Hengyuan2017 PDF

59
TH
ANNUAL
GENERAL MEETING
Thursday Ballroom 2
24 May 2018 Sime Darby Convention Centre,
10:00 am Kuala Lumpur
Powering a Sustainable Future

It has been an empowering year for Hengyuan Refining Company
Berhad (HRC), driven by the hard work and commitment of our
team. Together we transformed challenges to strengths, and
worked hard to realise opportunities that presented itself as
market dynamics for the refining sector improved. Our new era
of operations as HRC commenced and continues on solid footing
as we build confidence in the market and strengthen business
relationships through increased engagement. We stayed true
to our strategies and delivered on set goals. Working as one,
the HRC team is on track to deliver on our refreshed vision of a
sustainable future that balances business benefits with those of
our people, our communities and our planet.
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REALISING OUR VISION Contents
04 Our Heritage
05 Corporate Information
06 General Business Principles
08 Financial Calendar
FINANCIAL reportS
09 Notice of 59 Annual General
th
70 Directors’ Report
Meeting
73 Statement by Directors
74 Statutory Declaration
A stronger TEAM 75 Independent Auditors’ Report
16 Board of Directors 80 Statement of

Comprehensive Income
17 Board of Directors’ Profiles
81 Statement of Financial
20 Management Team Position
21 Management Team’s Profile 82 Statement of Changes In
Equity
83 Statement of Cash Flows
on a positive track 85 Notes to the Financial
26 Chairman’s Statement Statements
30 Management Discussion &

Analysis
OTHER INFORMATION
125 Company Properties
anchored on responsibility 128 Analysis of Shareholdings
50 Sustainability Statement 131 Additional Corporate
Governance Disclosures
54 Corporate Governance
Overview Statement 136 Recurrent Related Party
Transactions
59 Board Audit Committee Report
Proxy Form
63 Statement on Risk
Management and Internal
Control
REALISING
OUR
VISION
RELIABILITY
Operational Availability
2017 2016
97.4% 82.1%
SAFETY QUALITY
ZERO
Million Exposure Hours Worked
without Lost Time Injury (LTI)
Major Customer
2017 2016 Complaints
2 million 1.34 million Product Quality Incidents (PQI):

1 minor PQI
+ 1 waivers
ZERO fatality record
since 1963
OUR
01 REALISING
OUR VISION
02
HERITAGE
03
04
About Hengyuan Refining Both the MTA and ATLAS II projects, which are expected to
be completed by the second half of 2018, are integral to
05 Company Berhad HRC’s contribution towards nation building as well as to fuel
Hengyuan Refining Company Berhad (“HRC” or “Company”) our Company’s growth in a dynamic and sustainable manner.
was incorporated in 1960 and listed on the Main Board of the
then Kuala Lumpur Stock Exchange (now known as the Main
Market of Bursa Securities) in 1962.
HRC’s refining operations began in 1963 with a single
crude distiller operating at a capacity of 20,000 barrels per
day. Following several key debottlenecking and growth
investments, today, our Company’s licensed capacity allows
the refinery to produce up to 156,000 barrels per day,
making us the second largest refinery in Malaysia. Operating
in Port Dickson, HRC boasts a team of more than 450
employees comprising our own and direct contract employees
excluding contractors and suppliers.
HRC entered into a new phase of growth after a shareholder
transition exercise on 22 December 2016 and the Company’s
name was changed from Shell Refining Company (Federation Site plot plan highlighting HRC’s major project sites in 2018.
of Malaya) Berhad to Hengyuan Refining Company Berhad.
For the financial year ended 2017, HRC registered a
commendable revenue of RM11.6 billion, a 38% increase About Shandong Hengyuan
from RM8.4 billion last year. This solid performance is a Petrochemical Company Limited
testament to our Company’s continuing efforts to enhance
Shandong Hengyuan Petrochemical Company Limited (SHPC)
operational reliability and capture commercial opportunities
was incorporated in 1997 as an independent oil refinery based
throughout our value chain.
in Linyi County, Dezhou City, Shandong Province, China.
Reflecting our vision to be the top performing and most SHPC operates an independent oil refinery with a production
admired refinery in Asia, we have approved Final Investment capacity of 3.5 million tonnes per year.
Decision (FID) for two (2) major upgrading projects
SHPC develops, produces, processes and markets diesel oil,
totalling USD160 million (approximately RM700 million*).
liquefied gas, propylene, propane, polypropylene, tert-butyl
The first project, EURO 4M Mogas, allows the refinery to alcohol, oil slurry, asphalt, tert-pentene, ethybenzene, and
produce EURO 4M Mogas economically and subsequently, other petroleum-related products. SHPC is one of the Top
EURO 5, both of which are required to meet specifications 100 Leading Enterprises in Shandong and one of the Top 500
mandated by the Malaysian authorities. Chinese Chemical Enterprises, achieving multiple accolades
The second project, ATLAS II, enables the continued and over the years. SHPC’s Chairman and General Manager, Mr
efficient operation of the top dome and catalyst separation Wang YouDe, was also named ‘One of Ten Outstanding
system of the Long Residue Catalytic Cracker Unit’s (LRCCU) Entrepreneurs in Shandong Province’ and received the
regenerator reactor, which will be reaching its end-of-life ‘Outstanding People Award of National Advancements in
parameters in 2018. Productivity’, amongst many other awards.
Work for ATLAS II will commence during the scheduled Since the successful acquisition of a 51% equity stake in HRC
major statutory turnaround (MTA) in August 2018. The MTA via Malaysia Hengyuan International Limited in December 2016,
is undertaken in compliance with the legislative requirements the synergy between the SHPC Group and our Company has
of the Department of Occupational Safety and Health been good. HRC’s business complements the SHPC Group’s
(DOSH) Malaysia and will focus on ensuring the refinery’s existing portfolio, which enables SHPC to establish a strategic
competitiveness, safety and reliability. presence in Southeast Asia. SHPC continues to support HRC
through their experience and technical expertise to ensure
4 that our Company continues to deliver high-performance
products and enhance profitability.
ANNUAL
REPORT
2017 * The actual amount may differ depending on the latest currency exchange rate.
HENGYUAN REFINING COMPANY BERHAD

CORPORATE
INFORMATION
Board of Directors Board Risk Share Registrar

Management Tricor Investor & Issuing House
Wang YouDe Committee Services Sdn Bhd
Chairman 1. Wang ZongQuan (Chair) Unit 32-01, Level 32, Tower A
2. Alan Hamzah Sendut Vertical Business Suite
Non-Independent Non-Executive Director
3. Liang Kok Siang Avenue 3, Bangsar South
No 8, Jalan Kerinchi
Wang ZongQuan 59200 Kuala Lumpur
Deputy Chairman Board Projects Review Tel : 03-2783 9299
Non-Independent Non-Executive Director Committee Fax : 03-2783 9222
1. Wang YouDe (Chair)
Lim Tau Kien

2. Wang ZongQuan AGM Help Desk
3. Lim Tau Kien
Senior Independent Non-Executive Director Tricor Customer Service Centre
Unit G-3, Ground Floor
Board Tender Vertical Podium
Alan Hamzah Sendut Committee Avenue 3, Bangsar South
Independent Non-Executive Director No 8, Jalan Kerinchi
1. Wang YouDe (Chair)
2. Wang ZongQuan 59200 Kuala Lumpur
Fauziah Hisham 3. Lim Tau Kien
Independent Non-Executive Director 4. Fauziah Hisham Stock Exchange Listing
Main Board of
Liang Kok Siang Secretaries Bursa Malaysia
Independent Non-Executive Director Lim Hooi Mooi Securities Berhad
MAICSA 0799764 Stock Name : HENGYUAN
Stock Code : 4324
Ong Wai Leng Sector : IND-PROD
MAICSA 7065544 (Industrial Products)
Board Audit Committee
1. Alan Hamzah Sendut (Chair)
Auditors Registered Office
2. Lim Tau Kien PricewaterhouseCoopers PLT Unit 30-01, Level 30, Tower A
3. Fauziah Hisham 1 Sentral, Jalan Rakyat Vertical Business Suite
4. Liang Kok Siang Kuala Lumpur Sentral Avenue 3, Bangsar South
P.O. Box 10192 No 8, Jalan Kerinchi
50706 Kuala Lumpur 59200 Kuala Lumpur
Board Nominating and Tel : 03-2173 1188 Tel : 03-2783 9191
Remuneration Committee Fax : 03-2173 1288 Fax : 03-2783 9111
1. Lim Tau Kien (Chair)
2. Wang YouDe
3. Fauziah Hisham
Business Address
Batu 1, Jalan Pantai
71000 Port Dickson
Negeri Sembilan
Tel : 06-647 1311 5
ANNUAL
REPORT
2017

GENERAL BUSINESS
01 REALISING
OUR VISION
02
PRINCIPLES
03
04
05
Principle 1
Economic
Long-term profitability is essential to achieve our business goals and to assure our continued growth.
It is a measure of both efficiency and the value customers place on HRC’s products and services.
It supplies the necessary corporate resources for the continuing investment that is required to develop and
produce future energy supplies to meet customer needs. Without profits and a strong financial foundation,
it would not be possible to fulfil our responsibilities. Criteria for investment and divestment decisions include
sustainable development considerations (economic, social and environmental) and an appraisal of the risks
of the investment.
Principle 2
Competition
HRC supports free enterprise. We seek to compete fairly and ethically and within the framework of
applicable competition laws; we will not prevent others from competing freely with us.
Principle 3
Business Integrity
HRC insists on honesty, integrity and fairness in all aspects of our business and expects the same in our
relationships with all those with whom we do business. The direct or indirect offer, payment, soliciting
or acceptance of bribes in any form is unacceptable. Facilitation payments are also bribes and must not
be made. Employees must avoid conflicts of interest between their private activities and their part in the
conduct of Company’s business. Employees are also required to declare any potential conflicts of interest.
All business transactions on behalf of HRC must be reflected accurately and fairly in the accounts of the
company in accordance with established policies and procedures and are subject to audit and disclosure.
Principle 4
Political Activities
A. Of company
HRC acts in a socially responsible manner within the laws of the countries in which we operate in pursuit
of our legitimate commercial objectives. HRC does not make payments to political parties, organisations
or their representatives. HRC does not take part in party politics. When dealing with government, HRC
has the right and the responsibility to make our position known on any matters which affect us, our
employees, our customers, our shareholders or local communities, in a manner which is in accordance
with our core values and our Business Principles.
B. Of employees
Where individuals wish to engage in activities in the community, including standing for election to public
office, they will be given the opportunity to do so where this is appropriate.
6
ANNUAL
REPORT
2017

Principle 5
Health, Safety, Security and Environment
HRC has a systematic approach to health, safety, security and environmental management in order to
achieve continuous performance improvement. To this end, we manage these matters as critical business
activities, set standards and targets for improvement, and measure, appraise and report performance
externally. We continually look for ways to reduce any negative environmental impact of our operations,
products and services.
Principle 6
Local Communities
HRC aims to be a good neighbour by continuously improving the ways in which we contribute directly
or indirectly to the general wellbeing of the communities within which we work. We manage the
social impact of our business activities carefully and work with others to enhance benefits to local
communities and to mitigate any negative impact as a result of our activities. In addition, HRC takes a
constructive interest in societal matters directly or indirectly related to our business.
Principle 7
Communication and Engagement
HRC recognises that regular dialogue and engagement with our stakeholders is essential. We are
committed to reporting our performance by providing full relevant information to legitimately interested
parties, subject to any overriding considerations of business confidentiality. In our interactions with
employees, business partners and local communities, we seek to listen and respond honestly and responsibly.
Principle 8
Compliance
We comply with all applicable laws and regulations of the countries in which we operate.
7
ANNUAL
REPORT
2017

01 REALISING
OUR VISION
02
03
04
05
Financial Calendar
24
2017
24 25 30
May May August November
Unaudited financial 58th Annual Unaudited financial Unaudited financial
results for the General Meeting results for the results for the
1 quarter ended
st
2 quarter ended
nd
3 quarter ended
rd
31 March 2017 30 June 2017 30 September 2017
27
2018 25 24
February April May
Unaudited financial Notice of 59th 59th Annual
results for the Annual General General Meeting
4 quarter ended
th
Meeting
8 31 December 2017
ANNUAL
REPORT
2017

NOTICE OF 59TH
ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Fifty-Ninth Annual General Meeting

(AGM) of Hengyuan Refining Company Berhad (Company) will be held at
Ballroom 2, Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, 60000
Kuala Lumpur on Thursday, 24 May 2018 at 10.00 a.m. for the following
purposes:
AGENDA
ORDINARY BUSINESS
1. To receive the Audited Financial Statements for the financial year ended 31 December
2017 and the Reports of the Directors and Auditors thereon.
[Please refer to Note (a)]
2. To re-elect Mr Wang ZongQuan who is retiring as a director in accordance with Article (Ordinary Resolution 1)
81(3) of the Constitution of the Company, and who being eligible, has offered himself for
re-election.
3. To re-elect the following Directors retiring in accordance with Article 81(9) of the
Constitution of the Company, and who being eligible, have offered themselves for
re-election:-
(i) Ms Lim Tau Kien (Ordinary Resolution 2)
(ii) Mr Alan Hamzah Sendut (Ordinary Resolution 3)
(iii) Puan Fauziah Hisham (Ordinary Resolution 4)
(iv) Mr Liang Kok Siang (Ordinary Resolution 5)
4. To re-appoint Messrs PricewaterhouseCoopers PLT as Auditors of the Company until the (Ordinary Resolution 6)
conclusion of the next Annual General Meeting and to authorise the Directors to fix their
remuneration.
SPECIAL BUSINESS
To consider and if thought fit, to pass the following resolutions:-
5. To approve payment of Non-Executive Directors’ fees and benefits of up to RM2,900,000 (Ordinary Resolution 7)
for the period from 1 January 2018 until 30 June 2019.
[Please refer to Note (b)]
6. AUTHORITY TO ALLOT AND ISSUE SHARES PURSUANT TO SECTIONS 75 AND 76 OF (Ordinary Resolution 8)
THE COMPANIES ACT 2016
“THAT pursuant to Sections 75 and 76 of the Companies Act 2016 and subject to
approvals from Bursa Malaysia Securities Berhad for the listing of and quotation for the
additional shares so issued and other relevant authorities, where approval is necessary,
authority be and is hereby given to the Directors to allot and issue shares in the Company
at any time upon such terms and conditions and for such purposes as the Directors may in
their absolute discretion deem fit provided always that the aggregate number of shares to
be issued shall not exceed 10% of the total number of issued shares of the Company for
the time being AND THAT such authority shall continue to be in force until the conclusion 9
of the next AGM of the Company.”
[Please refer to Note (c)] ANNUAL
REPORT
2017

REALISING
01
OUR VISION NOTICE OF 59TH
02
03
04
7. PROPOSED AUTHORITY FOR SHARE BUY-BACK (Ordinary Resolution 9)
05 “THAT subject to the Companies Act 2016, the Main Market Listing
Requirements of Bursa Malaysia Securities Berhad and the approval of all
relevant governmental and / or regulatory authorities, the Company be and is
hereby authorised to purchase such number of ordinary shares in the Company
as may be determined by the Board from time to time on Bursa Malaysia
Securities Berhad upon such terms and conditions as the Board may deem fit
and expedient in the interest of the Company provided that the aggregate
number of shares purchased pursuant to this resolution does not exceed 10%
of the total number of issued shares of the Company as quoted on Bursa
Malaysia Securities Berhad as at the time of purchase(s) and an amount not
exceeding the retained profits of the Company based on the latest audited
accounts of the Company for the financial year ended 31 December 2017, at
the time of purchase(s).
THAT such authority shall commence upon the passing of this resolution and
shall remain in force until the conclusion of the next AGM of the Company
unless earlier revoked or varied by ordinary resolution of the shareholders of
the Company in a general meeting.
THAT upon completion of the purchase by the Company of its own shares,
authority be and is hereby given to the Directors of the Company, in their
absolute discretion to deal with the shares so purchased in such manner as
permitted under Section 127 of the Companies Act 2016 and such authority
to deal with such shares shall continue to be valid until all such shares have
been dealt with by the Directors of the Company.
AND THAT authority be and is hereby given to the Directors of the Company
to take all such steps as are necessary (including executing all such documents
as may be required) and to enter into any agreements and arrangements with
any party or parties to implement, finalise and give full effect to the aforesaid
with full powers to assent to any conditions, modifications, variations and/or
amendments (if any) as may be imposed by the relevant authorities and to do
all such acts and things as the Directors may deem fit and expedient in the
interest of the Company.”
[Please refer to Note (d)]
8. PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE FOR RECURRENT (Ordinary Resolution 10)

RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE
“THAT subject to the Bursa Malaysia Securities Berhad Main Market Listing
Requirements, approval be and is hereby given for the Company to enter into
recurrent related party transactions of a revenue or trading nature with the
related parties as set out in Section 2.2.2 of the Circular to the Shareholders
dated 25 April 2018 which are necessary for day-to-day operations and are
carried out in the ordinary course of business on terms which are not more
favourable to the related parties than those generally available to the public
and are undertaken on arms’ length basis and not to the detriment of minority
10 shareholders.
ANNUAL
REPORT
2017

THAT the authority conferred by such mandate shall commence upon the passing of this
resolution and continue to be in full force until:
(a) the conclusion of the next AGM of the Company at which time this shareholders’
mandate will lapse, unless by a resolution passed at the next AGM, the mandate is
renewed;
(b) the expiration of the period within which the next AGM is required to be held
pursuant to Section 340(2) of the Companies Act 2016 (the Act) (but must not extend
to such extension as may be allowed pursuant to Section 340(4) of the Act); or
(c) revoked or varied by resolution passed by the shareholders in a general meeting;
whichever is the earlier;
AND THAT the Board of Directors be and is hereby authorised to complete and do all
such acts and things as it may consider expedient or necessary (including executing such
documents as may be required) to give effect to the transactions contemplated and/or
authorised by this mandate.”
9. To transact any other business of the Company of which due notice shall have been given.
The Ordinary Resolution 11 and Ordinary Resolution 12 have been requisitioned under
Section 322 and Section 323(2)(b) of the Companies Act 2016 by shareholders of the
Company.
The Ordinary Resolution 11 and Ordinary Resolution 12 set out in this Notice are not
endorsed by your Directors. Your Directors consider that Ordinary Resolution 11 and
Ordinary Resolution 12 are not in the best interests of the Company as a whole,
and recommend that you vote against Ordinary Resolution 11 and Ordinary
Resolution 12 for the reasons set out in the explanatory note (e).
REQUISITION TO MOVE AND VOTE ON RESOLUTIONS REQUIRING SPECIAL NOTICE
PURSUANT TO SECTION 322 OF THE COMPANIES ACT 2016
(i) To approve a final single tier dividend of 43.5 cents per share in respect of the financial (Ordinary Resolution 11)
year ended 31 December 2017.
(ii) To approve a formal dividend policy of allocating at least 15% of the Company’s profit (Ordinary Resolution 12)
after tax, excluding exceptional items to be distributed to its shareholders as dividend
payment.
[Please refer to Note (e)]
BY ORDER OF THE BOARD

Lim Hooi Mooi (MAICSA No. 0799764)
Ong Wai Leng (MAICSA No. 7065544)
Company Secretaries
Dated this 25th day of April, 2018
Kuala Lumpur
11
ANNUAL
REPORT
2017

REALISING
01
OUR VISION NOTICE OF 59TH
02
03
04
Notes:-
1. Pursuant to Section 334 of the Companies Act 2016, a member of a company shall be entitled to appoint another
05
person as his proxy to exercise all or any of his rights to attend, participate, speak and vote at a meeting of members
of the company. A member may appoint more than one (1) proxy in relation to a meeting, provided that the member
specifies the proportion of the member’s shareholdings to be represented by each proxy.
2. Where a Member of the Company is an exempt authorised nominee who holds ordinary shares in the Company for
multiple beneficial owners in one securities account (Omnibus Account), there is no limit to the number of proxies
which the exempt authorised nominee may appoint in respect of each Omnibus Account it holds.
3. Where an exempt nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by
each proxy must be specified in the instrument appointing the proxies.
4. A proxy need not be a Member of the Company. There shall be no restriction as to the qualification of the proxy.
5. The instrument appointing a proxy shall be in writing and signed by the appointor or by his attorney who is authorised
in writing. In the case of a corporation, the instrument appointing a proxy or proxies must be made under seal or
signed by an officer or an attorney duly authorised.
6. The signature to the instrument appointing a proxy or proxies executed outside Malaysia must be attested by a
solicitor, notary public, consul or magistrate.
7. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed or
notarised must be deposited at the Company’s Share Registrar’s Office situated at Unit 32-01, Level 32, Tower A,
Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur or its Customer Service
Centre at Unit G-3, Ground Floor, Vertical Podium, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala
Lumpur not less than 48 hours before the time for holding the AGM or adjourned meeting.
8. Only an originally signed proxy form deposited at Tricor Investor & Issuing House Services Sdn Bhd, will entitle
the proxy holder to attend and vote at the AGM. Photocopies of signed proxy form will not be accepted
for the purposes of the AGM. Additional proxy forms are available to Members upon request in writing to the Company.
9. The Date of Record of Depositors for the purpose of determining Members’ entitlement to attend, vote and speak at
the AGM is 17 May 2018.
Explanatory Notes:
a. Agenda No. 1
This item is meant for discussion only. The provisions of Section 340(1)(a) of the Companies Act 2016 require
that the audited financial statements and the Reports of the Directors and Auditors thereon be laid before the
Company at its AGM. As such, this agenda item is not a business which requires a resolution to be put to vote
by shareholders.
b. Ordinary Resolution No. 7
This resolution is to facilitate payment of Non-Executive Directors’ fees and benefits for the period from 1 January
2018 to 30 June 2019 (the due date for which the next AGM should be held). In the event the Non-Executive
Directors’ fees and benefits proposed are insufficient (e.g. due to more meetings or enlarged Board size), approval will
be sought at the next AGM for additional fees to meet the shortfall.
Directors’ benefits include allowances for travel and training programmes for Directors and other emoluments payable
to Directors and in determining the estimated total, the Board had considered various factors including the number
of meetings for the Board and Board Committees which covers the period from 1 January 2018 to 30 June 2019 (the
last date by which the next AGM should be held).
c. Ordinary Resolution No. 8
12
The proposed Resolution No. 8 is to provide flexibility to the Company to issue new securities without the need
to convene a separate general meeting or meetings to obtain its shareholders’ approval so as to avoid incurring
ANNUAL
additional cost and time. The purpose of this general mandate is for any fund-raising exercise or exercises including
REPORT
but not limited to further placement of shares for the purpose of funding current and / or future investment projects,
2017

working capital, repayment of bank borrowings, acquisitions and / or for issuance of shares as settlement of purchase consideration.
Should the mandate be exercised, the Directors will utilise the proceeds raised for working capital or such other applications they
may in their absolute discretion deem fit.
d. Ordinary Resolution No. 9
The proposed Resolution No. 9, if passed, will empower the Directors to purchase, on behalf of the Company, up to 10% of the
total number of issued shares of the Company by utilising the funds allocated which shall not exceed the retained profits of the
Company. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the
Company.
For further information, please refer to the Share Buy-Back Statement dated 25 April 2018 accompanying the Company’s Annual
Report for the financial year ended 31 December 2017.
e. Ordinary Resolutions No. 11 and 12
Statement by the Board
The Ordinary Resolutions No. 11 and 12 propose to approve a final single tier dividend of 43.5 cents per share in respect of the
financial year ended 31 December 2017 and a formal dividend policy of allocating at least 15% of the Company’s profit after tax,
excluding exceptional items to be distributed to its shareholders as dividend payment.
Pursuant to Sections 131 and 132 of the Companies Act 2016, the Board wishes to highlight that the distribution of dividend to
shareholders can only be made if the following conditions are met:
– the distribution of dividend can only be made out of the Company’s profits available if the Company is solvent;
– the Directors must authorise the distribution of dividend before it is made by the Company to its shareholders; and
– the distribution of dividend can only be made if the Directors are satisfied that the Company will be solvent and is able to pay
its debts as and when the debts become due within twelve months immediately after the distribution of dividend is made to
its shareholders.
Having considered the proposal and conducted a solvency test on the Company by taking into account the liquidity and cash
flow projection of the Company for a period of 12 months, the Board has formed the view that the Company may not be able
to satisfy the solvency position within 12 months following the proposed distribution of dividend if it is made to the shareholders
and hence, any distribution of dividend of such a quantum will be in contravention of Sections 131 and 132 of the Companies
Act 2016.
Recommendation
For the reasons stated above, the Board considers that the Ordinary Resolution 11 and Ordinary Resolution 12 are not in the best
interests of the Company as a whole, and therefore recommends that you vote against Ordinary Resolution 11 and Ordinary
Resolution 12.
STATEMENT ACCOMPANYING NOTICE OF

