfolio and deepen our coverage of the personal care industry thereby strengthening our market position.

Megachem Thailand will now channel more resources towards deriving synergy and integrating these businesses into our overall business strategy.

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