(PURSUANT TO PARAGRAPH 8.27(2) OF THE MAIN MARKET LISTING REQUIREMENTS OF
BURSA MALAYSIA SECURITIES BERHAD)
1. There is no person seeking election as director of the Company at this Annual General Meeting.
2. General mandate for issue of securities
Kindly refer to the Explanatory Notes on Special Business - Authority to Allot and Issue Shares Pursuant to Section 75 13
and 76 of the Companies Act 2016 under Explanatory Note (c) of the Notes to the Notice of the Fifty-Ninth Annual
General Meeting. ANNUAL
REPORT
2017

A
stronger
TEAM
18.2% 349
Workforce growth Employees in Total at
in 2017 March 2018
(excluding contract staff)
Achieved Better Board Composition and

Leaner Board with diverse experience
Better Female to
Male ratio
2 2
2016 2017
7 5
STRATEGIC PRIORITIES FOR 2017
01 Safe &
Reliable
Safeguard asset integrity
and deliver continuous
and sustainable QHSSE
& SP excellence
06 Grow 02 People
First
Build our
reputation Become an Employer of
Choice by delivering
a complete Employee
Value Proposition
05 $ Smart
Manage financial risk, 03 Sustainable
maximise refinery margins Future
and deliver structural Dedicate resources to achieve
cost reductions and maintain statutory
compliance as well as
operational efficiency
04 Rise
Together
Engage with stakeholders
closely and continuously to
form new networks
and relationships
BOARD OF
01
02 a stronger
TEAM DIRECTORS
03
04
As we enter a new era of growth, new directions
05
have been set and new changes made to create
a leaner and more engaged Board
04 02
06
01
03
05
01 Mr Wang YouDe 04 Mr Alan Hamzah Sendut

Chairman Independent Non-Executive Director
Non-Independent Non-Executive Director
05 Pn Fauziah Hisham
02 Mr Wang ZongQuan Independent Non-Executive Director
Deputy Chairman
Non-Independent Non-Executive Director 06 Mr Liang Kok Siang
Independent Non-Executive Director
03 Ms Lim Tau Kien
Senior Independent Non-Executive
Director
16
ANNUAL
REPORT
2017

BOARD OF DIRECTORS’
PROFILE
01 02
Wang YouDe Wang ZongQuan
Chairman Deputy Chairman
Non-Independent Non-Executive Director Non-Independent Non-Executive Director
Age 55 - Chinese, Male Age 55 - Chinese, Male
Date of appointment Date of appointment

22 December 2016 22 December 2016
Academic Qualification Academic Qualification
Master’s Degree in Business Management from Degree in Chemical Machinery, Chengdu Institute of
Nankai University, Tianjin, China. Water Conservancy and Hydropower Survey
and Design
Experience
• Chairman of the Board and General Manager, Experience
Shandong Hengyuan Petrochemical Company • Deputy General Manager, Shandong Hengyuan
Limited (2001-present) Petrochemical Company Limited (2002-present)
• Executive President of the China Chamber • 14 years of experience in refining, units
of Commerce for the Petroleum Industry installation and management departments of
(2017-present) the petrochemical business in Shandong
• Vice President of the China Chamber of Hengyuan Petrochemical Company Limited
Commerce for the Petroleum Industry including as Head of the Equipment Control
(2007-2017) department of an installation engineering
• Deputy Mayor, Linyi County (2001-2013) company within the Group (1988-2002)
• Representative of the 12th National People’s
Directorship in other Listed Issuers / Public
Congress of the People’s Republic of China (2013) Companies
Directorship in other Listed Issuers / Public None
Companies
Membership of Board Committees in HRC:
None
• Chair of Board Risk Management Committee
Membership of Board Committees in HRC: • Member of Board Projects Review Committee
• Chair of Board Projects Review Committee • Member of Board Tender Committee
• Chair of Board Tender Committee
• Member of Board Nominating and Remuneration
Committee
17
ANNUAL
REPORT
2017

01 BOARD OF DIRECTORS’ PROFILE
02 a stronger
TEAM
03
04
03 04
05
Lim Tau Kien Alan Hamzah Sendut
Senior Independent Non-Executive Director Independent Non-Executive Director
Age 62 - Malaysian, Female Age 58 - Malaysian, Male

25 May 2017 25 May 2017
• University of Glasgow Faculty of Law • Bachelor of Science (Honours) Degree in
• Member of the Institute of Chartered Accountancy and Computer Science, University of
Accountants of Scotland Wales, Aberystwyth, United Kingdom
• Member of the Malaysian Institute of Accountants • Qualified as a Member of the Institute of Chartered
Accountants in England and Wales (1986)
Experience
• Chartered Audit Committee Director, The Institute
• 25 years in Senior Management positions in the
of Internal Auditors Malaysia
Royal Dutch Shell Group, including as Country
• Member of the Malaysian Institute of Accountants
Chief Financial Officer, Finance Director and
Country Controller of Shell Companies of China Experience
• Chartered Accountant, Ernst and Young UK • 35 years of finance and business experience
• Federal Accountant, Ministry of Finance and across multiple industries
Prime Minister’s Department • 25 years in C-Suite/Senior Manager roles
• Vice President, Institute of Internal Auditors in companies involved in motor and heavy
Malaysia and Oil and Gas Financial Management equipment distribution, manufacturing,
Association Malaysia plantation, corporate strategy, corporate finance,
and mergers and acquisitions, including:
Companies – Group Finance Director, Tractors Malaysia
• Hong Leong Financial Group Berhad Holdings Berhad
• Malaysian Pacific Industries Berhad – Group Finance Director, Consolidated
• UEM Group Berhad Plantations Berhad
– Executive Vice President, Group Corporate
Membership of Board Committees in HRC: Finance, Strategy and Business Development,
• Chair of Board Nominating and Remuneration Sime Darby Berhad
Committee – Managing Director, Energy and Utilities
• Member of Board Audit Committee (Non China) Division, Sime Darby Berhad
• Member of Board Projects Review Committee • Served with PriceWaterhouse, London,
• Member of Board Tender Committee United Kingdom
Companies
Hong Leong Islamic Bank Berhad
• Chair of Board Audit Committee
• Member of Board Risk Management Committee
18
ANNUAL
REPORT
2017

05 06
Fauziah Hisham Liang Kok Siang
Independent Non-Executive Director Independent Non-Executive Director
Age 62 - Malaysian, Female Age 62 - Malaysian, Male

1 June 2017 1 June 2017
Associate member of the Institute of Chartered • Bachelor of Science (Honours) Degree in
Secretaries & Administrators, United Kingdom Chemistry, University of Malaya
Experience
• Member of Institut Kimia Malaysia
• Over 30 years of experience in the banking Experience
industry with various leadership roles, • 35 years with Shell Malaysia, including as:
including as: – Managing Director, Shell MDS (2016)
– Chairman of the Board of Directors, – Director and General Manager, Marketing and
J.P. Morgan Chase Bank Berhad Commercial, Shell MDS (2001-2016).
(October 2014-March 2018) – Founder and General Manager, BonusLink
– Country Group Representative & Executive (1997-2001)
Director, Institutional Banking, Australia & – Various commercial leadership positions in
New Zealand Banking Group Ltd the Retail, Lubricants and Chemicals businesses
– Managing Director, Strategic Client Coverage (1981-1997)
Group, Standard Chartered Bank Malaysia
Berhad
Companies
– Chief Executive Officer, J.P. Morgan Chase Bank
None
Berhad (2002-2006)
• Member of Board Audit Committee
Companies
• Member of Board Risk Management Committee
None
• Member of Board Audit Committee
• Member of Board Nominating and Remuneration
Committee
• Member of Board Tender Committee
NOTE: Unless otherwise stated, all Directors have no family relationship with any other Director and/or major 19
shareholder of our Company. They have no conflict of interest with our Company and have not been
charged with any offence within the past 10 years. ANNUAL
REPORT
2017

MANAGEMENT
01
02 a stronger
TEAM TEAM
03
04
05
07
05
08 06 04 11
10 03
09
01
02
01 David Keat 05 Johan bin Jainudin 09 Low Peng Peng

Chief Executive Officer Senior Manager, Technology Chief Assurance Officer
Senior Legal Counsel
02 Foo Ai Li 06 Zackaria bin Abdulah
Chief Financial Officer Manager, Quality and HSSE 10 Nur Izatul Fitri binti Hussein
Chief Human Capital Officer Chief Internal Auditor
07 Sudhakaran Ayyappan
03 Zulhazmi bin Mohamad Manager, Contracts and Surya Gunawan bin Suharman
11
Chief Projects Officer Procurement Manager, Corporate Affairs and
Government Relations
04 William Chen Jung Huei 08 Shalina binti Sabtu
Chief Commercial Officer Manager, Human Resource
20
ANNUAL
REPORT
2017

MANAGEMENT TEAM’S
PROFILE
01 David Keat 02 Foo Ai Li

Chief Executive Officer Chief Financial Officer (CFO)
Age 57 - New Zealander, Male Chief Human Capital Officer (CHCO)
Age 42 - Malaysian, Female
Appointed with effect from
March 2018 Appointed with effect from
February 2017 (CFO) / March 2018 (CHCO)
Experience
Experience
David holds Degrees in Chemical Engineering (Chemical
Ai Li holds a Degree in Accounting from Lincoln University,
and Materials) and Science (Chemistry) in University of
New Zealand and is a member of the Institute of
Auckland, New Zealand and has 33 years of experience
Chartered Accountants Australia and New Zealand and of
in the oil and gas industry.
the Malaysian Institute of Accountants.
He began his career with Shell in the New Zealand
She joined Shell in 2002 after three years of external audit
Refining Company Ltd in 1985. Since then, he has held
exposure, garnering invaluable experience in six years
a wide range of operational, technical, project and
of regional treasury and five year of statutory reporting,
executive roles in oil refining, gas and Gas to Liquids in
hydrocarbon management and information technology.
New Zealand, Oman, Abu Dhabi, the Netherlands and
She also held a global role overseeing 300 staff in Shell’s
Malaysia. He was Refining Manager in New Zealand, Vice
finance operations managing billing for the Royal Dutch
President Technical Support in a large sour gas plant in
Shell Group. Ai Li was the General Manager, Finance
Abu Dhabi and SMDS Operations Manager in Bintulu,
in Shell MDS Sdn Bhd overseeing the finance functions
Malaysia. Other significant roles have been in Operations,
for manufacturing and marketing until she rejoined the
Technology, IT, E&S and Major Projects.
Port Dickson refinery in 2016.
He was appointed as Chief Operation Officer on
November 2017 before he accepted his current role.
03 Zulhazmi bin Mohamad 04 William Chen Jung Huei

Chief Projects Officer Chief Commercial Officer
Age 47 - Malaysian, Male Age 45 - Taiwanese, Male

March 2018
April 2017
Experience
Experience
Zulhazmi holds a Bachelor of Electrical Engineering
William holds a Master’s in International Business
(Hons) from the University of Southampton, UK.
Management from Soochow University, Taiwan.
He joined the Company in 1994, and has held multiple
He began his career with Formosa Plastics Group, Taiwan
jobs in projects, engineering, and maintenance over
in 1999, and has over 18 years of commercial experience
the last 24 years, including the detailed design and
including being a crude oil trader, a trading manager of
construction of the state-of-the-art Long Residue Catalytic
naphtha supply and a general manager of petrochemical
Converter Unit (LRCCU) project. He was also involved in
feedstocks.
the design, construction, commissioning and start-up
of HIJAU complex for HRC in Port Dickson. He was the
HRC Engineering Senior Manager since 2011 and was
appointed as Chief Projects Officer in 2018.
In his current role, he will be overseeing several
major projects in HRC such as Project E4M Mogas, 21
Major Turnaround 2018 (MTA 2018), ATLAS II and the
Jetty expansion. ANNUAL
REPORT
2017

01 MANAGEMENT TEAM’S PROFILE
02 a stronger
TEAM
03
04
05 Johan bin Jainudin 06 Zackaria bin Abdulah

05 Senior Manager, Technology Manager, Quality and HSSE
Age 40 - Malaysian, Male Age 38 - Malaysian, Male
Appointed with effect from Appointed with effect from

February 2012 November 2012
Experience Experience
Johan has a Degree in Chemical Engineering Zackaria holds a Bachelor of Environmental
from University of Manchester Institute of Science Sciences & Management (Hons) from the
and Technology (UMIST), UK, and is a Chartered University of Malaya, and is a Certified ISO 14001
Engineer of the Institution of Chemical Engineers Lead Auditor by IRCA. He has over 15 years
and Engineering Council, UK. He has 19 years of of experience in the field of HSSE and Quality
experience in the oil and gas industry. Assurance, with expertise in HSSE regulatory
compliance, management systems, incident
He started his career with PETRONAS in 1999
investigation and emergency response.
and served 17 years in the refining industry with
various roles in technical services, production Prior to joining HRC, he was with Schlumberger,
and major project design and commissioning. He BP, Accenture and Dutch Lady in various capacities,
also held a strategic planning role for two years including senior roles at site level, corporate and
where he worked on group-level strategy projects. consulting.
07 Sudhakaran Ayyappan 08 Shalina binti Sabtu

Manager, Contracts and Procurement Manager, Human Resource
Age 54 - Malaysian, Male Age 45 - Malaysian, Female

June 2016
December 2015
Experience
Experience
Sudhakaran joined Shell in 1990 and began his
Shalina holds a Bachelor of Management
career as a Lab Analyst at the Luboil Blending Plant.
Information Systems (Hons) from Leeds University,
After six years, he was made Senior Operations
UK.
Superintendent and was part of the successful
LRCCU start-up team. In 2003, he served in the She joined Shell Malaysia in 1996 as an IT Executive.
Contracts and Procurement team overseeing the Her career in Human Resource began when she
implementation and improvement of turnaround took on the role as the Local Services Manager,
and maintenance contracts. In 2012, he was made responsible for setting up the HR Shared Services
Regional Procurement Manager for Equipment Centre in Kuala Lumpur, managing local services
Category overseeing Shell Manufacturing East Sites that covered remuneration and benefits for Shell
in Malaysia, Singapore and the Philippines before Malaysia. She subsequently joined Shell Malaysia’s
accepting his current role in 2016. Enhanced Oil Recovery Centre as the HR Account
Manager before accepting her current role.
22
ANNUAL
REPORT
2017

09 Low Peng Peng 10 Nur Izatul Fitri binti Hussein
Chief Assurance Officer (CAO) Chief Internal Auditor
Senior Legal Counsel (SLO) Age 35 - Malaysian, Female
Age 45 - Malaysian, Female
Appointed with effect from February 2018
July 2017 (SLO) / March 2018 (CAO)
Experience
Experience Izatul holds a Bachelor’s Degree in Accountancy (Hons)
Peng has a Master’s Degree in Commercial Law (LL.M) from Universiti Utara Malaysia. She is a Certified
from the University of Wales, College of Cardiff. She Internal Auditor and Chartered Accountant who has
has 20 years of experience as a practising lawyer and over 12 years of extensive and varied experience in
in-house legal counsel. internal and external audits, business process risk, and
management audits.
She was admitted as a member of the Honourable
Society of Lincoln’s Inn and was called to the English Bar She is a Chartered Member of the Institute of Internal
in 1996 and is a qualified advocate and solicitor of the Auditors Malaysia and member of the Malaysian Institute
High Court of Malaya. She worked as a litigator and due of Accountants. She began her career as a consultant
diligence lawyer early in her career, before joining Tanjong at Ernst & Young Advisory Services Sdn Bhd. She later
Public Limited Company, which was listed on the London joined several public listed companies from diverse
Stock Exchange and the Malaysian Stock Exchange, industries as an Internal Auditor and Risk Management
for nearly 10 years with her last position being Senior Officer, specialising in financial and operational audit,
Manager, Legal. Prior to joining HRC, she was the Legal corporate governance, enterprise risk management,
Counsel of Ranhill WorleyParsons Sdn Bhd, a joint venture project management review and fraud investigation.
company involved in the oil and gas business.
11 Surya Gunawan bin Suharman

Manager, Corporate Affairs and
Government Relations
Age 42 - Malaysian, Male
December 2017
Experience
Surya holds a Bachelor of Mass Communications (Hons.)
from the University Technology of MARA, Malaysia and
is a member of the Intelligent Transportation Society
of Malaysia. He is a communications professional and
corporate planner with over 18 years of experience in
corporate development, stakeholder management, and
strategic business planning.
He has served UEM Group Berhad, Puncak Niaga
Holdings Berhad, DRB-Hicom Group Berhad and CLIQ
Energy Berhad in various capacities such as Senior
Manager, General Manager and Head of Corporate
Communications. Prior to his appointment with HRC,
he was Director of Communications for Sedania
23
Innovator Berhad.
ANNUAL
REPORT
2017

on a
positive
track
Shareholders’ Funds Sales Volume
+77% +5%
Energy Intensity
Earnings Per Share Index Improvement
+177% +2%
Production Volume
2017 2016
39.7 mln/bbl 37.5 mln/bbl
PRODUCT SLATE
5% LPG
2% Propylene
2% Light Naphtha
PRODUCT
31% Gasoline
SLATE
YIELD 7% Avation Fuel
45% Diesel
8% Fuel Oil Component

CHAIRMAN’S
01
02
STATEMENT
03 on a positive
track
04
05
Wang YouDe
Chairman
”2017 was a very positive year

for HRC, with higher production
numbers and improved plant
reliability. Our continuous
improvement on safety also
26
enabled us to reach 2 million
ANNUAL man hours without Lost Time
REPORT Injury at the end of 2017.”
2017

Building a Stronger Team
Dear Shareholders, Notable initiatives include the implementation
of HRC’s margins optimisation programmes, the
execution of projects for the future sustainability of
2017 has been a monumental HRC and loan refinancing with improved terms for
year for HRC, surpassing the the Company’s working capital requirements.
To all our shareholders, I humbly thank you for
previous year’s performance with supporting HRC. We are also pleased to assure our
an improved yield of close to stakeholders of our continuing efforts to meet our
economic, environmental and social sustainability
40 million barrels and a profit after goals, whilst optimising our financial position to
achieve a sound long-term return on investment.
tax of RM930 million.
I would like to share below some of HRC’s
experiences and achievements in 2017. Overall,
Following the transition in December we focused on employee retention, talent
2016, the Company’s indirect majority management, safe and reliable operations and
production improvement. We also worked tirelessly
shareholder, Shandong Hengyuan on our projects.
Petrochemical Company Limited

SAFETY AND OPERATIONAL
(SHPC), has provided critical support PERFORMANCE
and guidance to HRC through its In the plant operations, we continued our rigorous
focus on Health, Safety, Security and Environment
local entity to complement the (HSSE) compliance and the improvement of
operational reliability and financial resilience to
oversight and governance of the capture good refining margins. We took time to
enhance employee awareness and ownership of
Board of Directors. responsibility and to monitor adherence to safety
policies, standards and procedures. Particular
attention was paid to highlighting potential
incidents and using these as learning experiences
PRODUCTION & RELIABILITY for employees and contractors as part of our
97.4 % Operational Availability strategic preventive approach.
41.1million margin & financial performance

barrels Sales Volume
27
return on investment ANNUAL
310sen Earnings Per Share REPORT
2017

01 CHAIRMAN’S STATEMENT
02
03 on a positive
track
04
Through the reliability programmes implemented I would like to take this opportunity to record my
previously, HRC was able to achieve stable production, appreciation of HRC employees who have worked
05 which enabled us to deliver on our sales volume with much determination and dedication to sustain
commitment and more importantly, take advantage operational and production quality. These great
of market-driven spikes in refining margins during efforts have enabled HRC to deliver an uninterrupted
Quarter 3, 2017. Steps are currently being taken to supply of petroleum products to Malaysia and
improve our success further in this area. We were beyond. A more detailed analysis of our performance
also able to achieve substantial plant reliability in 2017 is elaborated in the Management Discussion
improvement by reducing our Unplanned Down Time and Analysis (MD&A) section of our annual report.
(UPDT) from 7.2% in 2016 to 2.3% in 2017 as a result
Our human resource team continues to focus on
of our continued emphasis on process safety, plant
talent management to help our employees realise and
reliability and product optimisation.
grow their potential to meet complementing objectives
of both individual and Company. In 2017, HRC’s
OUR PEOPLE, OUR ASSETS Learning and Development Programme was enhanced
During the transition period, there were concerns on to ensure that employees are able to gain access to
employment certainty and changes in remuneration. relevant knowledge, training and experience. All of
I am pleased to share that in addition to addressing these resulted in very credible performance results that
and alleviating these concerns, more than 30 new met our operational and financial Key Performance
employees were recruited, mainly in the finance, human Indicators (KPIs).
resource, contracting and procurement and engineering
departments, to further strengthen these functions. FUTURE SUSTAINABILITY
During the year, we took greater strides towards
ensuring the future sustainability of HRC. The Board
approved the Final Investment Decision for two major
projects, namely Euro 4M Mogas and Atlas II. Both
projects, described in further detail in our MD&A, are
necessary for HRC to produce products profitably in
the years to come
The progress of the Euro 4M Mogas Project is
monitored closely with weekly and monthly updates
to ensure that challenges are dealt with swiftly.
We have also been preparing for the 2018 Major
Turnaround and I am pleased to report that its
planning and execution and the associated project
tie-in works are on track and will be a major focus
area for the Company in 2018.
Other projects being looked into include Euro 5 and
the Clean Air Regulation which are necessary to meet
future regulatory requirements.
HRC staff conducting safety checks . DIVIDEND POLICY

2017’s outstanding financial performance has enabled
HRC to reduce its external loans in January 2018 and
28 to prepare for the large cash requirements of the
projects mentioned above.
ANNUAL
REPORT
2017

HRC Marine Captain overseeing Jetty activities.
The Board decided to approve the interim dividend of LOOKING AHEAD

RM0.02 per share after much consideration and deliberation
of all information available. The due diligence process We expect volatile refining margins in the year ahead.
included analysing the utilisation of 2017’s cash from While our hedging policies are aimed at reducing refining
operations, which was partially absorbed into working margins volatility to a certain extent, we hope to counteract
capital requirements due to the increase of oil prices. The losses and gain momentum by leveraging on the experiences
positive cash generated was also used to make a partial of SHPC and our strategic partners.
repayment of our existing term loans in January 2018, thus I am grateful to our Board, the Management Team and
lowering HRC’s interest expense. Further, cash balances employees, who are the backbone of HRC, for their steadfast
were ringfenced to secure HRC’s longer-term future, as dedication, loyalty and trust. Our Integrated People Plan
significant capital expenditure will be required to implement continues to support our human capital development so
projects for statutory compliance on product quality that we are well prepared for the projects and challenges
The Board also considered whether the solvency test and ahead. We will also proceed with our plans to implement
dividend distribution requirements set by the Companies forward-looking strategies, progress critical projects and
Act 2016 were met. To fulfil the requirements, HRC has to search for opportunities to grow our business.
ensure that its operational cash requirements for the next The support of our stakeholders, including our shareholders,
12 months after payment of the dividend, including capital investors, business partners, regulators, federal and local
expenditure, operational expenses, working capital and authorities, neighbours and communities are essential to our
loan repayment obligations, are sufficient. Additionally, the ongoing improvement and sustainability.
Board took cognisance of the uncertainty of oil prices and
We are confident that the combination of our history,
refinery margins, which have a high impact on our solvency
experience and track record, together with the full
and cash position.
commitment of HRC’s Board, Management Team and
Given these factors and the Board’s duty to ensure the employees, will allow us to advance unwaveringly in our
solvency of the Company as well as HRC’s intention to achieve journey forward.
sustainable long-term return to shareholders, the Board
decided on an interim dividend of RM0.02 per share for the
financial year ended 31 December 2017. The Company has Warm regards,
not issued a dividend for a number of years and we see this Wang YouDe
as a declaration in good faith whilst safeguarding the cash Chairman
requirements of the Company.
The Board will continue to uphold its responsibility to protect
the Company and its stakeholders in its consideration of 29
future dividends.
ANNUAL
REPORT
2017

MANAGEMENT
01
02
DISCUSSION & ANALYSIS
03 on a positive
track
04
VISION
05
To be the top performing and most admired refinery in Asia
MISSION
To improve shareholder value by:
• Manufacturing and supplying oil products and services that satisfy the needs of our
customers
• Constantly achieving operational excellence
• Conducting our business in a safe, environmentally sustainable and economically
optimum manner
• Employing a diverse, innovative and results oriented team, motivated to deliver
excellence
OBJECTIVES
We are committed to deliver sustainable excellence in business performance by focusing
on the following:
• Benefiting our shareholders;
• Realising the potential of our people;
• Meeting our customer requirements;
• Maximising refinery margins;
• Safeguarding asset integrity;
• Delivering structural cost reductions;
• Sustaining a robust management system; and
• Delivering continuous sustainable Health, Safety, Security and Environmental
excellence.
30
ANNUAL
REPORT
2017

OVERVIEW OF THE COMPANY’S BUSINESS AND OPERATIONS
1.1 Business and Operations
Hengyuan Refining Company Berhad’s oil refinery complex located in Port Dickson, Negeri Sembilan, is licensed for a
production capacity of 156,000 barrels per day. The main operating units in the refinery complex consist of two crude
distillers, a long residue catalytic cracker unit (LRCCU), two naphtha treaters and a Merox plant, one reformer and a
gasoil treatment plant.
5% - LPG
2% - Propylene
Naphtha
2% - Light Naphtha
Treaters
1&2
31% - Gasoline
Reformers
7% - Avation Fuel
Crude Tanks Merox
Crude Distillers 45% - Diesel

1&2
Gasoil Treater
(Hijau)
Long Residue
Catalytic
8% - Fuel Oil
Cracker Unit (LRCCU)
Component
The operating units produce a comprehensive range petroleum products. This POA commenced in 2016.
of petroleum products that include liquefied petroleum We have also been developing new customers and
gas (LPG), gasoline, diesel, aviation fuel, fuel oil supply channels, both within Malaysia and in the wider
components, and chemical feedstock (such as light South East Asia region. Further expansion is focused
naphtha and propylene). on the best commercial opportunities and financial
viability. Our strategy in this regard is to leverage on
HRC’s principal market is the domestic market, where over
competitive bidding for long-term deals based on
90% (by volume) of the company’s refined products are
published benchmark pricing.
sold in Malaysia. The remaining 10% of our production,
including naphtalene and propylene, are exported Our crude oil supply is partly covered by a 5-year crude
elsewhere in Asia. oil supply agreement (COSA) with Shell International
Eastern Trading Company (SIETCO), signed in 2016.
We focus on servicing the domestic market, mainly
through our 10-year Product Offtake Agreement (POA)
with Shell Malaysia Trading Sdn Bhd for gasoline, diesel
and aviation fuel, and Shell Timur Sdn Bhd for refined
31
ANNUAL
REPORT
2017

01 MANAGEMENT DISCUSSION & ANALYSIS
02
03 on a positive
track
04
Sources of Crude
05
11%
Russia
Our sources of crude supply include
Malaysia, Russia, Far East, Middle East
57% and Africa.
Far East,
We have also focused on building more
Middle East
and Africa relationships with the crude supply
network in the region and globally to
benefit from competitive pricing. To
complement these diversification efforts,
HRC has implemented various trade
instruments with financial institutions.
32%
Malaysia
1.2 Objectives & Strategies

Our strategic priorities for the Company remain unchanged:
01 Safe &
Reliable
06 Grow 02 People
First
Our
Strategic
Priorities
05 $ Smart
03 Sustainable
Future
04 Rise
Together
32
These priorities drive our business and operations at all levels to ensure safe and reliable performance,
ANNUAL whilst enabling HRC to embrace new opportunities and grow sustainably. The refinery’s quarterly goals
REPORT are segmented across these six (6) pillars.
2017

in which we operate. We also care for our neighbouring
Safe & Reliable communities and cultivate strong relationships with
them through corporate social responsibility activities
Reliability, process and personal safety remain a strong focus revolving around the themes of environment, safety,
for the Company. education and society. We build strong corporate
foundations across our key sustainability areas that are
HRC’s Reliability Management Framework is the foundation the basis of our resilience, to become a refiner of choice
for ensuring the integrity of our assets and optimising our in the region.
production performance. We instill a ‘reliability mindset’
to promote individual ownership and excellence at every
Rise Together
phase of asset management. We continuously maintain
and improve our high Quality, Health, Safety, Security and
We recognise the influence of our stakeholders in our
Environment (QHSSE) standards, policies and practices.
success. As such, we work closely with government agencies,
Process and personal safety are key components to ensure communities, customers and suppliers, and continuously
safe and responsible operations. We build on Health, engage them to create new networks and relationships.
Security, Safety, Environment and Social Performance (HSSE Events such as HRC’s Euro 4M Mogas Project ground
& SP) Commitment and Policy to improve and develop breaking ceremony in 2017 included the participation of our
safety procedures and training programmes. stakeholders from the community, our regulators and our
In line with our strong emphasis on safety and reliability, business partners.
we continue our initiatives to develop a Goal Zero (Zero
injuries, Zero significant incidents and Zero leaks) culture. $ Smart
We also maintain our Learning From Incident (LFI) sessions,
which enable us to strengthen the awareness of our people $ Smart helps us manage our financial risks. We have
on safety and learn from past experience. reduced foreign exchange and hydrocarbon risks exposure,
and achieved margin protection through the establishment
This strategic priority enables us to safeguard asset integrity
of our hedging policies in 2017. We have also negotiated
and deliver continuous and sustainable QHSSE excellence.
service and materials contracts on market competitive
prices, leveraging on longer term volume and cost modelling
People first leading to cost optimisation.
Our employees are instrumental to the success of the This strategic priority enables the Company to maximise
Company, and we strive to become an employer of choice in refinery margins and deliver structural cost reductions.
our sector in the Malaysian market.
Grow
At HRC, we seek to enable our employees to reach their
full potential by providing them with a platform through
As an independent refiner, we aspire to set our mark and
our Integrated People Plan (IPP), which has been revamped
grow our reputation in the market.
and is continuously reviewed to deliver a complete
Employee Value Proposition. The diversification of our crude oil supply and customer
base is necessary to build resilience in order to face sector
Sustainable future challenges. The expansion of our product portfolio will
enable us to meet customers’ requirements.
To secure consistent economic performance and business Other potential opportunities for growth include product
success, HRC strives to achieve product excellence and trading, leveraging Asia trade pacts and diversifying our
operational efficiency through the implementation of business through customer and product development.
stringent QHSSE standards, improved reliability practices and
talent management, while safeguarding the environment
33
ANNUAL
REPORT
2017

02
03 on a positive
track
04
05
HRC staff conducting routine operational inspection at site.
Influence of External Factors The year has also been a positive and constructive
one, during which HRC managed to improve plant
In 2017, HRC’s operations were affected to some extent
performance exponentially by capitalising on its
by a number of external factors and trends.
experience through LFI sessions for safety improvements
As expected, the fluctuations in crude oil price and and pursuing strict compliance of environmental
climatic condition affected the dynamics of supply and regulations. The recruitment of new personnel
demand. Crude oil prices in 2017 continued to rise, to undertake responsibilities in senior functional
underpinned by the decisions of OPEC and several other positions has also enabled the Company to finalise
oil-producing countries to reduce crude oil production in the transition and ensure that critical key functions
order to ease the glut in global oil supply. The prospects are covered under our strengthened organisation.
of stronger crude oil demand and geopolitical tensions in
2.1 Key Performance Indicators (KPIs)
the Middle East also supported this increase in oil prices.
Our KPIs assess the performance of the Company
Brent crude price per barrel increased from USD43.60
across all aspects of operations in a balanced
in 2016 to USD53.30 in 2017. Additionally, a fire in a
Business Performance Scorecard. Non-financial
large oil refinery in the Netherlands in July 2017 and
indicators include measures of production and
a hurricane in the United States of America in
reliability, safety, and sustainability. Financial
September 2017 caused a brief shut-down of refineries
indicators cover margin, financial performance
and off-shore facilities in those countries, affecting
and return on investment.
global product prices. HRC was able to capitalise
high refining margins during that period to capture Additional KPIs tied to sustainability are
considerable value. The margins returned to normal elaborated in our Sustainability Report 2017
levels in Quarter 4, 2017. which is available on our website.
OPERATIONS AND PERFORMANCE

34 The year was focused on continuing our operations
to improve production and reliability, as well as to
ANNUAL prepare for current and future projects, that are
REPORT important for our sustainability.
2017

2017 Performance Analysis
2017 2016 2015 2014 2013
Million Exposure Hours Worked 2.0 1.3 1.9 1.6 1.3
Lost Time Injuries (LTI) 0 1 1 1 0

Safety
Process Safety Incidents 1 1 0 0 0
First Aid Cases (FAC) 5 1 5 4 4
Operational Availability 97.4% 82.1% 86.1% 94.8% 97.70%

Production &
Reliability Unplanned Downtime (UPDT) 2.3% 7.2% 4.5% 5.1% 2.2%
Production Volume (million bbl) 39.7 37.5 33.9 37.9 37.1
Refining Margin (FIFO) (USD/bbl) 8.4 5.5 6.1 (2.3) 1.9
Sales Volume (‘000 bbl) 41,104 39,049 36,325 40,462 40,033
Margin & Revenue (RM million) 11,583 8,365 9,080 14,263 14,696
Financial
Performance Profit After Tax (RM million) 930 335 352 (1,189) (156)
Cash Generated From/(Used in)

Operations (RM million) 477 (5) 783 116 (252)
Quick Ratio 2.5 1.8 0.7 0.5 0.8
Shareholders’ Funds (RM million) 1,789 1,010 677 325 1,513

Return on
Earnings/(Loss) Per Share (sen) 310 112 117 (396) (52)
Investment
Return on Average Capital
Employed (times) 0.37 0.2 0.3 (0.6) (0.1)
Energy Intensity Index (EII) 111.5 114.0 113.5 112.2 116.4
Effluents – Average Oil in

Water Concentration (avg mg/l) 1.2 0.9 1.0 1.2 2.0
Sustainable
Development Waste Management
• Sludge (MT) 663 624 957 805 616
• Spent Oil Water Emulsion (MT) 1,794 1,835 2,084 2,548 1,242
Public Complaints 5 2 5 5 1
35
ANNUAL
REPORT
2017

02
03 on a positive
track
04
2.2 Review of Our Operations
Personal safety
05
Quality, Health, Safety, Security In terms of personal safety, the company emphasised
and Environment (QHSSE) enhancing behavioural safety culture, an essential
element of our corporate culture, through LFI Sessions
QHSSE remains a strong focus for the Company
and dedicated QHSSE programmes.
and a core activity in our business. We increased
the budget allocated to the QHSSE Department We are proud to have reached, at the end of 2017,
by more than 5% compared to 2016, in order to 2-million man-hours without a Lost Time Injury (LTI).
support the initiatives, programmes and training This was celebrated with a special event held with
necessary to improve and maintain our high our Board, Management, employees and contract
QHSSE standards. staff in early 2018. We have also successfully
maintained our zero work-related fatality record
We observed a positive increase in the reporting
since the beginning of our operations in 1963.
of potential incidents which exceeded the 2017
target. This increase means that our employees However, the number of First Aid Cases has increased
and contractors are constantly on the lookout from one (1) in 2016 to five (5) in 2017. These cases
for minor or potential incidents to prevent the involved minor injuries and highlighted the need for
occurrence of major safety events, indicating the our employees and contractors to remain aware of
high levels of commitment everyone working their environment and potential risks while performing
at site has towards Goal Zero. their duties. We have acknowledged this and have
taken these incidents into account to improve our
HRC undergoes annual ISO certification and
working environment and safety procedures. Targetted
surveillance audit by SIRIM Berhad to assess the
QHSSE campaigns, such as the ’Line of fire’ and
robustness of our management system for both
situational awareness stand downs with employees
environment and occupational health and safety.
and contract partners, were also held.
For year ending 2017, HRC was successfully
recertified for ISO 9001: 2015, ISO 14001: Our contractor reported an off-site LTI incident during
2015 and OHSAS 18001:2015, with zero Non- the Single Buoy Mooring (SBM) manoeuvre. Following
Conformance (NC) findings. the incident, all tug operations were immediately
stopped, and a safety stand down was held for all
tugboat crew members and jetty contractors who
were identified to be exposed to the same risk during
their work.
Following investigations, these safety incidents
became learning opportunities to reflect on risk
assessment and implement mitigation measures
to avoid re-occurrence, as well as raise awareness
among the employees and contractors. From the
multiple group discussions, a set of routine activities
were identified for risk re-assessment to ensure robust
controls and mitigations are in place.
All incidents above have been investigated and the
Ship berthing at HRC’s jetty for product off-take & off-load. outcomes were shared to all through Causal Learning
(CL) & LFI processes.
36
ANNUAL
REPORT
2017

System check by HRC Electrical Engineer.
Process Safety Detailed information about QHSSE management and

performance can be found in the integrated Sustainability
The number of American Petroleum Institute (API) Tier 1 report section of the Sustainability Report 2017.
process safety incidents has remained the same in 2017
as compared to 2016, highlighting the fact that we need Product Quality (PQ)
to continue to address process safety by improving our
procedures and enhancing training to embed in our people a
No major critical issue regarding PQ was reported in 2017.
process safety culture.
The PQ team focused on tackling the key threat to the site’s
2017 recorded one Process Safety Event (PSE), classified
PQ Giveaway such as Mogas RVP and RON through data
as API Tier 1 PSE. It was caused by a leak in an insulated
collection, multiple site walks, and the adaptation of the
hydrogen integration line, which resulted in the release of
“follow the molecules” approach to identify gaps and areas
hydrogen to the atmosphere. The system was isolated,
for improvements. Producing an after-loading report was
depressurised and barricaded immediately. Preliminary
necessary or all products delivered via Jetty, in order to ensure
findings by Inspection team have confirmed a localised
that they are fit for use prior to leaving HRC.
external pipe Corrosion Under Insulation (CUI) as the
primary cause of the leak. The evaluation on the site’s CUI However, two (2) minor incidents impacted our products
Inspection Programme was performed and a comprehensive and delivery: one (1) minor PQ incident and one (1) product
investigation completed to prevent similar incidents. quality waiver.
We also recorded two Loss of Primary Containment (LOPC) The minor PQ incident was a contamination incident which
in Quarter 1, 2017. The first LOPC of 200kg resulted from occurred during delivery in Quarter 1 of 2017. The incident
the overflow of molten sulphur from a sulphur lock during was investigated and an agreement found with the client to
start-up of the Sulphur Recovery Unit (SRU) after a unit proceed with delivery.
trip. The second LOPC resulted from the release of Liquified The PQ waiver was caused by our inability to transfer the
Petroleum Gas (LPG) to the atmosphere, caused by a leak in required product in a timely manner due to an issue at the
the Crude Distillation Unit 2 (CD 2). The total LPG released plant, resulting in a short duration customer stock-out. This
was estimated at 15kg. For both incidents, all investigations was solved by the client agreeing a waiver of some of the
have been completed and shared in the site’s weekly product specifications.
incident review session. The implementation of agreed
actions is in progress and followed-through. All obligations under the Product Offtake Agreement (POA)
were fulfilled and all contracted volumes were delivered,
Our own Fire, Rescue and Medical Team (FiRM) team except for the said incident above. Thus we achieved over
responded promptly to all calls in 2017. Several drills and 99% success in on-time deliveries and quality requirements.
exercises were conducted to strengthen the response
coordination among the Emergency Management Team 37
(EMT), FiRM Team, Operations and external stakeholders.
The learnings from the drills were used to revise and update ANNUAL
the operations Pre-Incident Plan (PIP). REPORT
2017

02
03 on a positive
track
04
Prior to the Major Turnaround 2018 (MTA), we
Production & Reliability have been actively conducting routine maintenance
05 on aging equipment. The aging equipment will
either be upgraded or replaced. Improvements in
Reliability remained a top priority in 2017, which we
baseline equipment reliability, “Mean Time” between
successfully improved, exceeding our 2017 targets
maintenance of rotating equipment and better
for Production and Reliability KPI.
prioritisation of Work Orders have contributed to
A significant achievement was the substantial higher reliability.
improvement in reliability with the unplanned
It is noteworthy that production output was better
downtime percentage (UPDT) decreasing from 7.2% in
than planned in 2017, resulting in a yield of almost
2016 to 2.3% in 2017. The average plant utilisation
40 million barrels.
was 86.82% in 2017. The strong reliability of the
plant supported the delivery of high-value products The improved reliability performance on reformer
to clients at a good price. and LRCCU is the main contributing factor driving
the gasoline production. The switch of making
This was achieved through the extensive efforts we
gasoline U95 to Mogas components (CCG and
placed in 2017 on:
Platformate) was driven by product economics,
• Internal Learning sessions from past issues and unsupportive blending economics on MTBE and
preventing future issues; Light Naphtha into gasoline pool due to the strong
naphtha price.
• Identifying and eliminating possible causes of
incidents through Proactive Threats Identification Kerosene/Jet production is supported by solid
(PTIE) and Asset Integrity Assessment (AIA); and performance of Kerosene Treating unit in Quarter 1
2017. However, production was later impacted by
• Elimination of threats to reliability.
several events, including the planned outage on Crude
Nevertheless, plant reliability was affected by the Distiller 1 and Kerosene Treating units in May 2017.
Long-Residue Catalytic Cracker Unit’s (LRCCU)
Gasoil production improved due to higher crude
Wet Gas Compressor (WGC), LRCCU’s heat
processing, positive regrade, and improvement of
exchanger performance and Platformer 2’s furnace
global oil cracks.
fouling. Identification of the causes and relevant
mitigation measures were swiftly undertaken to LPG and propylene production were boosted thanks to
minimise the disruption to the plant. Apart from higher intake and better conversion at LRCCU.
process unit limitations and equipment issues, the
HRC is confident that the use of well-established
UPDT was also affected by multiple ship delays
processes inherited from our many years of refining
throughout Quarter 1 and Quarter 2, 2017.
operations, combined with on-going improvements,
The performance of these late shipments have been
will continue to ensure good business performance.
actively managed with our respective counterparties
to ensure improvement in this area.
38
ANNUAL
REPORT
2017

HRC Fire,Rescue and Medical Team (FiRM) fire extinguisher handling demonstration.
Environment Factors hampering energy efficiency were lower overall

refinery utilisation and lower LRCCU coke yield and also the
Managing the refinery’s energy consumption, effluents inefficiency of dual-fired furnaces and boilers in PU1.
and waste are key to minimising negative impacts on the Average fuel gas flaring in 2017 was 47.13 tonnes per
environment and business sustainability. month, significantly lower than the average in 2016 which
was 110.98 tonnes per month.
Energy Intensity Index (EII)
Waste Management
Our energy consumption affects both our carbon footprint
and our operating costs. The EII allows us to measure our HRC is committed to manage our waste responsibly and
performance in terms of energy use. In 2017, our energy consistently looks for ways to reduce, recycle or recover
efficiency performance was the best over the past 5 years, generated waste.
with an EII of 111.5, representing a 12.4% improvement
Our sludge increased by 6.2% while our spent oil water
compared to the year 2012.
emulsion decreased by 2.2% compared to 2016.
The tactics that enabled us to optimise our energy included,
Detailed information about environmental management
inter alia, minimising fuel gas flaring, hunting down sources
and performance can be found in our Sustainability Report
of fugitive flaring, optimising high pressure-medium pressure
2017.
steam let down via turbine extraction, conducting test run
to increase high pressure steam header pressure for better
turbine efficiency and developing turbine-motor decision
tree. Other focus areas for energy improvement covered
39
online cleaning of air fin coolers, lower deaerator pressure
ANNUAL
study, and implementation of turbine-motor decision tree to
REPORT
reduce steam let down.
2017

02
03 on a positive
track
04
People Projects
05
HRC has more than 450 employees as of March 2018. Major Projects, critical for HRC’s sustainable operations,
In 2017, the headcount of our permanent employees initiated in 2017 and to be implemented in 2018-2019
was increased to support our growing operations. include:
Amongst others, 25 contract positions were converted
• Atlas II to replace the top dome of the LRCCU in
into permanent positions and early hiring was done
order to prolong its operating life;
as part of succession planning in anticipation of staff
retirement. We also focused on hiring new employees • Euro 4M Mogas to install a gasoline sulphur
with relevant experience and skills to complete HRC’s removal unit for statutory compliance with Euro 4M
transition to a stand-alone entrepreneurial company. Mogas specifications;
We initiated a revamp of our Integrated People Plan • Major Turnaround 2018, driven by legislative
(IPP) in 2017, targetted for completion in 2018. IPP requirements as part of the cyclical inspection
ensures that our employee value proposition remains programme and license renewal stipulated by
attractive in terms of salary, benefits and training. We DOSH;
are also benchmarking our value proposition against • Euro 5 (Gasoil) to comply with Euro 5 Diesel
the employment market to ensure it is competitive and specification by 2020; and
attractive. • Clean Air Regulation (CAR) to install Air Pollution
Various inter- and intra-department movements took Control System (APCS) and emission monitoring
place in 2017. These movements were made based system in order to comply with the monitoring
on candidate opportunities and motivation. Going requirements by 2019.
forward, we will continue to promote employee career All these projects are on track, with the exception of
advancement opportunities. the Euro 4M Mogas Project. Following the Board of
We also enhanced employee engagement activities Directors’ approval for the project investment decision in
with the kick-off of the “Be Well” campaign, an June 2017, HRC expanded extensive efforts to achieve
employee health improvement programme which completion in the second half of 2018. However, due
empowers employees to manage their health through to unexpected delays in the manufacturing and delivery
tournaments and sport activities. of the main equipment, the project will not be
completed as initially planned. We are currently
exploring options to minimise the impact of this delay
on our production and revenue.
On 29 May 2017, HRC received a letter from the
Department of Environment (DOE) approving the
Environment Impact Assessment (EIA) for the Euro 4M
Mogas Project. This represented an important milestone
for the project as a total of 71 EIA approval conditions
were specified for compliance during the construction
and operational phases of the Euro 4M Mogas Project.
Quarter 2, 2017 was a busy period for HRC with
the execution of a minor turnaround (2017 PitStop)
which covered some of the smaller operating units.
HRC operations monitoring and control personnel. This event recorded approximately 57,000 man-hours
throughout the month of May 2017. The shutdown
40 and start-up progressed safely and smoothly with no
recordable cases.
ANNUAL
REPORT
2017

2.3 MARGIN & FINANCIAL PERFORMANCE
Commercial
In the year under review, HRC posted a profit of RM930
million, almost a three-fold increase compared to the
To strengthen our commercial position, we explored
profit of RM335 million recorded in 2016. Though
diversification opportunities of our suppliers and
refining margins were volatile during the year, gradual
customer bases in 2017.
recovery of crude and product prices resulted in a full
In addition to our crude oil supply obtained via our year average Current Cost of Stock (CCS) of USD7.17
COSA agreement, we successfully negotiated additional per barrel, while First In First Out (FIFO) margins
crude oil supply with several local and regional crude oil were USD8.39 per barrel (2016: CCS USD4.06, FIFO
producers and traders. USD5.46). Further analysis of the financial performance
We also explored new trade opportunities with local follows below.
and global industry players for the sale of refined and
oil component based products to diversify our customer Revenue & Gross Margin
base. Further exports of a few cargoes of oil component
products were also undertaken with China in 2017. HRC recorded revenues of RM12 billion in 2017, higher
We will continue to evaluate and take advantage of by 38% compared to 2016, driven by increase in market
any potential opportunities where the pricing is traded crude and oil product prices. Crude prices
favourable. We have also initiated medium to long-term averaged at USD54.3/bbl1 compared to USD43.6/bbl1
contracts for some of our export products with new in 2016. The rise in crude oil prices were attributable
customers within our diversified customer base. to the OPEC (Organisation of the Petroleum Exporting
All these efforts, combined together, will contribute to Countries) widely committing to its production cuts
margin maximisation and provide a continuous stable (reducing production output by 1.2 million barrels per
outlet for our products. day (mbpd) since January 2017) and the prospect of this
action to be extended beyond the end of the year. The
political unrest in Iran and in the Middle-East region,
the fear of production outage and impact of hurricanes
Harvey and Nate in the United States of America (USA)
contributed to an increase in crude oil prices. However,
prices were dampened by high crude stocks and oil
production in USA and a rebound in production in Libya
and Nigeria.
During the year, overall crude oil prices increased by
17% from USD54.9/bbl in January 20172 with Brent
Crude oil price ending at USD64.2/bbl in December
2017. Gross proft margin increased by 76%, supported
by increase in revenue brought about by a gradual
increase in product prices from USD61.0/bbl (end
2016) to USD69.8/bbl (end 2017). At the same time,
gross profit margins were affected by foreign currency
exchange fluctuations relating to crude oil purchases and
product sales. The USD/MYR rate was less volatile in 2017
but the MYR gradually strengthened against USD from
an average of RM4.453 per US Dollar in January 2017 to
RM4.06 in December 2017.
41
1 Source of average yearly Brent oil price: https://www.statista.com/statistics/262860/
uk-brent-crude-oil-price-changes-since-1976/ ANNUAL
2 Source:https://www.indexmundi.com commodities/?commodity=crude-oil REPORT
brent&months=300
HRC staff conducting site inspection.
3 Source: http://www.x-rates.com average/?from=USD&to=MYR&amount=1&year=2016
2017

02
03 on a positive
track
04
The business improvement tactics delivered a value
of USD30.1 million in 2017, with USD22.5 million
05 achieved via crude optimisation, USD3.2 million
achieved via product optimisation and another USD4.4
million mainly from business improvement plan and
savings from contracting strategies.
Profit After Tax (RM million)
930
335 352
-156
HRC EURO 4M Mogas Project Ground Breaking Ceremony

officiated by YB. Dato’ Seri Hamzah bin Zainudin,
Minister of Ministry of Domestic Trade, Co-operatives &
Consumerism, Malaysia with Mr Wang YouDe, Chairman
-1,189 of HRC.
2017 2016 2015 2014 2013
The CCS refining margin in 2017 was USD7.17 per To support the major infrastructure investments
barrel in comparison to a lower margin of USD4.06 necessary for the continued plant operations and the
per barrel in 2016. The FIFO margin was USD8.39/bbl, production of new refined products, the Board in June
including stockholding gains of USD1.22/bbl in 2017, 2017 approved capital investments totaling USD160
compared to FIFO margin of USD5.46/bbl in 2016, million, or approximately RM700 million*. Of these, the
which includes a stockholding gain of USD1.46/bbl. Euro 4M Mogas Project was attributed RM590 million,
The higher CCS margin is attributed to higher product and the ATLAS II Project RM110 million. The projects
cracks (the pricing difference between product and will be funded using a mix of cash flow generated
crude) with rising crude premiums and higher refined from operations and existing borrowing facilities.
products prices year to year compared to 2016 as well
as better plant reliability in 2017. Revenue (RM million)
Income and Expenses 14,263 14,696
11,583
9,080
8,365
In 2017, as compared to 2016, our Company recorded a
5% increase in its annual sales volume, which, combined
with higher refined product prices, contributed
to the higher income. The exceptional refining
margins experienced in Quarter 3, 2017 positively
contributed to the good financial performance of the
Company in 2017. However, higher manufacturing
2017 2016 2015 2014 2013
expenses, administrative expenses, depreciation and
amortisation, higher finance costs and recognition of
42 deferred tax liabilities, being offset by foreign exchange
gains recognised in 2017 impacted our profit after tax
ANNUAL for 2017.
REPORT
2017 * The actual amount may differ depending on the latest currency exchange rate

Total Assets & Liabilities Cashflow
Total assets have increased by RM573 million in 2017 to We marked the year end with an improved cash position
RM3,652 million. Further details of each component are set of RM493 million. Our operating cash flows for the financial
out below: year resulted in a net inflow of RM477 million. The net
operating cash inflows were utilised in financing approved
• Net book value of our fixed assets amounting to RM777
capital expenditure, partial repayment of a term loan and
million in 2017, comprising of the following:
servicing the term loan interest charges.
Return on Investment
44% Gasoil Treater/Hijau
13% LRCCU Return on average capital employed for the year under
review stood at 37%, compared to 19% in 2016, supported
21% Assets Under
TOTAL Construction by a significantly higher net profit against an increasing
capital base. Earnings per share of our Company was RM3.10
ASSETS 11% Land and Buildings
in the current year, higher than RM1.12 per share recorded
5% Intangible Assets in 2016.
6% Others
Dividends
The valuation basis of these assets are as stated in our The Board of Directors declared a single-tier interim dividend
accounting policies. of RM0.02 per share, amounting to RM6 million in respect
of the financial year ended 31 December 2017.
• Our current assets comprise of inventories and receivables
which have increased by 32% compared to 2016 as they
directly correlate to higher oil prices. Cash balances have
increased as a result of the operational profits. Further
information is provided in the Cashflow commentary.
Total liabilities have decreased by RM205 million to RM1,863
million. Further details are set out below:
• Current liabilities comprise mainly of payables arising from
crude purchases and the portion of term loan balances
that are repayable within the next 12 months.
• Long term liabilities comprise of term loans and deferred
tax liabilities. Term loans are repayable over a 5-year
period, denominated in USD and are secured by way of
charges, corporate guarantee and /or cash collaterals.
• Although deferred tax liabilities were recognised in
2017, our overall liabilities have decreased. This is due
to the repayment of a term loan amounting to USD20 HRC’s 58th Annual General Meeting in 2017.
million during the year using internally generated cash,
combined with currency translation differences due to
the strengthening of RM against USD. 43
ANNUAL
REPORT
2017

02
03 on a positive
track
04
SUSTAINABLE DEVELOPMENT In relation to energy efficiency, we were largely within
the targeted energy consumption value and achieved
05 Our Company’s financial success is sustained by our the best energy efficiency since 2012. For reliability
business prioritisation of economic, environmental issues that may occur and which have the potential to
and societal (EES) aspects. We continue to build and impact our performance, the root causes are identified
maintain our reputation as a first choice partner for and prioritised for future elimination or mitigation. We
our shareholders, customers, employees and those have also supported meaningful and socially responsible
with whom we do business, as well as society and initiatives along our value chain spanning the
the future generations. Our Company is committed to marketplace, workplace, community and environment.
economic growth while integrating environmental and
social factors into the way we plan, design and take The Sustainability Report 2017, which forms an
investment decisions on new projects as spelled out in integral part of this Annual Report, will provide further
our HSSE policies. insights into our achievements and highlights of
our practices and performances in our sustainability
In this regard whenever we begin work on new major management efforts in our economic, environmental
projects, an environmental, health and social impact and social aspects.
assessment is conducted to ensure we reduce any
potential negative impacts by:
RISKS
• Safeguarding the health and safety of employees
and neighbours; The most important risks for HRC in 2017 and 2018
are linked to the major infrastructure projects that will
• Reducing disruptions to the community and
enable the Company to expand its product portfolio
lowering harmful and greenhouse gas emissions;
and ensure the efficiency and reliability of the plant in
• Reducing impact on biodiversity; the long-run.
• Using less energy, water and other resources; and
• Managing wastes responsibly.
Major Turnaround 2018
Guided by Malaysia Hengyuan International Limited
and SHPC, we are proud to announce that our
Company continues to adhere to the environmental
standards implemented by regulators and continues
to uphold and fully comply with Malaysian legislations The Major Turnaround (MTA) in 2018 is driven by
and other related international conventions and legislative requirements of the Malaysia Department
protocols. of Occupational Safety and Health (DOSH). HRC
subscribes to the DOSH Statutory Safety Inspection
In our management of emissions and effluent
(SSI) programme which is a structured integrity
discharge, we use a systematic management approach
inspection and assurance programme. Part of the
designed to ensure compliance and to achieve
requirement is establishing a baseline of equipment
continuous improvement in line with our Company’s
inspection status, which requires all equipment to be
Health, Security, Safety, the Environment and Social
opened in 2018. A full inspection of the equipments
Performance (HSSE & SP) Commitment and Policy.
during MTA 2018 will thus enable us to renew our
licence to operate as issued by DOSH.
MTA 2018 will be the biggest turnaround since 1953
and the preparation progress is on target.
44
ANNUAL
REPORT
2017

ATLAS II Project is a critical operation that will take place scenario, our customer can choose to import their required
during MTA 2018. The project is to replace the LRCC catalyst product using HRC’s facilities as contractually outlined in our
regenerator top dome and the top dome internals to enable POA. In doing so, HRC’s financial performance during the
continued and efficient operation of the product upgrader period pending the production of EURO 4M Mogas will be
unit as the current system will be reaching its end-of-life significantly impacted
parameters in 2018.
Management is reviewing the project progress weekly to
RISK: Planning and execution of the ATLAS II Project is crucial ensure challenges and hurdles are effectively dealt with to
to a successful and timely Turnaround. Any unexpected meet the regulatory timeline.
incident or significant emergent scope arising during the
event could result in an extended shutdown resulting in Clean Air Regulation (CAR) Compliance
significant financial impact. The project team which has
been assigned to this crucial project comes with extensive
Clean Air Regulation (CAR) was gazetted by the DOE in
experience, and is well-placed to undertake all operations
June 2014 and is mandated for compliance in 2019 by DOE.
during MTA 2018.
There are two main scopes to the CAR project, which are the
Moreover, the ATLAS II project is executed in partnership installation of the Air Pollution Control System (APCS) and
with contractors that have experience in the manufacturing the Emission Monitoring System. The APCS will be installed
and installation of similar units elsewhere. at the LRCCU and Plat-2 to meet the new legislative limit
MTA 2018 will be challenging in terms of personal and of CAR. HRC has selected two separate licensors to provide
process safety, as we would have some 3,000 contractors options to reduce the emissions from our process. Emission
working on site. We have prepared ourselves to ensure monitoring systems will be installed at our flue gas stacks
safe working conditions at all times and compliance to to ensure full compliance. The project team is progressing
all operations and performance standards during this the development of the Basic and Detail Engineering
exceptional and intense exercise. Package (BDEP) and Front End Engineering Design (FEED)
with reputable vendors. Several scopes have been identified
for tie-in during the MTA 2018 to ensure the overall project
Euro 4M Mogas Project completion by 2019.
Euro 5 Gasoil Project
The Euro 4M Mogas Project is crucial for the DOE has mandated that refineries are to comply with Euro
sustainability of the business to meet the industry’s future 5 gasoil specifications by 1 September 2020. Since our
requirements. The plant, which will have a capacity of next turnaround is only planned for 2022, we will need to
1.15 million tonnes will use a combination of hydro- undertake project tie-ins during the upcoming MTA 2018
processing and liquid-liquid extraction technology, which window. Front end studies and licensor selection are now in
has been applied successfully by the licensor in various progress to enable the timely identification of tie-in points.
operating plants in China. RISK: The CAR and Euro 5 Gasoil projects are on track as
In 2017, the projects and technology teams focused on at end 2017. Nevertheless, we anticipate that we will have
the final engineering design, procurement of materials and to have additional resources to deliver several large projects
long-lead items and project execution. To minimise downtime at the same time. The Board has sanctioned for HRC to
outside MTA 2018 period, equipment tie-ins are targeted engage external subject matter experts where necessary to
during MTA 2018. ensure that the initial identification and implementation for
tie-ins are executed to the intended specifications and in a
RISK: Management is currently mitigating unexpected delays timely manner.
due to the manufacturing of a major piece of equipment.
The risk is that this delay extends beyond the regulatory date 45
we target to be able to produce Euro 4M Mogas. In such a
ANNUAL
REPORT
2017

02
03 on a positive
track
04
– Margin Performance
Reliability The spread between the products which we sell
05 and the feedstock which we purchase determines
As our last turnaround was in 2015, HRC continues
the refining margins. As the pricing of both
to closely monitor and manage reliability threats of
our sales and purchases is influenced by a wide
its assets due to higher risks of equipment failure. All
variety of market forces, HRC has, where possible,
measures are being taken to extend the operational
implemented hedging to protect its refining
life of current equipment and maximise operational
margins against extreme market movements.
reliability until inspection, cleaning and repairs can be
done during MTA 2018. – Stockholding Gains / Losses
Oil price movements impact financial performance
Employee hiring and retention because HRC holds on average 30 to 40 days of
inventories. HRC captures stockholding gains or
losses depending on which way oil prices move
Majority shareholder transition, intensification of
during that period. To mitigate those fluctuations,
our project activities and the stretch of our resources
HRC has implemented hedging strategies which
represent a risk for the safe and efficient conduct of
are working well.
our operations. We have increased our workforce in
2017, and are still in the process of hiring more specific
Foreign Exchange Exposures
talents in the technical and engineering fields in order
to fill all vacancies. In doing so, we need to strike the
right balance between skills and local/international This market-driven risk arises because of HRC’s different
recruitment to help us strengthen our position as an settlement currencies. Although our sales and purchases
international player. We are reviewing and enhancing are USD based as these values are linked to commodity
our IPP programme to strengthen our employee value pricing published by platforms such as Platts, our
proposition and engagement. sales are settled using the translated equivalent of
Malaysian Ringgit (MYR or RM) in compliance with
Financial and market-related risks local regulations for settlements between resident
companies. Triggered by the refinancing of the loan
to be entirely USD based financing, our Company has
As an independent refiner, HRC is cognisant of refining
changed its functional currency to USD in line with
margins and foreign exchange (FX) risks that could
our accounting policy effective 1 January 2017. This
hamper our financial performance. The decision to
change ensures that our financial reporting reflects
hedge and limit the risk exposure from these market
HRC’s underlying transactions in accordance with the
movements is to achieve a more consistent financial
Malaysian Financial Reporting Standards (MFRS) and
performance.
International Financial Reporting Standards (IFRS).
Oil-related Commodities/Margin Performance
With hedging comes a certain level of risk which
This risk consists of two (2) distinct market movements needs to be balanced with the benefits. Management
as follows: is aware of the exposures and has implemented a
currency hedging strategy for the refinery based on our
projected sales and production volumes and taking
into account market information as well as our cash
requirements. Management will continue to manage
foreign exchange exposure risks, guided by the
governance policies approved by the Board of Directors.
46
ANNUAL
REPORT
2017

Climate change
Aside from project risks, climate change risks may also

have an impact on our water supply. As HRC’s operations
depend on consistent and constant supply of water, water
disruptions can be a potential risk to our production, causing
possible delays in production output and delivery and
potentially resulting in negative financial implications. We
have made efforts to ensure that mitigation measures are in
place should there be any disruption of water supply.
MOVING FORWARD
Although global oil prices were higher at the end of
2017, it remains uncertain with the continued production
cuts supported by OPEC and Russia, increased demand by
China, the massive draw in USA crude oil inventories and
geopolitical tensions that may disrupt supply in the Middle-
East region.
The margin environment in the Southeast Asia region
is still expected to be challenging in 2018 due to
continued refinery capacity oversupply, the volatility of
crude prices and the softer product demands in the region.
Valve maintenance inspection.
HRC will continue to optimise and maximise its refinery
capabilities by:
• More aggressively negotiating product supply tenders
• Continuing to focus on crude optimisation & and contracts to obtain a better price;
diversification through:
• Improving refinery units’ reliability; and
– increasing new crudes and feedstock processing, by • Mitigating margin threat items.
bringing in new crudes to optimise crude value to
the site; As we move into 2018 our key focus areas will continue to be
on the following five (5) areas, namely;
– Enhancing trade relationships with crude suppliers;
and • Personal Safety & Process Safety;
• Plant Reliability;
– Increasing production optimisation predominantly
attributed by diversifying product outlets and • MTA and Project Execution;
reducing the variation in crude compositions for • Talent Management and Staff Retention; and
uninterrupted processing at the plant. • Production Improvement.
• Increasing unit throughputs and operational flexibility Despite the challenges ahead, we are optimistic that we will
which allows us to widen the residue feed basket; achieve our targets.
47
ANNUAL
REPORT
2017

anchored on
responsibility
DRIVING PRIME MINISTER EXPANDED CSR
SUSTAINABILITY: HIBISCUS AWARD PROGRAMMES
RECERTIFIED ISO
STANDARDS
WASTE MANAGEMENT PUBLIC ENERGY INTENSITY

& EFFLUENT SCORES COMPLAINTS INDEX IMPROVEMENT
HRC Go Green campaign with SMKT Port Dickson.

ENHANCED RISK AND STRATEGY
MANAGEMENT WITH NEW STRUCTURE
FOR BOARD COMMITTEES:
BNRC
BAC BRMC
formed on
29 November
2017
BTC BPRC
formed on formed on
27 February 30 November
2018 2017
BAC - Board Audit Committee

BNRC - Board Nominating & Remuneration Committee
BRMC - Board Risk Management Committee
BPRC - Board Projects Review Committee
BTC - Board Tender Committee
SUSTAINABILITY
01
02
STATEMENT
03
04 anchored on
responsibility HRC leverages on a strong business foundation based on health, safety, security and environmental excellence,
product quality stewardship and a high performance workforce to enhance its reputation and grow its business.
05 This has enabled us to deliver good financial performance and sustain growth, while minimising the impact to
the environment and successfully balancing the interests of our various stakeholders. We have set in place robust
structures and processes to ensure that our operations support sustained growth and business performance to best
meet the interests of our stakeholders.
We manage sustainability issues under the following areas:
• Marketplace
• Responsible Operations
• Environment
• Our People
• Society
• Ethics & Integrity

• Compliance
• Stakeholders’ Engagement
• Corporate Social Responsibility • Product Quality
(CSR) Activities MARKETPLACE • Supply Chain Management
• Public Complaints Management
• Customers
• Education, Trainee Programmes
• Addressing Public Concerns
RESPONSIBLE
SOCIETY OPERATIONS
MATERIAL
ASPECTS • Personal Safety
• Human Capital Management

FOR HRC • Process Safety
• Emergency Response
• Conducive Work Environment Preparedness
• Talent Development • Production & Reliability
• Employee Engagement
• Energy Efficiency
• Waste
Management
• Effluents
OUR ENVIRONMENT
• Emissions to Air
PEOPLE [GHG, NOx,
50 SOx]
• Environmental
ANNUAL Incidents
REPORT
2017

We have been exploring new avenues to supply our
MARKETPLACE products in order to strengthen our customer base and
secure new markets for our products and will continue to
HRC firmly believes in the fundamental importance of the do so in the future. Regular evaluation of our customer
promotion of trust, openness, teamwork and professionalism, satisfaction through a yearly survey have shown a continuous
which are reflected in our Company’s principles and our core improvement in overall customer satisfaction across reliability,
values. We have developed and cultivated a strong corporate responsiveness, communication and cost since 2013.
culture that embeds good corporate governance, business
ethics and integrity, operational excellence and excellent SAFE & RESPONSIBLE OPERATIONS
product stewardship.
Our Company is committed to the highest standards of As QHSSE remain a strong focus of the Company’s
integrity, transparency and accountability in the conduct Management Team, we doubled the budget allocated to
of its businesses and operations. As such, HRC’s General QHSSE to support development and training, programmes
Business Principles (GBP) and Code of Conduct (Code) and campaigns, environmental monitoring and emergency
set the framework and establish the ethical standards by response. In 2017, HRC conducted 79 safety and emergency
which we operate, covering the areas of: human rights, response trainings, representing a total of 587 hours and
whistleblowing, anti-bribery and corruption, conflicts of involving 979 participants.
interests, anti-money laundering, anti-trust, political activities,
As for reliability, our Proactive Threats Identification and
and compliance.
Elimination (PTIE) and Asset Integrity Assessment (AIA)
HRC has set in place measures to address the continuity of the processes have enabled us to identify the maintenance and
business, Human Capital (HC) management, Quality, Health upgrade projects required to ensure continuous availability
Safety, Security and Environment (QHSSE), commercial aspects and operability of equipment. These actions, combined
as well as project and business risks. These strategies enabled with our ‘Reliability Mindset’, underpin the positive strides
the Company to improve drastically its performance, with an the Company has made towards enhancing the plant’s
almost three-fold increase in profit after tax compared to last reliability; we managed to achieve an unplanned downtime
year. These results augur well for the future of the Company, (UPDT) of 2.3% in 2017, a great improvement compared to
and we will continue looking for opportunities to maximise the UPDT of 7.2% observed in 2016; we continue to focus
margins, optimise our costs and minimise the operational on asset integrity to essure a unit does not fail prematurely.
and financial risks for the Company.
In the area of personal safety, our strong safety culture is
We have remained committed towards engaging with anchored on initiatives such as Goal Zero, the 12 Life-Saving
stakeholders in a timely, clear and transparent manner. This Rules and the ‘Chronic Unease Mindset’. We take pride in
engagement has enabled us to build long-term relationships having achieved a zero-fatality track record over the past
based on trust and confidence, and gain positive support and 25 years and two (2) million man-hours without Lost Time
buy-in. We will continue to nurture these relationships. Injury (LTI) on 30 December 2017. Despite our efforts to
ensure that our workforce operates in a safe environment,
Product Quality (PQ) is critical to our Company’s performance
we still recorded personal safety incidents and first aid
and reputation. As such, the quality of our products is
cases. These cases highlight a need to continue our safety
systematically verified along the production chain, and PQ
initiatives for our employees and contractors, which
audits are conducted regularly to achieve PQ excellence,
included initiatives such as ‘Take 5 for safety’, situational
whether in execution of timely deliveries or meeting product
awareness and the risk identification campaigns in 2017.
quality specifications.
Our Learning from Incident (LFI) sessions decreased by
We promote transparent and fair supply chain management approximately 50% compared to 2016, indicating that we
through supplier selection, specification design, bid had a lower number of significant incidents that required
evaluation, contract award and supplier performance review. investigation and learning, which is encouraging and
We prioritise local suppliers and apply systematic competitive demonstrates the effectiveness of our continuous efforts
51
bidding before awarding contracts. This has enabled us to towards Goal Zero.
procure quality products and services at competitive prices. ANNUAL
REPORT
2017

01 SUSTAINABILITY
STATEMENT
02
03
04 anchored on
responsibility We continued our actions under the ‘Process Safety All our emissions and effluent discharges are managed
to the Next Level’ initiative, which covers programmes in accordance with the Company’s Health, Safety,
05 such as ‘The 8 Key Steps’, ‘Keep It in the Pipe’ and Security, Environment and Social Performance (HSSE
‘9 Fundamentals of Process Safety’. Our process safety & SP) Commitment and Policy, and we strive for
performance remains comparable to 2016, with continuous improvements of our operations with
one (1) Process safety incident in 2017. respect to the environment.
Emergency preparedness and response, which is a In 2017, our energy efficiency performance was the
key component to process safety, helps us to prevent best in the past five (5) years with an Energy Intensity
incidents and respond effectively to any emergency Index (EII) of 111.5, supported by the more efficient
that may occur and may put people, the environment operation of the refinery and the implementation of
and our assets at risk. The joint exercises and drills several energy improvement tactics.
performed in collaboration with the Fire & Rescue
The total waste generated increased by 15.6%
Department, Petroleum Industry of Malaysia Mutual
compared to 2016, still below the average 6,562
Aid Group (PIMMAG) and the Port Dickson Mutual
tonnes of waste generated over the past five (5) years.
Aid Group helped us to update and strengthen
The waste generation rate (waste by million barrel)
the site’s ‘Oil Spill Response Plan’ and ‘Emergency
nevertheless constitutes a substantial improvement
Response Plan’.
compared to 2012 with 164.3 tonnes/mln bbl in 2017.
We set up a new contract directly with a cement
company towards the 4th quarter of 2017 to supply
them with all spent catalysts from the catalytic cracking
process to be re-used as raw feedstock.
The results from the monitoring of HRC’s treated
effluent and sea water quality monitoring, which are
reported to the Department of Environment (DOE)
on a quarterly basis, showed full compliance with the
applicable legislations. Over the years, we managed
to achieve a yearly reduction of our oil in water
concentration by 11.1% on the average since 2012,
with a total reduction of 53.4% percent in 2017 as
compared to 2012 levels.
HRC in-house firefighting team conducting a fire drill. Our greenhouse gas (GHG) emissions increased by 7%
as compared to 2016. However, our GHG emissions per
million barrel produced showed a 2.9% improvement
ENVIRONMENT in carbon efficiency since 2016.
Our SOx emissions decreased by 19.9% compared
HRC is committed to protect the environment and to the baseline year 2007, and by 7.5% compared
minimise the environmental impacts of its operations, to 2016 while our SOx emissions per million barrel
products and services. As such, we fully comply with produced improved by 12.6% compared to 2016.
local environmental legislations and other related
international conventions and protocols and follow Our NOx emissions increased by 9.7% compared to the
stringent environmental standards inherited from our baseline year 2007 and by 4.8% compared to 2016,
previous operator. mostly resulting from the overall refinery throughput
and use of fuel oil for refinery heating. However, our
HRC is proud to have been awarded the Hibiscus Award NOx emissions per million barrel produced showed
for EXCEPTIONAL ACHIEVEMENT in Environmental
52 Performance category in 2017, in recognition of our
1.0% improvement in NOx efficiency compared to 2016.
efforts towards environmental management. We recorded three (3) environmental incidents in

ANNUAL 2017, all of which have been promptly closed out.
REPORT
2017

Our People
We endeavour to attract, retain and nurture the best

people by investing in their professional development and
providing them with challenging and rewarding opportunities
for personal and professional growth. Our Integrated
People Plan (IPP), which was developed in 2015, improves
our employee value proposition and integrates people
development and organisational health as components of
our business performance.
Our human capital grew substantively by 18.2% compared
to 2016, following the hiring of employees mainly to
endorse responsibilities in supporting service areas such as Project planning meeting.
finance, contract and procurement and human resources.
We expect our workforce to continue to increase, especially
in engineering and technical positions, as a result of our
CARING FOR OUR COMMUNITIES
growing operations and anticipated retirement of some of
our employees.
As part of our corporate social responsibility (CSR), we
HRC strives to provide a conducive work environment for maintain a high level of social and community investments
all its employees and contract workers by promoting through our outreach programmes that we spearhead in
diversity and equal opportunities, offering benefits and partnership with the Port Dickson Residents Association,
salaries on par with market practices, maintaining open local communities and schools within our vicinity. Our CSR
and transparent relationships with unions, and recognising programmes are aligned with community and business
outstanding employees and inspiring others through the priorities along the following pillars:
weekly Pride Moments.
• Social
Our Talent Management provides our employees with the
• Environment
opportunity to acquire and enhance news skills, as well
as offering them, where possible, career development • Safety
opportunities that will help them fulfil their full potential • Education
within our company. Several programmes have been set in In 2017, our social investment included: Kampung Paya
place to inspiring and develop employees at different times Gotong Royong, ‘Go Green’ Campaign, Hari Alam Sekitar,
of their careers: HRC Graduate programme, Internship firefighting briefing and demonstration and emergency
Programme, Onboarding Programme and Leadership and drills in a local school, Buka Puasa with Yayasan Anak Yatim
training programmes. In 2017, a total of 5,488 hours of Negeri Sembilan, food ration distribution and Sponsorship
training were provided to 338 employees, representing an to Academic Excellence Award in Kampung Gelam.
average of 16 hours of training per employee.
We will continue our journey to achieve the sustainable
We launched in November 2017 the ‘Be Well!’ campaign, success of the Company by leveraging on our skilled and
which empowers employees and direct contractors to passionate human capital, pursuing product excellence, and
manage their health through tournaments and sport continually improving our high QHSSE standards.
activities. Other employee engagement activities include:
our ‘Energizer’ events, which cultivates teamwork and Detailed information regarding our sustainability governance,
personal development, festive celebrations, charity events, management, performance and initiatives are available
sports events and the HR Open Day. in HRC’s Sustainability Report 2017, which is available on
our website. 53
ANNUAL
REPORT
2017

CORPORATE GOVERNANCE
01
02
OVERVIEW STATEMENT
03
04 anchored on
responsibility
Hengyuan Refining Company Berhad (HRC) is committed to
05
upholding and practising good corporate governance and supports
the recommendations made by the Malaysian Code on Corporate
Governance 2017 (MCCG 2017).
The Board of Directors (Board) is pleased to set out HRC’s Corporate

Governance Overview Statement, which is to be read together
with the Corporate Governance Report (CG Report) published
on HRC’s website at hrc.com.my. The CG Report sets out HRC’s
application of each practice recommended by MCCG 2017 for the
current financial year.
PRINCIPLE A: BOARD LEADERSHIP (b) The Board Nominating and Remuneration

AND EFFECTIVENESS Committee (BNRC) reviews and recommends to
the Board the appointments of directors, oversees
I. Board Responsibilities the annual Board effectiveness assessments,
The Board holds the overall responsibility of evaluates the appointment, performance and
representing, promoting and protecting the interests of termination of key senior Management positions,
HRC and its stakeholders, determining the direction of considers remuneration frameworks and policies
HRC and monitoring HRC performance. for Directors and key senior Management and
ensures that the succession planning and talent
Following the change in major shareholder on management framework for key roles are in place;
22 December 2016, the Board spent the year
re-assessing its functions and effectiveness and made (c) The Board Risk Management Committee
improvements to its structure. (BRMC) oversees risk management functions
and policies of HRC and reviews the efficacy of
The Board is currently supported by five (5) Board risk management. The BRMC was established on
Committees which assist the Board in discharging its 29 November 2017;
fiduciary and leadership roles. In summary, roles and
responsibilities of these Board Committees are as (d) The Board Projects Review Committee (BPRC)
follows: provides oversight and direction for the execution
and delivery of major projects. The BPRC was set up on
(a) The Board Audit Committee (BAC) oversees 30 November 2017; and
HRC’s operations by reviewing the Company’s
processes of producing financial reports and its (e) The Board Tender Committee (BTC) assists with
internal controls, policies and procedures; the oversight of contracting and procurement
policies and practices of HRC. The BTC was
established on 27 February 2018.
54
ANNUAL
REPORT
2017

An overview of the Board’s governance structure is set out below.
BOARD OF DIRECTORS
Board
Board
Board Nominating Board Board
and Risk
Audit Projects Review Tender
Remuneration Management
Committee Committee Committee
Committee Committee
Chief Chief Chief Chief Chief

Executive Financial Human Capital Projects Commercial
Officer Officer Officer Officer Officer
Chief Chief
Assurance Internal
Officer Auditor
The board charter of HRC (Board Charter) and the terms of The Board is further supported by two (2) qualified company
reference of the BAC, BNRC and BRMC have been updated secretaries who are members of The Malaysian Institute of
to ensure its compliance with MCCG 2017, Main Market Chartered Secretaries and Administrators (MAICSA). The
Listing Requirements of Bursa Malaysia Securities Berhad company secretaries’ responsibilities include advising the
(Listing Requirements) and Companies Act 2016, and can be Board on its role and responsibilities, attending Board and
found on HRC’s website. Board Committee meetings, ensuring that meeting minutes
are recorded timely and accurately, and updating the Board
The positions of Chairman of the Board and Chief Executive
on changes to laws, regulations and guidelines that affect or
Officer (CEO) of HRC are held by different individuals with
may affect the Company.
separate roles and responsibilities. The CEO is not a member
of the Board. HRC’s Directors and employees adopt a code of conduct
which addresses situations such as conflicts of interests,
The Chairman of the Board exemplifies good leadership by
corruption and bribery, harassment, breach of laws and
managing the decision-making process of the Board. This
unprofessional behaviour. HRC’s whistleblower policy was
includes setting the meeting agenda, ensuring that Directors
updated and relaunched during its Business Integrity Week
have sufficient information for their respective Board
held between 22-25 January 2018 and contains information
meetings, conducting pre-Board meeting briefings with
on the procedures for reporting and the reporting channel.
Management, encouraging discussions amongst Directors
The code of conduct and whistleblower policy can be found
and setting the strategic priorities of HRC. 55
on HRC’s website.
ANNUAL
REPORT
2017

01 CORPORATE GOVERNANCE
OVERVIEW STATEMENT
02
03
04 anchored on
responsibility II. Board Composition In line with the Board Charter, four (4) out of six (6)
members of the Board are independent non-executive
05 The composition of the Board and appointment of
directors and 33% of its members are women. The
Directors are overseen by the BNRC.
Board continues to strive to achieve its diversity targets
The BNRC consists of a majority of independent non- wherever possible.
executive directors and is chaired by Lim Tau Kien, the
The BNRC also reviews the appointment of senior
Senior Independent Non-Executive Director of HRC.
Management of the Company. On 27 February 2018,
Details of the BNRC members and their attendance at
the Board, on BNRC’s recommendation, appointed
BNRC committee meetings are set out on page 132 of
David Keat as the CEO of HRC with effect from
the Annual Report.
1 March 2018, based on the suitability of his skill
The BNRC reviews the composition of the Board and experience.
based on diversities of skills, experience, gender,
The Board has a policy which limits the tenure of
nationality, age, culture, socio-economic background,
independent directors to a term of nine (9) years.
independence and the core competencies required.
HRC is required to obtain shareholders’ approval if the
The variety of skills and experiences of Board members Board wishes to retain an independent director beyond
are illustrated in the chart below. nine (9) years.
The BNRC conducted the annual Board Effectiveness
No. of
Skills & Experience Assessment for the year 2017 (BEA 2017) through
Directors
self and peer reviews. The assessment included the
Oil & Gas Industry & Strategy 5
evaluation of each Director in the areas of contribution
Health, Safety, Security and Environment to interaction, quality of input, skill sets, understanding
4
(HSSE) of role, commitment and character. The Directors also
Corporate Governance 5 assessed the overall performance of the Board in terms
Regulatory Compliance / Legal 5 of structure and composition, Board operations and
interactions, strategy planning, performance, roles and
Internal Controls / Risk Management / Audit 5 responsibilities, risk management and internal control
Contracting and Procurement 4 and mix of skills and experience.
Supply / Marketing / Sales 4 Overall, the Board is satisfied with its structure and
composition, general roles and responsibilities, skills
Human Resource & Development 5
and experiences of directors, strategy planning,
performance and risk management and internal
In considering candidates for appointment to the Board, controls but would like to see improvements
the Board utilises independent sources to identify in areas such as human capital management.
suitably qualified candidates and considers factors such
as time commitment, character, professionalism and Further, the assessment of the BAC and BNRC in BEA
integrity, technical skills and number of directorships 2017 showed that Board members are satisfied with
outside HRC. the overall effectiveness of their respective Board
Committees.
56
ANNUAL
REPORT
2017

The Board continuously assesses the training needs of its The main duties of the BAC include overseeing financial
members and is responsible for ensuring that Directors reporting, internal controls, assessing the suitability of
attend trainings and continuing education programmes. external auditors and related party transactions.
The Board Charter of HRC also provides that it is the
BAC members are also expected to undertake continuous
responsibility of each Director to keep abreast of regulatory
professional development to keep abreast of relevant
changes, other developments and broad business trends and
developments in accounting and auditing standards, practices
devote time to attend training programmes and briefings.
and rules.
A list of trainings attended by the Directors in 2017 are set
The terms of reference of the BAC also provides that a former
out on page 134 of the Annual Report.
key audit partner of the external auditors shall be subject to
III. Board Remuneration a minimum two (2) year cooling-off period before being
considered for appointment to the BAC.
The BNRC is responsible for the review of the remuneration
framework of Directors and employees of HRC. The BAC’s report can be found on page 59 of the Annual
Report.
HRC has been disclosing the remuneration breakdown of the
individual Directors, including fees, salary, bonus, benefits II. Risk Management and Internal Control
in-kind and other emoluments since 2004. Framework
The Board’s remuneration is determined based on factors HRC’s risk management and internal control function is
such as comparison of amounts paid by similar companies, monitored by the BRMC, which was set up on 29 November
the time and effort involved, meeting frequencies and 2017 pursuant to recommendations of MCCG 2017. The
allowances for travel and continuing education programmes. BRMC is chaired by Wang ZongQuan, Deputy Chairman of
HRC, who has 14 years of operational experience in refining
The Directors’ remuneration breakdown for the financial year
and petrochemical businesses.
ended 2017 is set out on page 135 of the Annual Report.
Prior to the establishment of the BRMC, the risk management
HRC has a remuneration and benefits policy for all employees,
and internal control functions were overseen by the BAC.
including senior Management.
The BAC has the responsibility of ensuring that proper internal
HRC has also engaged an independent external advisor, who
controls are implemented to enhance the independence
is currently evaluating the organisational structure of HRC.
of both the external and internal audit functions. The BAC
Pending the results of the assessment, the Board has decided
has conducted a high level review of HRC’s Internal Audit
not to publish the remuneration policy of HRC on its website.
Department (IAD) and is satisfied with the independence of the
Chief Internal Auditor. The IAD governs itself by adherence to
PRINCIPLE B: EFFECTIVE AUDIT AND the mandatory elements of The Institute of Internal Auditors’
RISK MANAGEMENT International Professional Practices Framework.
I. Board Audit Committee The Board’s statement on risk management and internal
The BAC comprises of four (4) independent non-executive control of HRC is set out on page 63 of the Annual Report.
directors and is chaired by Alan Hamzah Sendut.
BAC members possess a variety of skills and experience
including accounting, strategy and corporate finance. Two
(2) of the BAC members, Alan Hamzah Sendut and Lim Tau
Kien, are chartered accountants who fulfil the accounting
qualifications required by the Listing Requirements.
57
ANNUAL
REPORT
2017

01 CORPORATE GOVERNANCE
OVERVIEW STATEMENT
02
03
04 anchored on
responsibility PRINCIPLE C: INTEGRITY IN II. Conduct of General Meetings
05
CORPORATE REPORTING AND HRC’s Board Charter was updated on 27 February
MEANINGFUL RELATIONSHIP 2018 to incorporate the Board’s responsibility to ensure
WITH STAKEHOLDERS that shareholders receive at least 28 days’ notice
to attend the Company’s annual general meetings.
I. Communication with Stakeholders All directors and Chairs of the respective Board
HRC continuously strives to improve its relationship Committees are required to attend general meetings
and communication with stakeholders to facilitate a of the Company.
mutual understanding of each other’s objectives and HRC held its 58th Annual General Meeting on 24 May
expectations.
2017 and two (2) Extraordinary General Meetings on
HRC Corporate Affairs Department is the main point 28 February 2017 and 24 May 2017. The attendance
of contact for all investors and shareholders. Contact of the Directors at the aforementioned general
details, including e-mail address and telephone number, meetings are set out on page 131 of the Annual Report.
of the Corporate Affairs Department are published on
Following presentations by the Chairs of the general
HRC’s website.
meetings, shareholders were given the opportunity
The website also includes relevant information on HRC, to pose questions to the Board. The Chairs of the general
such as an introduction to the Board and Management, meetings responded to queries from shareholders.
HRC’s operations and products, daily share price, annual
The Corporate Governance Overview Statement
reports and sustainability efforts. Announcements
and CG Report is prepared in compliance with the
submitted to Bursa Malaysia Securities Berhad are
Listing Requirements and was approved by the Board
uploaded promptly.
on 16 April 2018.
HRC engages with the Minority Shareholders Watchdog
Group prior to the annual general meeting and ensures
that their questions, as well as the questions posed by
other shareholders, are addressed during the annual
general meeting.
HRC engages its employees regularly through both
formal and informal events and dialogues. Similarly,
HRC continuously connects with its customers, business
partners, regulators, government bodies and suppliers
during major project launches, periodical briefings and
festive celebrations. HRC is also committed to local
community engagement and has conducted several
CSR events in 2017, as set out on page 53 of the
Annual Report.
58
ANNUAL
REPORT
2017

BOARD AUDIT COMMITTEE
REPORT
INTRODUCTION & COMPOSITION PwC had presented its audit plan to the BAC prior to
the commencement of their annual audit. PwC has also
HRC’s Board Audit Committee (BAC) comprises four (4) briefed the BAC on the outcome of the statutory audit
members with a diverse mix of skills, knowledge, experience for the financial year ended 2017, significant auditing
and perspectives in the areas of accounting, corporate and accounting matters, the progress on business process
finance, banking, the oil and gas industry, strategy and and information technology systems migration, internal
corporate governance, which enables the BAC to discharge control recommendations and developments in relevant
its duties. laws and regulations.
In compliance with the step-up recommendation in Practice The BAC held its independent meeting with PwC on
8.4 of MCCG 2017, the BAC consists solely of independent 22 August 2017 without the presence of Management to
non-executive directors since 24 November 2017. The discuss the plan for the year end audit, level of cooperation
Independent Non-Executive Directors are able to exercise received from Management, specific audit concerns and the
strong independent judgement and provide balance to the quality of financial reporting.
Board with their unbiased and independent views on all
Board deliberations. Minutes of the BAC meetings were circulated to all BAC
members and significant issues were highlighted by the
The current members of the BAC are: BAC Chair at Board meetings for further discussion and
Alan Hamzah Sendut (Chair) deliberation. Where applicable, recommendations were
Independent Non-Executive Director tabled to the Board for approval.
• Qualified as Member of the Institute of Chartered
Accountants in England and Wales (1986) ACTIVITIES OF THE BAC
• Malaysian Institute of Accountants (1987)
The BAC holds the overall responsibility for monitoring
• Chartered Audit Committee Director, Institute of Internal
HRC’s management of financial risk processes, accounting
Auditors Malaysia (2018)
and financial reporting practices and ensuring adequacy and
Lim Tau Kien effectiveness of internal controls.
Senior Independent Non-Executive Director
A summary of the BAC’s key activities for the financial year
• Institute of Chartered Accountants of Scotland (1981)
ended 31 December 2017 are set out below.
• Malaysian Institute of Accountants (1983)
Terms of Reference and Composition
Fauziah Hisham
Independent Non-Executive Director On 27 February 2018, the BAC reviewed and updated its
terms of reference to be compliant with the Listing
Liang Kok Siang
Requirements, Companies Act 2016 and MCCG 2017.
Independent Non-Executive Director
The revised terms of reference are published on HRC’s
MEETINGS website.
The BAC held seven (7) meetings during the financial year On 23 November 2017, the BAC and the Board
ended 31 December 2017. Details of the meetings and the accepted the resignation of Wang ZongQuan, a non-
attendance of BAC members are set out on page 132 of the independent non-executive director, as a member of
Annual Report. the BAC with effect from 24 November 2017 in line
with the step-up recommendation of MCCG 2017 for
HRC’s Chief Executive Officer, Chief Financial Officer, Chief the audit committee to consist solely of independent
Commercial Officer, Chief Assurance Officer, Chief Internal non-executive directors.
Auditor and PricewaterhouseCoopers PLT (PwC), as external
auditors of HRC, were invited to attend BAC meetings to
brief the BAC on specific matters as and when required.
59
ANNUAL
REPORT
2017

01 BOARD AUDIT COMMITTEE
REPORT
02
03
04 anchored on
responsibility Assurance Plan 2017 Process Effectiveness Reviews
05 The BAC oversaw HRC’s approved assurance plan for Management of Change
the year 2017 which consisted of five (5) regulatory / Hazard Effect Management Process
statutory audits, 15 site internal audits, five (5) Mitigate Threat to Availability
operational efficiency reviews and nine (9) process
Reliability Centred Maintenance
effectiveness reviews to ensure business processes and
regulatory compliance. These include: Ensure Safe Production
Emergency Response
Name of Audit / Review
Permit To Work
Regulatory / Statutory Audits
Ensure Quality Product
ISO 9001 Recertification
Site Internal Assurance
ISO 14001 Upgrading / OHSAS 18001 Surveillance
Where appropriate, the BAC directed Management to
ISO 17025
rectify and improve internal control processes based on
International Ship and Port Facility Security
the auditors’ recommendations and suggestions for
Interim and Annual Financial Audit by External Auditor improvement based on severity of findings and ratings
Site Internal Audits of audits.
Turnaround review 1 (MTA2018)
The progress of the Assurance Plan 2017 and its audits
Site Turnaround Review 3 (Pitstop 2017) were reported to the Board on a quarterly basis.
Contractor Management
Pursuant to the establishment of HRC’s BRMC on
ISO9001 / ISO14001 / OHSAS18001 29 November 2017, the BAC will only oversee audits
Process Isolation relating to finance and corporate governance for the
Pressurised Equipment Integrity year 2018.
ISO17025 Internal Audit
Reliability Centered Maintenance
The internal audit function of HRC is monitored by
Emergency Response the BAC and consists of two (2) segments:
Marine Terminal Management and Self-Assessment
(1) An internal audit department (IAD), which acts
Learning From Incident
as an independent evaluating body to assist
Permit to Work and provide assurance to Management, the
International Shipping and Port Facility Security BAC and the Board. The department is led by a
Site Internal Assurance Chief Internal Auditor who reports functionally
Related Party Transaction to the BAC Chair and administratively to the
Chief Human Capital Officer; and
Operational Efficiency Reviews
Turnaround Assurance Review 2 (2) HRC’s site internal assurance (SIA), which
comprises of 36 trained and / or certified site
Custody Transfer Meter and Mass Balance
internal auditors from various departments of
Health, Safety and Environmental Management System
HRC. The SIA reviews the site internal audits and
Audit
process effectiveness of HRC and reports to the
Instrumented Protective Function Quality & Health, Security, Safety and Environment
Social Performance Review (to be completed Q2 2018) Manager.
60
ANNUAL
REPORT
2017

Urgent issues arising from the internal audit processes are Financial Reporting
highlighted to the Management promptly.
The BAC also reviewed HRC quarterly financial statements
During the year 2017, HRC spent RM231,000 on its internal for the year 2017. The condensed financial statements were
audit function. prepared in accordance with the requirements of Malaysian
Financial Reporting standard (MFRS) 134 “Interim Financial
External Audit
Reporting” and paragraph 9.22 of the Listing Requirements.
The BAC reviewed PwC’s audit plan and scope for the
The annual audited financial statements for the year ended
financial year ended 2017 and the payment of auditors’
2016 was also discussed and reviewed during the BAC’s
statutory and non-audit fees.
meeting on 14 April 2017 to ensure that it was compliant
Results of PwC’s annual audit and audit findings together with provisions of the Companies Act 2016, Listing
with recommendations and Management’s response were Requirements, applicable approved accounting standards,
reviewed by the BAC. Matters included in the Management compliance to new accounting standards and other legal
representation letter were also reviewed by the BAC. and regulatory requirements.
The non-audit fees for 2017 incurred by HRC amounted to Risk Management and Internal Control
RM57,500. This included work provided by PwC for training
Up until 29 November 2017, HRC’s risk profile was reviewed
on hedging documentation and an application to the Inland
and deliberated by the BAC on a quarterly basis to ensure
Revenue Board of Malaysia for the use of USD functional
sufficient coverage of all major risks in the business
currency for the computation of annual tax returns.
environment. In line with recommendations of MCCG
The BAC is satisfied with the objectivity and independence 2017, a separate BRMC has since been established by the
of PwC, whose appointment was approved by shareholders Board to oversee the risk management and internal control
of the Company at HRC’s 58th Annual General Meeting. frameworks of the Company.
Related Party Transactions
In year 2017, the BAC reviewed HRC’s Circular to Shareholders
(Circular) in relation to the proposed renewal of shareholders’
mandate and proposed new shareholders’ mandate for
recurrent related party transactions for the period of 24 May
2017 to the 59th Annual General Meeting of HRC.
61
ANNUAL
REPORT
2017

01 BOARD AUDIT COMMITTEE
REPORT
02
03
04 anchored on
responsibility As a matter of prudence, the BAC recommended that (b) HRC’s acceptance of banking, financial and
Mercuria Energy Trading Pte Ltd. and the Royal Dutch insurance services from licensed institutions
05 Shell group of companies be deemed as parties related to ensure that these were done on the most
to HRC due to their connection with Sun JianYun and optimal terms, including the USD430 million
Martinus Joseph Marinus Aloysius Stals (Maarten Stals), refinancing exercise that was entered into with
who were Director and Managing Director of HRC, Ambank (M) Berhad – Labuan Offshore Branch,
respectively. This was elaborated in more detail in the China Construction Bank (Malaysia) Berhad
Circular. Shareholders’ mandates for recurrent related and Maybank International Labuan Branch on
party transactions with the abovementioned entities 23 January 2018;
were sought at the Extraordinary General Meeting of
(c) The Company’s cash forecast and financing
HRC on 24 May 2017.
planning;
Following the resignations of Sun JianYun with effect
(d) The establishment of the margins and inventory
from 1 June 2017 and Maarten Stals on 1 March 2018
hedging policy, which was tabled to and
and in accordance with the Listing Requirements,
approved by the Board on 15 June 2017;
Mercuria Energy Trading Pte Ltd ceased to be a party
related to HRC on 1 December 2017 and the Shell group (e) HRC’s information technology projects for
of companies will cease to be a party related to HRC on improving efficiency, security and robustness
1 September 2018. after its major shareholder transition and risk
management actions taken against cyber or
In addition, the BAC oversaw HRC’s compliance with
digital threats; and
the Listing Requirements in respect of related party
transactions and recurrent related party transactions (f) Whistleblowing and other business integrity
and ensured that the necessary announcements were related cases reported to the BAC, where the
made to Bursa Malaysia Securities Berhad. BAC ensured that appropriate actions were taken.
Others
Other activities considered by the BAC during its
meetings include:
(a) HRC’s transition of functional currency from
MYR to USD, which was effective from 1 January
2017, and the changes that had to be applied
to the accounting, finance and tax-related aspects
of the Company;
62
ANNUAL
REPORT
2017

STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROL
The Board of Directors (Board) of Hengyuan Refining Company Berhad (HRC)

is committed to maintaining a sound internal control and risk management
system to ensure a smooth running of the business. It is HRC’s aim to
manage its risks and to control its business and financial affairs economically,
efficiently and effectively so as to be able to deliver profitable business
opportunities in a disciplined way, to avoid or mitigate risks that can cause
loss, reputational damage or business failure, and to enhance resilience to
external events. The following statement outlines the nature and scope of
HRC’s internal control and risk management in 2017.
BOARD’S RESPONSIBILITY
The Board affirms its overall responsibility for HRC’s risk management and internal control system, and for reviewing the system’s
adequacy and integrity. The Board recognises that this system is designed to manage, rather than eliminate, the risks of not
achieving HRC’s objectives and adhering to the policies. Due to the inherent limitations, the system can only provide reasonable
and not absolute assurance against material misstatement, fraud or loss or the occurrence of unforeseeable circumstances.
The BAC assists and supports the Board’s responsibility of overseeing the Company’s operations by providing a means for
reviewing the Company’s processes or producing financial data, its internal controls, and policies and procedures to assess
the suitability, objectivity and independence of the Company’s external auditor and internal audit function. The adequacy and
effectiveness of the system has been reviewed by BAC in relation to the audits conducted by Site Internal Assurance (SIA) during
the year. Audit issues and actions taken by Management to address the issues tabled by SIA were deliberated on during the
BAC meetings.
The BRMC provides oversight and direction on risk management matters to ensure prudent risk management over HRC’s
business and operations. Management has conducted a systematic and comprehensive evaluation of the Key Risk Areas which
were deliberated and presented to BRMC. The implementation of risk controls are monitored and the results are presented
during the BRMC meeting.
Internal control and risk-related matters which warranted the attention of the Board are recommended by the Board Committees
to the Board for its deliberation and approval.
63
ANNUAL
REPORT
2017

01 STATEMENT ON RISK MANAGEMENT
02
03
04 anchored on
responsibility MANAGEMENT’S ROLE Fit-for-purpose risk responses are primarily intended to:
05 Whilst the Board assumes responsibility for HRC’s • Minimise the likelihood of a risk occurring by
internal controls and risk management, the actively managing the sources of the risk and
Management holds the key role in the implementation ensuring competent people are overseeing the risk
of the internal controls and risk management system. on a regular basis; and
Management is accountable to self-assess regularly • Mitigate the impact of risk should it arise, often
that the systems continue to operate efficiently through the application of some form of alert
and effectively. that the risk has materialised, followed by the
initiation of a contingency or recovery plan to
RISK MANAGEMENT reduce the potential consequences and also future
The risk management function was formalised to occurrences.
provide an enterprise-wide view of the risk management HRC adopts the best practices from ISO 31000:2009
within HRC. Risk Management – Principles and Guidelines to
The objective of risk management is to set advanced manage the risks of its business and operations. HRC
awareness and boundaries for risk-taking and to has an established and structured process for the
apply fit-for-purpose risk responses in order to enable identification, assessment, communication, monitoring
HRC to provide a reasonably sufficient, and not an as well as continual review of risks and effectiveness
absolute assurance, against material misstatements, of risk mitigation strategies and controls.
fraud or loss. In addition, it allows HRC to operate HRC’s risk management is backed up by the
and achieve its objectives, within a managed and implementation of three lines of defence that
acceptable risk profile. distinguishes the three groups which are involved in
effective management of risk in HRC.
THREE LINES OF DEFENCE

BOARD OF DIRECTORS
BAC BNRC BRMC BPRC BTC
MANAGEMENT
REGULATOR
EXTERNAL AUDITOR
1ST LINE OF DEFENCE 2ND LINE OF DEFENCE 3RD LINE OF DEFENCE
PROCESS OWNER RISK MANAGEMENT INTERNAL AUDIT

Perform day-to-day risk FUNCTIONS Independent review on
management activities Oversight function to the overall adequacy,
review risk management integrity and effectiveness
and control system and of risk management and
provide assurance control system
64
ANNUAL
REPORT
2017

Management has conducted a systematic and comprehensive b. HRC’s financial performances are reviewed regularly
evaluation of the Key Risk Areas which were deliberated and by Management. The financial results and variances
presented to BRMC. The implementation of risk controls are (if any) are presented to the Board on a quarterly
monitored and the results presented during BRMC meetings. basis.
c. There is a regular and comprehensive flow of
INTERNAL CONTROL
information by Management to the Board on all
HRC’s internal control system comprises the following key aspects of the HRC’s operations to facilitate the
processes: monitoring of performance against HRC’s corporate
strategy, business and regulatory plans.
1. AUTHORITY AND RESPONSIBILITY
d. The sustainability plan is established by Management
a. Certain responsibilities are delegated to Board
and reviewed by the Board to ensure its robustness
Committees through clearly defined Terms of
in achieving HRC’s objectives. The sustainability plan
Reference (TOR) which are reviewed annually.
was approved by the Board for disclosure in the
b. The Manual of Authority is reviewed periodically HRC’s Sustainability Statement and standalone
to reflect the authority and authorisation limits Sustainability Report.
of Management in all aspects of the HRC’s major
4. POLICIES AND PROCEDURES
business operations and regulatory functions.
Clear, formalised and documented internal policies,
2. ORGANISATION STRUCTURE AND
standards and procedures are in place to ensure
MANAGEMENT COMMITTEE
compliance with internal controls and relevant laws
a. An organisational structure, which is aligned to the and regulations. A list of identified laws and regulations
business and operational requirements, and with applicable to HRC is documented and maintained to
clearly defined lines of responsibility, accountability facilitate compliance. Regular reviews are performed
and levels of authority, is in place to assist in to ensure that documentation remains current and
implementing HRC’s strategies and day-to-day relevant. Policies and procedures are available on HRC’s
business activities. intranet and accessible by the employees.
b. The Management Team serves in an advisory capacity 5. COMPLIANCE MANAGEMENT
to the Chief Executive Officer and Chief Financial
HRC’s compliance management covers compliance to
Officer in accomplishing the vision, strategies and
all relevant laws, regulations, rules and major identified
objectives set for HRC.
guidelines or legal requirements. It also covers risk-based
Various functional committees have also been compliance to internal policies, procedures and code of
established across the Company to ensure HRC’s conduct.
activities and operations are properly aligned towards
In 2017, no major non-compliance was encountered.
achieving its organisational goals and objectives.
6. CODE OF CONDUCT
3. PLANNING, MONITORING AND REPORTING
The Code of Conduct (Code) applies to every employee,
a. An annual planning and budgetary exercise is
Director and officer in HRC as well as contract employees
undertaken by all departments to prepare business
working for HRC. Contractors and consultants who are
plans and budgets for the forthcoming year. These are
agents of, or working on behalf of, or in the name of
deliberated on by the BAC to ensure alignment with
HRC (through outsourcing of services, processes or any
the strategy as agreed at the latest strategy review.
business activity), are required to act consistently with
Thereafter, the BAC would recommend to the Board
the Code when acting on HRC’s behalf. Contractors and
for approval before its implementation.
consultants are also made aware of the Code as it applies
to their dealings with HRC employees.
65

ANNUAL
REPORT
2017

01 STATEMENT ON RISK MANAGEMENT
02
03
04 anchored on
responsibility The Code outlines the following: 9. WHISTLEBLOWER POLICY
05 • Our responsibilities and a guide to ethical HRC has established a Whistleblower Policy (Policy)
decision-making. which provides an avenue for the employees and
members of the public to disclose any improper
• The standards of good behaviour that HRC
conduct in accordance with the procedures as
expects from every employee, contractors and
provided under the Policy.
consultants.
Under the Policy, a whistleblower will be accorded
• That we have the right to expect the same
with protection of confidentiality of identity, to
standard of behavior from our colleagues.
the extent reasonably practicable. An employee
• System of handling of sensitive information and who whistleblows internally will also be protected
HRC’s Intellectual Property. against any adverse and detrimental actions for
disclosing any improper conduct committed or
• Guidelines to help in keeping our business
about to be committed within HRC, to the extent
interactions legal, ethical and professional,
reasonably practicable, provided that the disclosure
ensuring that we protect ourselves from any
is made in good faith. Such protection is accorded
suspicion of wrongdoing and to safeguard
even if the investigation later reveals that the
HRC’s reputation.
whistleblower is mistaken as to the facts, rules and
7. INFORMATION AND COMMUNICATIONS procedures involved.
TECHNOLOGY
Information and communications technology is INTERNAL AUDIT
extensively deployed in HRC to automate work The Board recognises that the internal audit function
processes, where possible and to efficiently collect is an integral component of the governance process.
key business information. The Chief Internal Auditor reports directly to the
HRC has committed to obtain the certification in BAC Chair. The Internal Audit Department supports
Information Security Management System (ISMS), the BAC by providing an independent and objective
MS ISO / IEC 27001:2013 and continues to enhance assurance designed to add value and improve
its information and communication systems in HRC’s operations.
ensuring that it can act as an enabler to improve In 2017, the following reviews were performed and
business processes, work productivity and decision reported to the BAC:
making throughout HRC.
a. Audit engagements are carried out based on
8. EMPLOYEES PERFORMANCE the 4-year assurance plan proposed by SIA and
MANAGEMENT approved by the BAC. SIA assesses the audit
HRC selects individuals for employment through a areas with regard to risk exposures, compliance
structured recruitment process. The professionalism towards the approved policies and procedures and
and competency of employees are continuously relevant laws and regulations. For any significant
enhanced through a structured training and gaps identified, SIA provides recommendations
development programme. A performance to Management to improve the effectiveness of
management system is in place which measures controls where applicable.
employees performance against agreed goals on
an annual basis.
66
ANNUAL
REPORT
2017

b. A yearly assessment was carried out by: REVIEW OF THIS STATEMENT
• SIRIM Berhad for Quality Management Systems (ISO As required by Paragraph 15.23 of the Listing Requirements,
9001:2015), Environmental Management Systems the external auditors have reviewed this Statement on
(ISO 14001:2015) and Occupational Health and Risk Management and Internal Control. Their limited
Safety Management System (OHSAS 18001:2007); assurance review was performed in accordance with Audit
and and Assurance Practice Guide (AAPG) 3 issued by the
• Department of Standard Malaysia for the Laboratory Malaysian Institute of Accountants. AAPG 3 does not require
Quality Management System (ISO/IEC 17025:2017). the external auditors to form an opinion on the adequacy
and effectiveness of the risk management and internal
The reviews concluded that HRC was conforming to the control systems of the Group.
requirements of the management system.
CONCLUSION
OTHERS
The Board has received assurance from the Chief Executive
In addition to the annual audit of HRC’s financial statements Officer and the Chief Financial Officer that HRC’s financial
conducted by the External Auditors, the External Auditors records are properly maintained and that its risk management
were engaged to conduct: and internal control system is operating adequately and
• reviews on financial results in accordance with the effectively in addressing the material risks within the
International Standard on Review Engagements 2410 Company in its current business environment.
“Review of Interim Financial Information Performed by The Board is of the view that risk management and internal
the Independent Auditor of the Entity” as required; controls instituted throughout HRC are sound and provide
• review on regulatory compliance with MCCG 2017 a reasonable level of confidence but not absolute assurance
and the compliance of the Annual Report with the that HRC is not affected by any event that cannot be
requirements of the Companies Act 2016 and Listing reasonably foreseen. In the year under review, the Board
Requirements; and is not aware of any significant control failure or weakness
that would have resulted in material losses, contingencies
• financial impact assessment on proposed hedging or uncertainties requiring separate disclosure in the
structure. Annual Report.
This statement is approved by the Board of Directors on
16 April 2018.
67
ANNUAL
REPORT
2017

financial
reports
+54%
REFINING MARGIN
+5%
SALES VOLUME
+38%
REVENUE
+177%
PROFIT AFTER TAX
70 Directors’ Report
73 Statement by Directors
74 Statutory Declaration
75 Independent Auditors’ Report
80 Statement of Comprehensive Income
81 Statement of Financial Position
82 Statement of Changes In Equity
83 Statement of Cash Flows
85 Notes to the Financial Statement
OTHER INFORMATION
125 Company Properties
128 Analysis of Shareholdings
131 Additional Corporate Governance
Disclosures
136 Recurrent Related Party Transactions
Proxy Form
DIRECTORS’
01
02
REPORT
FINANCIAL REPORTS
03
04
The Directors are pleased to submit their report to the members together with the audited financial statements of the
Company for the financial year ended 31 December 2017.
05
PRINCIPAL ACTIVITIES
The principal activities of the Company consist of refining and manufacturing of petroleum products. There has been no
significant change in these activities during the financial year.
FINANCIAL RESULTS
The results of the operations of the Company for the financial year were as follows:
RM’000
Profit for the financial year 929,759
DIVIDENDS
On 27 February 2018, the Directors declared a single-tier interim dividend of RM0.02 per share, amounting to RM6,000,000
in respect of the financial year ended 31 December 2017. The dividend is payable on 17 April 2018 to shareholders
registered on the Record of Depositors at the close of business on 20 March 2018. These financial statements do not reflect
the interim dividend which will be accounted for in the financial year ending 31 December 2018.
RESERVES AND PROVISIONS

All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.
DIRECTORS
The Directors in office during the financial year and during the period from the end of the financial year to the date of this
report are:
Wang, YouDe
Wang, ZongQuan
Lim Tau Kien (appointed on 25 May 2017)
Alan Hamzah Sendut (appointed on 25 May 2017)
Fauziah binti Hisham (appointed on 1 June 2017)
Liang Kok Siang (appointed on 1 June 2017)
Dato’ Seri Talaat bin Haji Husain (retired on 24 May 2017)
David Lau Nai Pek (retired on 24 May 2017)
Datuk Yau Ah Lan @ Fara Yvonne (resigned on 1 June 2017)
Datuk Zainun Aishah binti Ahmad (resigned on 1 June 2017)
Heng Heyok Chiang @ Heng Hock Cheng (resigned on 1 June 2017)
Sun, JianYun (resigned on 1 June 2017)
Martinus Joseph Marinus Aloysius Stals (resigned on 1 March 2018)
70
ANNUAL
REPORT
2017

DIRECTORS’ BENEFITS
During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements
with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in,
or debentures of, the Company or any other body corporate.
Since the end of the previous financial year, no Director of the Company has received or become entitled to receive any benefit
(other than benefits disclosed as Directors’ remuneration in Note 12 to the financial statements) by reason of a contract made
by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company
in which the Director has a substantial financial interest.
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURE

According to the Register of Directors’ Shareholdings required to be kept under Section 59 of the Companies Act 2016, none
of the Directors who held office at the end of the financial year held any shares or debentures in the Company during the
financial year.
DIRECTORS’ REMUNERATION
Details of Directors’ remuneration are set out in Note 12 to the financial statements.
INDEMNITY AND INSURANCE COST

Indemnity insurance for Directors and Officers of the Company during the financial year amounted to RM60,000.
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the financial statements were prepared, the Directors took reasonable steps:
(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision
for doubtful debts and satisfied themselves that there were no known bad debts and that adequate provision had been
made for doubtful debts; and
(b) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including the values
of current assets as shown in the accounting records of the Company had been written down to an amount which the
current assets might be expected so to realise.
At the date of this report, the Directors are not aware of any circumstances:
(a) which would render it necessary to write off any bad debts or the amount of the provision for doubtful debts inadequate
to any substantial extent; or
(b) which would render the values attributed to current assets in the financial statements of the Company misleading; or
(c) which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the
Company misleading or inappropriate.
No contingent or other liability has become enforceable or is likely to become enforceable within the period of 12 months
after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the
Company to meet its obligations when they fall due.
At the date of this report, there does not exist:
(a) any charge on the assets of the Company which has arisen since the end of the financial year which secures the liability 71
of any other person except as disclosed in Note 27 to the financial statements; and
ANNUAL
(b) any contingent liability which has arisen since the end of the financial year. REPORT
2017

01 DIRECTORS’ REPORT
02
FINANCIAL REPORTS
03
04
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (continued)
05 At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the
financial statements of the Company, which would render any amount stated in the financial statements misleading.
In the opinion of the Directors:
(a) the results of the Company’s operations during the financial year were not substantially affected by any item, transaction
or event of a material and unusual nature; and
(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
or event of a material and unusual nature likely to affect substantially the results of the operations of the Company for
the financial year in which this report is made.
IMMEDIATE AND ULTIMATE HOLDING COMPANIES

The Directors regard Malaysia Hengyuan International Limited, a company incorporated in Labuan, Malaysia and Shandong
Hengyuan Petrochemical Group Company Limited, a company incorporated in China, as the Company’s immediate and
ultimate holding companies respectively.
AUDITORS’ REMUNERATION
Details of auditors’ remuneration are set out in Note 9 to the financial statements.
AUDITORS
The auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), have expressed their willingness to accept
re-appointment as auditors.
PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146) was registered on 2 January 2018 and with effect from that date,
PricewaterhouseCoopers (AF 1146), a conventional partnership was converted to a limited liability partnership.
This report was approved by the Board of Directors on 16 April 2018. Signed on behalf of the Board of Directors:
WANG, YOUDE ALAN HAMZAH SENDUT

DIRECTOR DIRECTOR
72
ANNUAL
REPORT
2017

STATEMENT BY DIRECTORS
PURSUANT TO SECTION 251(2) OF THE COMPANIES ACT 2016
We, Wang, YouDe and Alan Hamzah Sendut, two of the Directors of Hengyuan Refining Company Berhad, do hereby state
that, in the opinion of the Directors, the accompanying financial statements set out on pages 80 to 124 are drawn up so as to
give a true and fair view of the financial position of the Company as at 31 December 2017 and financial performance of the
Company for the financial year ended 31 December 2017 in accordance with the Malaysian Financial Reporting Standards,
International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.
Signed on behalf of the Board of Directors in accordance with a resolution of the Directors dated 16 April 2018.
WANG, YOUDE ALAN HAMZAH SENDUT

DIRECTOR DIRECTOR
73
ANNUAL
REPORT
2017

STATUTORY DECLARATION
01
02 PURSUANT TO SECTION 251(1) OF THE COMPANIES ACT 2016

FINANCIAL REPORTS
03
04
I, Foo Ai Li, the officer primarily responsible for the financial management of Hengyuan Refining Company Berhad, do solemnly
and sincerely declare that the financial statements set out on pages 80 to 124 are, to the best of my knowledge and belief,
05 correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the
Statutory Declarations Act, 1960.
FOO AI LI
CHIEF FINANCIAL OFFICER
Subscribed and solemnly declared by the abovenamed at Kuala Lumpur, Malaysia, on 16 April 2018.
Before me:
W.490 S. ARULSAMY
COMMISSIONER FOR OATHS
74
ANNUAL
REPORT
2017

INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HENGYUAN REFINING COMPANY BERHAD
(Incorporated in Malaysia)
(Company No. 3926-U)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Our opinion
In our opinion, the financial statements of Hengyuan Refining Company Berhad (“the Company”) give a true and fair view
of the financial position of the Company as at 31 December 2017, and of its financial performance and its cash flows for
the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting
Standards and the requirements of the Companies Act 2016 in Malaysia.
What we have audited
We have audited the financial statements of the Company, which comprise the statement of financial position as at
31 December 2017, and the statement of comprehensive income, statement of changes in equity and statement of cash flows
for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies,
as set out on pages 80 to 124.
Basis for opinion
We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on
Auditing. Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the
financial statements” section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence and other ethical responsibilities
We are independent of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of
the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of
Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with
the By-Laws and the IESBA Code.
Our audit approach
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements of the Company. In particular, we considered where the directors made subjective judgements; for example, in
respect of significant accounting estimates that involved making assumptions and considering future events that are inherently
uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among
other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due
to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial
statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the
industry in which the Company operates.
75
ANNUAL
REPORT
2017

01 INDEPENDENT AUDITORS’ REPORT
02 (Incorporated in Malaysia)
FINANCIAL REPORTS
03
04
Key audit matters
05 Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the Company for the current financial year. These matters were addressed in the context of our audit of the
financial statements of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matter How our audit addressed the key audit matter
Carrying amount of plant, machinery and equipment

Refer to Note 3 – critical accounting estimates and We performed the following audit procedures on the VIU
judgements, Note 2.3 – significant accounting policies, Note calculation which was approved by the Board:
13 – property, plant and equipment.
• Discussed with the Board Audit Committee members
The carrying amount of the Company’s plant, machinery and and the Chief Financial Officer on the VIU calculation
equipment of RM489,280,000 as at 31 December 2017, is to understand the key assumptions which formed the
net of accumulated impairment losses of RM417,144,000. basis of the recoverable amount. This included our
understanding of the updated key assumptions used to
We focused on this area considering the material amount
determine the refinery’s VIU since the last impairment
involved and the significant judgements and estimates
assessment performed in 2016. The key assumptions are
made by the Directors in determining the value in use (‘VIU’)
the projected refining margins and capital expenditure
for its impairment assessment.
to be incurred to ensure compliance with future changes
The key assumptions considered in the VIU calculation in regulations for product specifications;
include:
• Evaluated management’s cash flow projections and the
• the projected refining margins which fluctuates based process by which they were developed to ensure key
on the oil price and global economic changes; and inputs are in line with financial budgets approved by the
Board of Directors;
• the planned capital expenditure to be incurred to ensure
compliance with future changes in regulations for • Corroborated supporting evidence underlying the
product specifications. projected refining margins provided by management to
market data and industry research;
Based on the impairment assessment of the VIU, the
Directors are of the view that no reversal of impairment is • Agreed the capital expenditure for key projects in the
required. projections to the Board’s final investment decision
approval and enquired with relevant management on
the supporting and basis of deriving the cost estimates;
and
• Checked sensitivity analysis prepared by management
on these key assumptions used in the impairment model
to assess if reasonable changes in these assumptions
could give rise to a material reversal of the impairment
loss previously recognised.
Based on the procedures performed, we did not find any
material exception to the Directors’ view that no reversal of
impairment is required.
76
ANNUAL
REPORT
2017

Key audit matters (continued)
Key audit matter How our audit addressed the key audit matter
Translation of the Company’s transactions and

balances from Ringgit Malaysia (“RM”) to United
States Dollars (“USD”)
Refer to Note 2.1 – basis of preparation and Note 2.2 – We tested the accuracy of the translation of opening
significant accounting policy. balances, closing balances and transactions during the year
from RM to USD by performing the following:
The Company changed its functional currency from Ringgit
Malaysia (“RM”) to United States Dollars (“USD”) with • Tested that the opening balances as at 1 January 2017
effect from 1 January 2017. were translated using the opening foreign exchange
rate on 1 January 2017 which have been agreed to an
The Company’s accounting records are maintained in RM
external source;
and were manually converted from RM to the USD functional
currency for the financial year ended 31 December 2017. • On a sampling basis, tested the translation of revenue
and expense transactions denominated in currencies
We focused on the accuracy of the translation of the
other than USD during the financial year using the spot
Company’s financial results from RM to USD as it involved
rate applicable on the respective transaction dates;
large volumes of data and complex computation for cost of
sales as well as inventory balances. • On a sampling basis, tested the translation of depreciation
and amortisation using the rate applicable to the cost
of acquisition of the property, plant and equipment and
intangible assets during the financial year or the opening
foreign exchange rate on 1 January 2017 as applicable;
• Tested the cost of sales by agreeing the movement in
translated inventory balances and applying the USD
manufacturing cost in the valuation of petroleum
products; and
• All monetary assets and liabilities denominated in non-
USD currencies were translated using the closing foreign
exchange rate as at 31 December 2017.
Based on the procedures performed, we did not find any
material exceptions to the translation of transactions and
balances from RM to USD.
77
ANNUAL
REPORT
2017

01 INDEPENDENT AUDITORS’ REPORT
02 (Incorporated in Malaysia)
FINANCIAL REPORTS
03
04
Information other than the financial statements and auditors’ report thereon
05 The directors of the Company are responsible for the other information. The other information comprises the Chairman’s
Statement, Management Discussion & Analysis, Corporate Governance Statement, Board Audit Committee Report, Statement
on Risk Management and Internal Control, Directors’ Report, Company Properties, Additional Corporate Governance
Disclosures and Recurrent Related Party Transaction, but does not include the financial statements of the Company and our
auditors’ report thereon.
Our opinion on the financial statements of the Company does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements of the Company, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Company
or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial statements
The directors of the Company are responsible for the preparation of the financial statements of the Company that give a true
and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and
the requirements of the Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as the
directors determine is necessary to enable the preparation of financial statements of the Company that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements of the Company, the directors are responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements of the Company as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved
standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing,
we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
(a) Identify and assess the risks of material misstatement of the financial statements of the Company, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
(b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control.
78
ANNUAL
REPORT
2017

Auditors’ responsibilities for the audit of the financial statements (continued)
(c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
(d) Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Company
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
(e) Evaluate the overall presentation, structure and content of the financial statements of the Company, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of
the financial statements of the Company for the current financial year and are therefore the key audit matters. We describe
these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
OTHER MATTERS
This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies
Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of
this report.
PRICEWATERHOUSECOOPERS PLT PAULINE HO

LLP0014401-LCA & AF 1146 02684/11/2019 J
Chartered Accountants Chartered Accountant
Kuala Lumpur
16 April 2018
79
ANNUAL
REPORT
2017

STATEMENT OF COMPREHENSIVE INCOME
01
02 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

FINANCIAL REPORTS
03
04
Note 2017 2016
RM’000 RM’000
05
Revenue 6 11,583,467 8,365,330
Purchases (10,150,554) (7,550,208)
1,432,913 815,122
Other income 7 30,764 39,685
Manufacturing expenses (246,747) (223,002)
Administrative expenses (54,993) (46,021)
Depreciation and amortisation (205,688) (195,295)
Other operating gains/(losses) 80,932 (6,162)
Finance cost 8 (63,679) (49,054)
Profit before taxation 9 973,502 335,273

Taxation 10 (43,743) –
Profit for the financial year 929,759 335,273
Other comprehensive expense:

Items that will be reclassified to profit or loss:
Cash flow hedge - net fair value loss on derivative used for hedging (net of tax) (1,727) –
Items that will not be reclassified to profit or loss:
Foreign currency translation differences (149,777) –
(151,504) –
Total comprehensive income for the financial year 778,255 335,273
Earnings per unit of share (sen) - basic 11 310 112
80
ANNUAL
REPORT The accompanying notes to the financial statements form an integral part of these financial statements.
2017

STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
Note 2017 2016

RM’000 RM’000
NON-CURRENT ASSETS
Property, plant and equipment 13 736,834 851,282
Prepaid lease payments 14 1,632 1,824
Intangible assets 15 38,433 51,444
776,899 904,550
CURRENT ASSETS
Inventories 16 1,109,945 825,819
Trade receivables 17 1,081,278 950,686
Other receivables and prepayments 18 166,296 41,514
Tax recoverable 1,230 1,050
Derivative financial assets 19 3,498 –
Deposits with licensed banks 20 310,000 328,900
Bank balances 20 202,907 26,712
2,875,154 2,174,681
TOTAL ASSETS
3,652,053 3,079,231
CAPITAL AND RESERVES ATTRIBUTABLE TO OWNERS

OF THE COMPANY
Share capital 21 300,000 300,000
Retained earnings 23 1,640,198 710,439
Cash flow hedges 24 (1,727) –
Exchange translation reserve 24 (149,777) –
1,788,694 1,010,439
CURRENT LIABILITIES
Trade and other payables 25 587,297 651,879
Amounts due to immediate holding company 26 14,200 –
Derivative financial liabilities 19 14,812 –
Borrowings 27 79,103 87,324
695,412 739,203
NON-CURRENT LIABILITIES
Borrowings 27 1,125,905 1,329,589
Deferred tax liabilities 28 42,042 –
1,167,947 1,329,589
TOTAL EQUITY AND LIABILITIES

3,652,053 3,079,231
81
ANNUAL
The accompanying notes to the financial statements form an integral part of these financial statements. REPORT
2017

STATEMENT OF CHANGES IN EQUITY
01
02 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

FINANCIAL REPORTS
03
04
Issued and fully
paid ordinary
05 shares Non-distributable Distributable
Exchange
Number Nominal PSP translation Cash flow Retained Total
Note of shares value reserve reserve hedge earnings equity
‘000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 January 2017 300,000 300,000 – – – 710,439 1,010,439

Net profit for the
financial year – – – – – 929,759
929,759
Other comprehensive
expense for the
financial year – – – (149,777) (1,727) – (151,504)
Total comprehensive
(expense)/income
for the financial year – – – (149,777) (1,727) 929,759 778,255
At 31 December 2017 300,000 300,000 – (149,777) (1,727) 1,640,198 1,788,694
At 1 January 2016 300,000 300,000 1,924 – – 375,166 677,090

Total comprehensive income
for the financial year – – – – – 335,273 335,273
Transaction with owners
PSP from RDS* 22
- recharge by parent – – (2,983) – – – (2,983)
- charge during the
financial year – – 1,059 – – – 1,059
Total transactions with
owners – – (1,924) – – – (1,924)
At 31 December 2016 300,000 300,000 – – – 710,439 1,010,439
* Performance Share Plan from Royal Dutch Shell Plc
82
ANNUAL
2017

STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017
Note 2017 2016

RM’000 RM’000
CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 973,502 335,273
Adjustments for:
Interest expense 58,905 40,098
Interest income (16,564) (4,376)
Property, plant and equipment
- depreciation 189,384 191,754
- write off – 965
Amortisation of prepaid lease payments 22 19
Amortisation of intangible assets 16,282 3,523
Write back of allowance for inventories, net (113) (4,917)
Allowance/(reversal of allowance) for doubtful debts 1,383 (759)
Amortisation of term loan commitment fees 4,541 –
Net fair value loss/(gain) on derivative financial instruments 1,549 (13,195)
Net foreign exchange gain - unrealised (14,336) (11,267)
PSP from RDS – 1,059
Operating profit before changes in working capital 1,214,555 538,177

Changes in working capital:
Inventories (375,786) (125,198)
Trade and other receivables (357,333) (252,623)
Trade, other payables and amounts payable to immediate holding company (20,425) (172,650)
Cash generated from/(used in) operations 461,011 (12,294)

Interest received 16,564 4,376
Net tax (paid)/refund (765) 2,753
Net cash flows generated from/(used in) operating activities 476,810 (5,165)
CASH FLOWS FROM INVESTING ACTIVITIES

Property, plant and equipment
- additions (125,980) (14,773)
Intangible asset
- additions (3,432) (12,694)
Net cash flows used in investing activities (129,412) (27,467)
83
ANNUAL
REPORT
2017

01 STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 (continued)
02
FINANCIAL REPORTS
03
04
Note 2017 2016
RM’000 RM’000
05
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (86,006) (1,480,440)
Interest paid (58,972) (38,425)
Prepaid term loan instalments (571) (11,096)
Security deposit placed with a licensed bank for trade facilities (10,000) –
Net proceeds from borrowings – 1,413,043
Proceeds from settlement of derivatives – 318,383
Net cash flows (used in)/generated from financing activities (155,549) 201,465
NET INCREASE IN CASH AND CASH EQUIVALENTS 191,849 168,833

CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE FINANCIAL YEAR 344,516 175,523
EFFECTS OF EXCHANGE RATE CHANGES (43,479) 160
CASH AND CASH EQUIVALENTS AT THE END

OF THE FINANCIAL YEAR 20 492,886 344,516
Reconciliation of liabilities arising from financing activities:

Non-cash changes
At Foreign At 31
1 January Cash Interest Amortisation exchange December
2017 outflows accrued of term loan movement 2017
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Borrowings 1,416,913 (144,978) 58,905 3,870 (129,702) 1,205,008
During the financial year ended 31 December 2017, the Company acquired property, plant and equipment with an
aggregate cost of RM153,518,000 (2016: RM14,666,252). Cash payments of RM125,980,000 (2016: RM14,773,203) were
made for acquisitions of property, plant and equipment. The balance unpaid at the financial year end of RM27,538,000
(2016: RM8,050,049) is included within accruals for capital expenditure as disclosed in Note 25.
The Company also acquired intangible assets with an aggregated cost of RM7,534,000 (2016: 54,967,166) during the
financial year, for which cash payments of RM3,432,000 (2016: RM12,694,166) were made. The balance unpaid as at
31 December 2017 amounting to RM4,102,000 (2016: RM42,273,000) is included within accruals for capital expenditure
as disclosed in Note 25.
84
ANNUAL
2017

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017
1 GENERAL INFORMATION
The principal activities of the Company consist of refining and manufacturing of petroleum products. There has been no
significant change in these activities during the financial year.
The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main
Market of the Bursa Malaysia Securities Berhad (“Bursa Malaysia”).
The Company regards Malaysia Hengyuan International Limited (“MHIL”), a company incorporated in Labuan, Malaysia
and Shandong Hengyuan Petrochemical Group Company Limited, a company incorporated in China, as its immediate
and ultimate holding companies respectively.
The Company changed its name from Shell Refining Company (Federation of Malaya) Berhad to Hengyuan Refining
Company Berhad with effect from 9 March 2017.
The address of the registered office of the Company is:
Unit 30-01, Level 30
Tower A, Vertical Business Suite
Avenue 3, Bangsar South
No 8, Jalan Kerinchi
59200 Kuala Lumpur
The address of the principal place of business of the Company is:
Batu 1, Jalan Pantai
71000 Port Dickson
Negeri Sembilan
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 BASIS OF PREPARATION
The financial statements of the Company have been prepared in accordance with the Malaysian Financial
Reporting Standards (“MFRS”), International Financial Reporting Standards and the requirements of the Companies
Act 2016 in Malaysia.
The financial statements of the Company have been prepared under the historical cost convention, unless
otherwise indicated in the summary of significant accounting policies.
All values are rounded to the nearest thousand (“RM’000”) except when otherwise indicated.
The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reported period. It also requires Directors to exercise their judgment in the process of applying
the Company’s accounting policies. Although these estimates and judgment are based on the Directors’ best
knowledge of current events and actions, actual results may differ. As at 31 December 2017, the areas involving a
higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial
statements are disclosed in Note 3.
85
ANNUAL
REPORT
2017

01 NOTES TO THE FINANCIAL STATEMENTS
02
FINANCIAL REPORTS
03
04
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
05 2.1 BASIS OF PREPARATION (continued)
(a) Standards, amendments to published standards and interpretations to existing standards that are
effective to the Company
The amendments and improvements to published standards that are effective for the Company’s financial
year beginning on 1 January 2017 are as follows:
• Amendments to MFRS 107 “Statement of Cashflows – Disclosure Initiative”
• Amendments to MFRS 112 “Income Taxes – Recognition of Deferred Tax Assets for Unrealised Losses”
The adoption of the Amendments to MFRS 107 has required additional disclosure of changes in liabilities
arising from financing activities. Other than that, the adoption of these amendments did not have any impact
on the current period or any prior period and is not likely to affect future periods.
(b) Standards, amendments to published standards and interpretations to existing standards that are
applicable to the Company but not yet effective
The Company will apply the new standards, amendments to published standards and interpretations to
existing standards in the following periods:
(i) Financial year beginning on 1 January 2018
• MFRS 9 “Financial Instruments” will replace MFRS 139 “Financial Instruments: Recognition and
Measurement”
MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three
primary measurement categories for financial assets: amortised cost, fair value through profit or
loss and fair value through other comprehensive income (“OCI”). The basis of classification depends
on the entity’s business model and the cash flow characteristics of the financial asset. Investments
in equity instruments are always measured at fair value through profit or loss with an irrevocable
option at inception to present changes in fair value in OCI (provided the instrument is not held for
trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect
contractual cash flows and the cash flows represent principal and interest.
For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost
accounting for most financial liabilities, with bifurcation of embedded derivatives. The main changes are:
– For financial liabilities classified as fair value through profit or loss (“FVTPL”), the fair value changes
due to own credit risk should be recognised directly to other comprehensive income. There is no
subsequent recycling to profit or loss.
– When a financial liability measured at amortised cost is modified without this resulting in
derecognition, a gain or loss, being the difference between the original contractual cash flows
and the modified cash flows discounted at the original effective interest rate, should be recognised
immediately in profit or loss.
MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment
model used in MFRS 139. The expected credit loss model is forward-looking and eliminated the need for
a trigger event to have occurred before credit losses are recognised.
86
ANNUAL
REPORT
2017

2.1 BASIS OF PREPARATION (continued)
applicable to the Company but not yet effective (continued)
existing standards in the following periods: (continued)
(i) Financial year beginning on 1 January 2018 (continued)
The new hedge accounting rules aligns the accounting for hedging instruments more closely with the
Company’s risk management practices. As a general rule, more hedge relationships might be eligible
for hedge accounting, as the standard introduces a more principles-based approach. The Company
has confirmed that its current hedge relationships will qualify as continuing hedges upon the adoption
of MFRS 9.
The Company does not expect the requirements of the new standard to affect the classification and
measurement of both its financial assets and financial liabilities. The expanded disclosure requirements
and changes in presentation as required by the standard will be incorporated in the Company’s financial
statements for the financial year ending 31 December 2018.
• MFRS 15 “Revenue from contracts with customers” effective from 1 January 2018 replaces MFRS
118 “Revenue” and related interpretations. The core principle in MFRS 15 is that an entity recognises
revenue to depict the transfer of promised goods or services to the customer in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services.
Revenue is recognised when a customer obtains control of goods or services, i.e. when the customer
has the ability to direct the use of and obtain the benefits from the goods or services.
A new five-step process is applied before revenue can be recognised:
– Identify contracts with customers;
– Identify the separate performance obligations;
– Determine the transaction price of the contract;
– Allocate the transaction price to each of the separate performance obligations; and
– Recognise the revenue as each performance obligation is satisfied.
Key provisions of the new standard are as follows:
– Any bundled goods or services that are distinct must be separately recognised, and any discounts
or rebates on the contract price must generally be allocated to the separate elements.
– If the consideration varies, minimum amounts of revenue must be recognised if they are not at
significant risk of reversal.
– The point at which revenue is able to be recognised may shift: some revenue which is currently
recognised at a point in time at the end of a contract may have to be recognised over the contract
term and vice versa.
– There are new specific rules on licenses, warranties, non-refundable upfront fees and consignment
arrangement, to name a few.
87
– As with any new standard, there are also increased disclosures.
ANNUAL
The Company does not expect any material changes upon the adoption of MFRS 15 beginning
REPORT
1 January 2018 as the revenue recognition principles proposed by MFRS 15 are largely consistent
2017
with the current measurement and timing of revenue recognition.

02
FINANCIAL REPORTS
03
04
05 2.1 BASIS OF PREPARATION (continued)
applicable to the Company but not yet effective (continued)
existing standards in the following periods: (continued)
(ii) Financial year beginning on 1 January 2019
• MFRS 16 “Leases” supersedes MFRS 117 “Leases” and the related interpretations.
Under MFRS 16, a lease is a contract that conveys the right to control the use of an identified asset
for a period of time in exchange for consideration.
MFRS 16 eliminates the classification of leases by the lessee as either finance leases or operating
leases. MFRS 16 requires a lessee to recognise a “right-of-use” of the underlying asset and a lease
liability reflecting future lease payments for most leases.
The right-of-use asset is depreciated in accordance with the principle in MFRS 116 “Property, Plant
and Equipment” and the lease liability is accreted over time with interest expense recognised in
profit or loss.
For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to classify all
leases as either operating leases or finance leases and account for them accordingly.
The Company does not expect any material changes upon the adoption of MFRS 16 as its
existing classification and treatment of leased assets are consistent with the requirements of the
new standard.
2.2 FOREIGN CURRENCIES
The basis of accounting for foreign currency transactions is as follows:
(a) Functional and presentation currency
A company’s functional currency should reflect the underlying transactions, events and conditions that are
relevant to it which includes the currency of the primary economic environment in which a company generates
and expends cash, the currency in which funds from financing activities are generated and the currency in
which receipts from operating activities are usually retained. The Company changed its functional currency
from Ringgit Malaysia (“RM”) to United States Dollar (“USD”) with effect from 1 January 2017 following the
refinancing of the Company’s borrowings to entirely USD denominated loans.
The Company continues to present its financial statements in RM, consistent with the requirements of
Companies Act 2016 which requires financial statements and reports to be quoted in RM. The resulting
exchange differences arising from the conversion to RM presentation currency have been recognised within
other comprehensive income/expense.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions or valuation where items are remeasured. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-
monetary items denominated in foreign currencies that are measured at historical cost are translated using
88 the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign
currencies measured at fair value are translated using the exchange rates at the date when the fair value
ANNUAL
was determined. Foreign exchange gains and losses resulting from the settlement of such transactions and
REPORT
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
2017
currencies are recognised in profit or loss.

2.3 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost or valuation deemed as cost. The cost of an item of property,
plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated
with the item will flow to the Company and the cost of the item can be measured reliably. The cost of an item
of property, plant and equipment initially recognised includes its purchase price and any cost that is directly
attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the
intended manner. Cost also includes borrowing costs that are directly attributable to the acquisition, construction
or production of a qualifying asset (refer to accounting policy Note 2.16 on borrowing costs).
Subsequent to initial recognition, property, plant and equipment are measured at cost less accumulated depreciation
and accumulated impairment losses. When significant parts of property, plant and equipment are required to be
replaced in intervals, the Company recognises such parts as individual assets with specific useful lives. The carrying
amount of any component accounted for as a separate asset is derecognised when replaced.
Freehold land is not depreciated as it has an infinite life.
All property, plant and equipment are depreciated on a straight-line basis to allocate the cost, or the revalued
amounts deemed as cost, to their residual values, over their estimated useful lives at the following annual rates:
Land improvements and buildings 2.5% - 5.0%
Plant, machinery and equipment 9.0% - 33.3%
Motor vehicles 20%
Depreciation on work-in-progress commences when the assets are ready for their intended use.
Plant, machinery and equipment comprise components of the refinery which are subject to different refurbishment
cycle. Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at the end of each
reporting period.
At the end of each reporting period, the Company assesses whether there is any indication of impairment. If such
indicators exist, the carrying amount of the asset is assessed and written down immediately to its recoverable
amount. Refer accounting policy Note 2.7 on impairment of non-financial assets. An item of property, plant and
equipment is derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Gains and losses on derecognition of the asset is included in the profit or loss in the year the asset
is derecognised.
2.4 MAINTENANCE COSTS
Asset replacement costs incurred by the Company for major scheduled maintenance of the refinery are capitalised
as part of the refinery assets and depreciated on a straight-line basis over the period until the next major scheduled
maintenance. All other repairs and maintenance are charged to profit or loss in the financial period they are incurred.
2.5 PREPAID LEASE PAYMENTS
Prepaid lease payments are initially measured at cost. Following the initial recognition, prepaid lease payments
are measured at cost less accumulated amortisation and accumulated impairment losses. Refer accounting policy
Note 2.7 on impairment of non-financial assets. The prepaid lease payments are amortised over their respective
lease terms.
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REPORT
2017

02
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03
04
05 2.6 INTANGIBLE ASSETS
Intangible assets comprise of software costs that are acquired by the Company, which have finite useful lives, and
are measured at cost less any accumulated amortisation.
Intangible assets are amortised from the date that they are available for use. Amortisation is based on the cost of
an asset less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated
useful lives of the intangible assets.
The estimated useful lives of intangible assets are between 3 and 5 years. Amortisation methods, useful lives and
residual values are reviewed at the end of each reporting period and adjusted, if appropriate.
2.7 IMPAIRMENT OF NON-FINANCIAL ASSETS
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any
such indication exists, the Company makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the
purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating-units (“CGU”)).
In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value and
the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is
written down to its recoverable amount. Impairment losses are recognised in profit or loss.
An assessment is made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed
only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable
amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognised previously. Such reversal is recognised in profit or loss.
2.8 FINANCIAL ASSETS
Financial assets are recognised in the statement of financial position when, and only when, the Company become
a party to the contractual provisions of the financial instrument.
(a) Classification
The Company classifies its financial assets in the following categories: at fair value through profit or loss and
loans and receivables. The classification depends on the purpose for which the financial assets were acquired.
The Company determines the classification of its financial assets at initial recognition.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if it is acquired or incurred principally for the purpose of selling or repurchasing
in the near term. Derivatives are also categorised as held for trading unless they are designated as
hedges. Assets in this category are classified as current assets if expected to be settled within 12 months;
otherwise, they are classified as non-current.
90
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REPORT
2017

2.8 FINANCIAL ASSETS (continued)
(a) Classification (continued)
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for maturities greater than
12 months after the end of the reporting period. These are classified as non-current assets. The
Company’s loans and receivables comprise trade and other receivables and cash and cash equivalents.
(b) Recognition and initial measurement
Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried
at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially
recognised at fair value, and transaction costs are expensed in profit or loss.
(c) Subsequent measurement – gains and losses
Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables
are subsequently carried at amortised cost using the effective interest method.
Changes in the fair values of financial assets at fair value through profit or loss, including the effects of
currency translation, interest and dividend income are recognised in profit or loss in the period in which the
changes arise. Gains and losses for loans and receivables are recognised in profit or loss when the loans and
receivables are derecognised or impaired, and through the amortisation process.
(d) Subsequent measurement - impairment of financial assets
Assets carried at amortised cost
At the end of the reporting period, the Company assesses whether there is objective evidence that a financial
asset or group of financial assets is impaired. A financial asset or a group of financial assets are impaired only
if there is objective evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets that can be reliably estimated.
The criteria that the Company uses to determine that there is objective evidence of an impairment loss
include:
• Significant financial difficulty of the customers;
• A breach of contract, such as a default or delinquency in interest or principal payments; or
• It becomes probable that the customers will enter bankruptcy or other financial reorganisation.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired
individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics.
Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience
of collecting payments, an increase in the number of delayed payments in the portfolio past the average
credit period and observable changes in national or local economic conditions that correlate with default
on receivables.
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04
05 2.8 FINANCIAL ASSETS (continued)
(d) Subsequent measurement - impairment of financial assets (continued)
Assets carried at amortised cost (continued)
The amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted
at the financial asset’s original effective interest rate. The asset’s carrying amount is reduced and the amount
of the loss is recognised in profit or loss. If loans and receivables have a variable interest rate, the discount
rate for measuring any impairment loss is the current effective interest rate determined under the contract.
As a practical expedient, the Company may measure impairment on the basis of an instrument’s fair value
using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised (such as an improvement in the
debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance
account. When a trade receivable is uncollectible, it is written off against the related allowance account. Such
assets are written off after all the necessary procedures have been completed and the amount of the loss has
been determined.
(e) De-recognition
Financial assets are de-recognised when the right to receive cash flows from the assets have expired or have
been transferred and the Company has transferred substantially all risks and rewards of ownership. On
de-recognition of a financial asset in its entirety, the difference between the carrying amount and the sum of
the consideration received and any cumulative gain or loss that had been recognised in other comprehensive
income is recognised in profit or loss.
2.9 DERIVATIVE AND HEDGING ACTIVITIES
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting period.
The accounting for subsequent changes in fair value depends on whether the derivative is designated as hedging
instrument, and if so, the nature of the item being hedged. Derivatives that do not qualify for hedge accounting
are classified as held for trading and accounted for in accordance witht the accounting policy set out in Note 2.8.
The Company designates certain derivatives as either:
• Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
• Hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable
forecast transactions (cash flow hedges).
The Company documents at the inception of the hedging transaction the relationship between hedging instruments
and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.
The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting
92 changes in fair value or cash flows of hedged items.
ANNUAL
REPORT
2017

2.9 DERIVATIVE AND HEDGING ACTIVITIES (continued)
The fair values of various derivative financial instruments used for hedging purposes are disclosed in Note 19.
Movements in the hedging reserve in shareholders’ equity are shown in Note 24. The full fair value of a hedging
derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more
than 12 months; it is classified as current asset or liability when the remaining maturity of the hedged item is less
than 12 months. Trading derivatives are classified as a current asset or liability.
(a) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised in other comprehensive income and accumulated in reserves in equity. The gain or
loss relating to the ineffective portion is recognised immediately in profit or loss within “other operating
gains/losses”.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects
profit or loss (for instance when the forecast sales that is hedged takes place).
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when
the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity is immediately realised to profit
or loss.
(b) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognised immediately in profit or loss and are
included in “other operating gains/losses”.
(c) Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives
when their risks and characteristics are not closely related to those of the host contracts and the host contracts
are not carried at fair value.
Crude purchases resulting in variability in the payable associated with the commodity price gives rise to
an embedded derivative which is not closely related to the host financial instrument. The Company has
an accounting policy choice for subsequent changes in the fair value of the embedded derivative. Cost of
inventory could be adjusted to reflect subsequent changes in the fair value of the embedded derivative on
the basis that such changes are part of the purchase and other costs incurred in bringing the inventory to its
present location and condition. Alternatively, these changes could be charged to profit or loss in accordance
on the basis that the cost of inventory is determined at the time of delivery and the bifurcated embedded
derivative should be accounted for separately as if it was a freestanding instrument.
The Company opted to reflect subsequent changes in the fair value of the embedded derivative as part of the
cost of inventory. The chosen policy will be consistently applied.
93
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REPORT
2017

02
FINANCIAL REPORTS
03
04
05 2.10 TRADE RECEIVABLES
Trade receivables are amounts due from customers for oil products sold in the ordinary course of business.
If collection is expected in one year or less, they are classified as current assets. If not, they are presented as
non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest rate method, less allowance for impairment. See accounting policy 2.8 on
financial assets.
2.11 CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, cash and cash equivalents comprise cash, bank balances, deposits
with licensed banks and other short-term and highly liquid investments with original maturities of three months
or less.
2.12 INVENTORIES
Inventories are stated at the lower of cost and net realisable value.
Cost comprises direct purchase costs (including transportation, insurance and premium) and is determined using
the first in, first out method. The cost of finished goods and work in progress comprises design costs, raw materials,
direct labour, other direct costs and an appropriate proportion of variable and fixed overhead expenditure, the
latter being allocated on the basis of normal operating capacity and gains/losses on qualifying cash flow hedges for
purchase of raw materials. It excludes borrowing costs. The cost of finished products includes the cost of crude oil,
direct materials, labour and an appropriate proportion of fixed and variable manufacturing overheads.
Net realisable value is the estimate of selling price in the ordinary course of business, less any cost of completion
and selling expenses.
2.13 FINANCIAL LIABILITIES
Financial liabilities are classified according to the substance of the contractual arrangements entered into and the
definitions of a financial liability.
(a) Classification
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other
financial liabilities.
(i) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial
liabilities held for trading include derivatives entered into by the Company that do not meet the hedge
accounting criteria. Liabilities in this category are classified within current liabilities if they are either held
for trading or are expected to be settled within 12 months after the reporting date. Otherwise, they are
classified as non-current.
(ii) Other financial liabilities
The Company’s other financial liabilities include trade payables, other payables, amounts due to
holding company and borrowings. Loans and borrowings are classified as current liabilities unless the
Company has an unconditional right to defer settlement of the liability for at least 12 months after the
94 reporting date.
ANNUAL
REPORT
2017

2.13 FINANCIAL LIABILITIES (continued)
(b) Recognition and initial measurement
Derivative liabilities are initially measured at fair value. Trade and other payables are recognised initially at fair
value plus directly attributable transaction costs. Loans and borrowings are recognised initially at fair value,
net of transaction costs incurred.
(c) Subsequent measurement – gains and losses
Derivative liabilities are subsequently stated at fair value, with any resultant gains or losses recognised in
profit or loss. Net gains or losses on derivatives include exchange differences. Trade and other payables and
loans and borrowings are subsequently measured at amortised cost using the effective interest method. For
other financial liabilities, gains and losses are recognised in the profit or loss when the financial liabilities are
derecognised, and through amortisation process.
(d) De-recognition
A financial liability is de-recognised when the obligation under the liability is extinguished. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition
of the original liability and the recognition of a new liability, and the difference in the respective carrying
amounts is recognised in profit or loss.
2.14 TRADE PAYABLES
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method. See accounting policy 2.13 on financial liabilities.
2.15 PROVISIONS
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past
events, when it is probable that an outflow of resources will be required to settle the obligation, and when a
reliable estimate of the amount can be made.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation
using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to
the obligation. The increase in the provision due to passage of time is recognised as interest expense.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer
probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed.
2.16 BORROWINGS AND BORROWING COSTS
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently
stated at amortised cost; any difference between the fair value (net of transaction costs) and the redemption value
is recognised in profit or loss over the period of the borrowings using the effective interest method, except for
borrowing costs incurred for the construction of any qualifying asset.
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04
05 2.16 BORROWINGS AND BORROWING COSTS (continued)
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale,
are added to the cost of those assets, until such time the assets are substantially ready for their intended use or sale.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it
is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown
occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down,
the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which
it relates.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Borrowings are removed from the statement of financial position when the obligation specified in the contract is
discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred
or liabilities assumed, is recognised in profit or loss as other income or finance costs.
2.17 OFFSETTING FINANCIAL INSTRUMENTS
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when
there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net
basis, or realise the asset and settle the liability simultaneously.
2.18 REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the
revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.
(a) Sale of oil products
Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of
the goods to the customer.
Revenue is recognised upon delivery of products and acceptance by customers of refined and partially refined
oil products and feedstocks, net of government taxes.
(b) Interest income
Interest income is recognised using the effective interest method. When a loan and receivable is impaired,
the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flow
discounted at the original effective interest rate of the instrument, and continues unwinding the discount as
interest income. Interest income on impaired loan and receivables are recognised using the original effective
interest rate.
(c) Other income
Other income comprises mainly of operating and transport fees charged to customers.
2.19 PURCHASES
Purchases reflect all costs related to acquisition of inventories and supplies used for conversion into finished
96 products, including the effects of the changes therein (cost of inventories), foreign exchange gains and losses.
ANNUAL
REPORT
2017

2.20 LEASES
Company as lessee
(a) Finance leases
Leases of property, plant and equipment where the Company assumes substantially all the risks and rewards
of ownership are classified as finance leases.
Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased
property and the present value of the minimum lease payments. Each lease payment is allocated between
the liability and finance charges so as to achieve a constant rate of interest on the remaining balance of the
liability. The corresponding rental obligations, net of finance charges is included in payables. Finance charges
are charged to profit or loss.
Property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over
the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Company
will obtain ownership at the end of the lease term.
(b) Operating leases
Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments made under operating leases are charged to profit or loss on a
straight-line basis over the lease period.
Initial direct costs incurred by the Company in negotiating and arranging operating leases are capitalised as
prepayments and recognised in profit or loss over the lease term on a straight-line basis.
2.21 EMPLOYEE BENEFITS
(a) Short-term employee benefits
The Company recognises a liability and an expense for bonuses, based on a formula that takes into
consideration the profit attributable to the Company’s shareholders after certain adjustments. The Company
recognises a provision where contractually obliged or where there is a past practice that has created a
constructive obligation.
Wages, salaries, paid annual leave, sick leave, bonuses, social security contributions and non-monetary
benefits are accrued in the period in which the associated services are rendered by employees of the Company.
Short term accumulating compensated absences such as paid annual leave are recognised when services are
rendered by employees that increase their entitlement to future compensated absences, and short term non-
accumulating compensated absences such as sick leave are recognised when the absences occur.
(b) Post-employment benefits
The Company’s post-employment benefit scheme comprises only of the defined contribution plan.
Contributions to the Employees’ Provident Fund, which is a defined contribution plan, are charged to the
profit or loss when incurred. Once the contributions have been paid, the Company has no further payment
obligations.
(c) Employee leave entitlement
Employee entitlements to annual leave are recognised as a liability when they accrue to the employees. The 97
estimated liability for leave is recognised for services rendered by employees up to the reporting date.
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04
05 2.21 EMPLOYEE BENEFITS (continued)
(d) Long-term employee benefits
The Company provides death in service and long-term disability benefits to its employees. The benefit is on
a lump sum basis based on a multiplier of the last drawn average annual salary of the employee and is not
dependent on the employee’s length of service. Accordingly, it is charged to profit or loss when incurred.
2.22 CURRENT AND DEFERRED INCOME TAX
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is
also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of the reporting period.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities. This liability is measured using the best estimate of the most likely outcome.
Deferred tax assets and liabilities are recognised on temporary differences arising between the amounts attributed
to assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the
end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred
tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable profits will be available against which the deductible
temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent
that it has become probable that future taxable profit will allow the deferred tax assets to be utilised.
Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied
by the same taxation authority on the taxable entity.
2.23 SHARE CAPITAL
(a) Classification
An equity instrument is any contract that evidence a residual interest in the assets of the Company, after
deducting all of its liabilities. Ordinary shares are classified as equity. Ordinary shares are recorded at the
proceeds received, net of directly attributable incremental transaction costs.
(b) Dividend distribution
98 Dividend distribution to owners of the Company is debited directly to equity. The corresponding liability is
recognised in the period in which the dividends are approved.
ANNUAL
REPORT
2017

2.24 SHARE BASED PAYMENTS
Royal Dutch Shell Plc (“RDS”), the Company’s ultimate holding company prior to the acquisition of the issued and
paid up share capital of the Company by Malaysia Hengyuan International Limited, operated a number of equity
settled, share-based compensation plan for the employees of RDS and its subsidiaries.
Employee services received in exchange for the grant of the share options were recognised as an expense in
the prior year’s profit or loss over the vesting period of the grant, with a corresponding increase in equity as a
contribution from RDS.
The total amount to be expensed over the vesting period was determined by reference to the fair value of the share
options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales
growth targets). Non-market vesting conditions were included in the assumptions about the number of options
that were expected to vest. At the end of the previous reporting date, RDS revised its estimates of the number of
share options that were expected to vest. It recognised the impact of the revision of original estimates, if any, in
prior year’s profit or loss, with a corresponding adjustment to equity as an employees’ share option scheme reserve.
Where RDS recharged the Company for the equity instruments granted, the recharge was treated as an adjustment
to the equity contribution from RDS.
All PSP initially funded by RDS had been repaid by the Company to RDS in the previous financial year.
2.25 EARNINGS PER SHARE
(a) Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the Company, excluding any costs of servicing equity other than
ordinary shares; and
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for
bonus elements in the ordinary shares issued during the year and excluding treasury shares.
2.26 CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The Company does not recognise contingent liability but discloses its existence in the financial statements. A
contingent liability is a possible obligation that arises from past event whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a
present obligation that is not recognised because it is not probable that an outflow of resources will be required to
settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot
be recognised because it cannot be measured reliably.
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company. The
Company does not recognise contingent assets but discloses its existence where inflows of economic benefits are
probable, but not virtually certain.
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04
05 2.27 SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of Directors.
No segmental information is considered necessary for analysis by business or by geographical segments. This is
because the Company is principally engaged in the business of refining and manufacturing of petroleum products
in Malaysia, which is a single business segment. Also, the Company’s primary segment operations are also
concentrated within Malaysia, hence operating within a single geographical segment.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amount of
assets within the next financial year is:
Impairment of plant, machinery and equipment
The Company reviews the carrying values of its plant and equipment in accordance to its accounting policy stated in Note
2.7. The Company’s results from operations in any given period are principally driven by the demand for and price of
petroleum products relative to the supply and cost of crude oil.
The Company had a change in its controlling shareholder in the previous financial year, being Malaysia Hengyuan
International Limited (‘MHIL’). In the current financial year, MHIL has confirmed its intention to implement necessary
upgrades to the refinery which will ensure compliance with future changes in regulations for product specification. In view
of this, the Directors undertook a review of the carrying value of the plant, machinery and equipment of RM489,280,000
net of accumulated impairment loss of RM417,144,000. The recoverable amount of the plant, machinery and equipment,
being defined as a cash-generating-unit, was determined using the value in use (‘VIU’) method based on management’s
internal assessment benchmarked to external sources. The VIU is the net present value of the projected future cashflow
derived from the asset discounted at an appropriate discount rate.
Key assumptions considered in the VIU calculations include projected refining margins adjusted for planned turnaround
every four years. The VIU calculations also took into account the planned capital expenditure and incremental operating
costs anticipated to ensure compliance with future changes in product specification regulations. The assessment was
based on a 20-year projected cash flow, which were discounted at a rate of 11%.
The positive refining margin in the current year remains uncertain going forward due to market stabilisation initiatives by
the oil and gas industry. Therefore, it is reasonably possible that the estimate of expected future cash flows may change
in the near term resulting in the need to adjust the resulting cash flow projections to support the recoverable amount
of the refinery. Accordingly, the Directors are of the view that no reversal of impairment to the carrying amount of the
refinery is required.
100
ANNUAL
REPORT
2017

4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company is exposed to a variety of financial risks; market risk (including foreign currency exchange risk and interest
rate risk), credit risk, liquidity and cash flow risk and capital risk. The Company’s overall financial risk management
objective is to ensure the Company creates value for its shareholders. The Company focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. Financial
risk management is carried out through risk reviews, assurance plans, internal control systems, insurance programmes
and adherence to the Company’s Treasury Policy and Procedures.
The Company may enter into foreign exchange forward contracts to manage its exposure to foreign currency risks
in receivables and payables. In addition, financial assets and liabilities such as trade receivables, trade payables and
borrowings arise directly from the Company’s operations. Straightforward derivative financial instruments are utilised
by the Company to manage the exposure to foreign currency and interest rate risks. The Company does not enter into
derivative financial instruments for trading purposes.
(a) Market risk
Market risk refers to the risk that changes in market prices, such as foreign exchange rates, interest rates and prices
will affect the Company’s financial position and cash flows.
(i) Foreign currency exchange risk
Foreign currency exchange risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates.
The objective of the Company’s currency risk management policies is to allow the Company to effectively
manage exposures that may arise from operating and financing activities.
The Company is exposed to currency risk as a result of foreign currency transactions entered into in currencies
other than its functional currency. In the previous financial year, financial assets and liabilities affected by
foreign currency exchange risk include intercompany balances, receivables and payables, deposit and bank
balances and bank borrowings. The Company has changed its functional currency from RM to USD with effect
from 1 January 2017 following the refinancing of the Company’s borrowings to entirely USD denominated
loans. Due to the change in functional currency, the Company’s exposure to foreign currency exchange
risk has changed from USD to RM. The financial assets and liabilities affected by foreign currency risk in the
current financial year include receivables and payables, amount due to holding company and deposit and
bank balances.
The Company may enter into foreign currency swaps and forward contracts to limit its exposure on foreign
currency receivables and payables and on cash flows generated from anticipated transactions denominated
in foreign currencies.
101
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
05 (a) Market risk (continued)
(i) Foreign currency exchange risk (continued)

The following analysis illustrates the Company’s sensitivity to changes in RM to USD exchange rate
(2016: USD to RM exchange rate):
Increase/(Decrease) in profit
after tax, equity and net assets
2017 2016
RM’000 RM’000
RM strengthens by 10% 99,882 –

RM weakens by 10% (99,882) –
USD strengthens by 10% – (139,799)
USD weakens by 10% – 139,799
(ii) Interest rate risk

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate
because of changes in market interest rates.
The Company finances its operations through a mixture of retained earnings and bank borrowings. The
Company’s interest rate risk arises from borrowings at variable rates and deposits with licensed banks and
are managed in compliance with the treasury policy of the Company.
Surplus funds are placed with licensed financial institutions to earn interest income based on prevailing
market rates. The Company manages its interest rate risks by placing such funds on short tenures of 12
months or less.
The interest rate profile of the Company’s significant interest-bearing financial instrument have been
presented in Notes 20 and 27.
Cash flow sensitivity analysis for variable rate instruments
The Company analyses its cash flow interest rate exposure on a regular basis. Various scenarios are simulated
taking into consideration refinancing, renewal of existing positions, alternative financing and hedging.
Based on these scenarios, the Company calculates the impact on profit or loss of a defined interest rate shift.
The scenarios are run only for borrowings and deposits that represent the major interest-bearing positions.
2017 2016
RM’000 RM’000
100 basis points increase in interest rate (9,103) (10,769)

100 basis points decrease in interest rate 9,103 10,769
102
ANNUAL
REPORT
2017

(a) Market risk (continued)
(iii) Commodity price risk

The Company is exposed to fluctuations in crude oil and petroleum product prices which may affect the
value of the Company’s assets, liabilities or expected future cash flows. During the financial year, the Board
has approved a policy for the hedging of refining margins as part of the Company’s risk management policy.
Refining margins are hedged based on the Company’s physical exposures to prices of crude oil and its 3
main products namely mogas, gasoil and jet fuel. Competitive quotes are obtained from counterparties
and compared to published prices as a basis for entering into a hedge. The purpose of executing these
hedges are to stabilise refining margins exposure towards achieving a sustainable profit over the short and
medium term.
2017 2016
RM’000 RM’000
10% increase in refining margin 4,499 –

10% decrease in refining margin (4,499) –
(b) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Company.
At the reporting date, the Company’s maximum exposure to credit risk is represented by the carrying amounts of
each class of financial assets recognised in the statement of financial position.
(i) Receivables
Credit risk on customers arises when sales are made on deferred credit terms. It seeks to control credit risk by
setting counterparty limits and ensuring that sales of products are made only to approved customers with an
appropriate credit history. It is the Company’s policy to monitor the financial standing of the customers on an
ongoing basis to ensure that the Company is exposed to a minimal credit risk. The maximum credit exposure
associated with financial assets is equal to the carrying amount.
78% (2016: 95%) of the Company’s total receivables at the reporting date are due from two (2016: two)
major customers in the oil and gas industry in Malaysia. The Directors are of the view that such credit risk
is minimal in view of the strength of the customers’ financial position and no history of default from these
major customers.
(ii) Deposits with licensed banks, bank balances and forward contracts
The Company seeks to invest cash assets safely and profitably. Deposits and forward contracts entered into
are placed only with financial institutions with strong long-term credit ratings based on independent rating
agencies. The likelihood of non-performance by these financial institutions is remote based on their high
credit ratings.
None of the financial assets have been renegotiated in the current financial year.
103
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
05 (c) Liquidity and cash flow risks
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company’s exposure to liquidity risk arises principally from its payables and borrowings. The Company ensures
that cash is available to meet working capital and other financing obligations, and that cash flows are managed
efficiently. This is done through cash forecasts to achieve optimal cash management planning. The Company
sets a minimum level of cash to be held on a daily basis in order to meet both firm commitments and forecast
obligations. The Company has access to undrawn facilities from its Term Loan II, subject to cash deposits placed by
an intermediate holding company, as disclosed in Note 27.
As at 31 December 2017, there are outstanding borrowings amounting to RM1,205,008,000 (2016:
RM1,416,913,000). The borrowings have been repaid in the subsequent year using a mix of cash flows generated
from operations and new financing facilities as disclosed in Note 35.
All financial liabilities of the Company that will be due and payable within the next 12 months are classified
within current liabilities. The contractual cash flows of derivative financial liabilities and non-derivative financial
liabilities are presented below:
Total
Between Between contractual Total
Within 1 to 2 to undiscounted carrying
1 year 2 years 5 years cash flows amount
RM’000 RM’000 RM’000 RM’000 RM’000
At 31 December 2017
Non-derivative financial liabilities
Trade and other payables excluding
statutory liabilities 586,705 – – 586,705 586,705
Amount due to holding company 14,200 – – 14,200 14,200
Borrowings 138,284 182,186 1,083,432 1,403,902 1,205,008
739,189 182,186 1,083,432 2,004,807 1,805,913
Derivative financial liabilities

Refining margin swaps 5,619 – – 5,619 5,619
Forward priced commodity contracts 7,731 – – 7,731 7,731
Forward foreign currency contracts
Gross settled
- inflow (221,756) – – (221,756) –
- outflow 223,218 – – 223,218 1,462
14,812 – – 14,812 14,812
754,001 182,186 1,083,432 2,019,619 1,820,725
At 31 December 2016
Trade and other payables excluding
statutory liabilities 642,354 – – 642,354 642,354
104 Borrowings 150,000 340,379 1,187,360 1,677,739 1,416,913
ANNUAL 792,354 340,379 1,187,360 2,320,093 2,059,267
REPORT
2017

(d) Capital risk management
The Company’s objectives when managing capital are:
• to safeguard the Company’s ability to continue as a going concern;
• to maximise returns for shareholders; and
• to maintain an optimal capital structure which minimises the cost of capital while maintaining sufficient
liquidity.
The Company monitors capital on the basis of gearing ratio. This ratio is calculated as total borrowings divided
by total capital. The capital structure of the Company consists of borrowings and total equity:
2017 2016
RM’000 RM’000
Total borrowings 1,205,008 1,416,913
Total equity 1,788,694 1,010,439

Total borrowings 1,205,008 1,416,913
Total capital 2,993,702 2,427,352
Gearing ratio 40% 58%
The borrowings of the Company are subject to the banks’ covenants, which include debt service cover ratios,
which the Company has complied with.
5 FAIR VALUE MEASUREMENTS

(a) Determination of fair value
Financial instruments that are not carried at fair value and whose carrying amounts are reasonable
approximation of fair value
The carrying amounts of financial assets and liabilities classified within current assets and current liabilities
respectively approximate their fair values due to the relatively short term nature of these financial instruments.
Fair values of non-derivative financial liabilities are calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest at the end of the reporting period.
Financial instruments carried at amortised cost
The carrying amount of financial assets and liabilities measured at amortised cost approximates their respective
fair values.
105
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
5 FAIR VALUE MEASUREMENTS (continued)
05 (a) Determination of fair value (continued)
Financial instruments carried at fair value

Refining margin swaps, forward foreign currency contracts and forward priced commodity contracts are valued
using a valuation technique with market observable inputs. The most frequently applied valuation techniques
include forward pricing model, using present value calculations. The models incorporate various inputs including
the credit quality of counterparties and foreign exchange spot and forward rates.
Fair value hierarchy
The Company measures fair value using the following fair value hierarchy that reflects the significance of the input
used in making the measurements:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs).
There were no outstanding derivative financial instruments as of 31 December 2016. Derivative financial
instruments outstanding as at 31 December 2017 are detailed below:
As at 31 December 2017
Contract Value Fair Value
Derivatives USD’000 RM’000
Refining margin swaps, net 40,826 (2,121)

Forward foreign currency contracts 55,000 (1,462)
Forward priced commodity contracts 51,030 (7,731)

The table below summarises all financial instruments carried at fair value as at reporting date, based on a hierarchy
that reflects the significance of the inputs used in measuring its respective fair values.
Level 1 Level 2 Level 3 Total
RM’000 RM’000 RM’000 RM’000
Financial assets/(liabilities)
Derivative financial assets:
- Refining margin swaps – 3,498 – 3,498
Derivative financial liabilities:
- Refining margin swaps – (5,619) – (5,619)
- Forward foreign currency contracts – (1,462) – (1,462)
- Forward priced commodity contracts – (7,731) – (7,731)
At 31 December 2017 – (11,314) – (11,314)
During the year, there were no transfers between Level 1 and Level 2 fair value measurements and no transfers into
and out of Level 3 fair value measurement. The fair values were obtained from published rates of counterparties.
106
ANNUAL
REPORT
2017

6 REVENUE
2017 2016
RM’000 RM’000
Sale of oil products:

- refined 11,579,846 8,363,891
- crude oil 3,621 1,439
11,583,467 8,365,330
7 OTHER INCOME
2017 2016
RM’000 RM’000
Operating and transport fees 14,200 13,669

Interest income 16,564 4,376
Cost recovery from intellectual property buy-out – 21,640
30,764 39,685
In the previous financial year, as part of the acquisition of 51% of the issued and paid up share capital of the Company
by MHIL from Shell Overseas Holdings Limited (“SOHL”), RDS acquired ownership of all intellectual property previously
developed in the Company’s refinery via an intellectual property buy-out arrangement.
RDS then granted the Company rights to use said intellectual property to operate the refinery indefinitely for a
one-time fee.
8 FINANCE COST
2017 2016
RM’000 RM’000
Interest expense:
- term loan 58,905 32,427
- short-term borrowings – 1,285
- bank facilities and commitment fees 4,541 –
- cross-currency interest rate swap (‘CCIRS’) – 6,386
Total interest expense 63,446 40,098

Foreign exchange loss on term loans:
- unrealised – 2,193
- realised – 19,878
Fair value gain on derivative financial instruments – (13,195)
Others 233 80
63,679 49,054
107
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
9 PROFIT BEFORE TAXATION
05 2017 2016
RM’000 RM’000
The profit before taxation is arrived at after charging/(crediting):

Auditors’ remuneration:
- statutory audit fees 355 390
- audit-related fees 135 48
- fees for non-audit services 58 –
Cost of inventories 10,156,363 7,206,687
Write back of allowance for inventories (113) (4,917)
Staff cost:
- salaries, bonus and allowances 75,691 67,620
- defined contribution plan 11,315 11,516
- other employee benefits 7,933 8,897
- share based payments – 1,059
Foreign exchange (gain)/ loss
- realised (56,962) 52,271
- unrealised (25,494) (11,267)
Net fair value loss/(gain) on derivative financial instruments 1,549 (13,195)
Ineffective portion of cash flow hedges (25) –
Depreciation of property, plant and equipment 189,384 191,754
Property, plant and equipment written off – 965
Amortisation of prepaid lease payments 22 19
Amortisation of intangible asset 16,282 3,523
Allowance/(reversal of allowance) for doubtful debts 1,383 (759)
10 TAXATION
2017 2016
RM’000 RM’000
Current tax – Malaysian tax

- current financial year 109 –
Deferred taxation (Note 28)
- origination and reversal of temporary differences 43,634 –
Tax expense recognised in profit or loss 43,743 –
Deferred taxation (Note 28)

- origination and reversal of temporary differences (545) –
Taxation recognised in other comprehensive income (545) –
108
ANNUAL
REPORT
2017

10 TAXATION (continued)
Income tax is calculated at the Malaysian statutory tax rate of 24% (2016: 24%) of the estimated assessable profit for
the year. The numerical reconciliation between the effective tax rate and the applicable statutory tax rate is as follows:
2017 2016
% %
Applicable statutory tax rate 24 24

Tax effects in respect of:
- expenses not deductible for tax purposes 1 3
- income not taxable due to difference between functional and tax reporting currency (1) –
- utilisation of tax losses / deductible temporary differences
previously not recognised (19) (27)
Effective tax rate 5 –
11 EARNINGS PER UNIT OF SHARE

Basic earnings per unit of share of the Company is calculated by dividing the profit for the financial year by the weighted
average number of ordinary shares in issue during the financial year.
2017 2016
Profit for the financial year (RM’000) 929,759 335,273

Weighted average number of ordinary shares in issue (‘000) 300,000 300,000
Basic earnings per unit of share (sen) 310 112
12 DIRECTORS’ REMUNERATION
2017 2016
RM’000 RM’000
Fees 928 421

Salaries, bonus and allowances 1,909 1,141
Defined contribution plan – 108
Share based payment – 1
2,837
1,671
Indemnity insurance for Directors and officers of the Company during the financial year amounted to RM60,000.
109
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
13 PROPERTY, PLANT AND EQUIPMENT
05 Plant,
machinery,
equipment
Freehold Land and motor Work-in-
land improvements Buildings vehicles progress Total
2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Cost or deemed cost

At 1 January 50,598 15,654 109,242 3,427,178 21,434 3,624,106
Additions – – – – 153,518 153,518
Reclassification – – – 4,821 (4,821) –
Effect of exchange rate changes (4,801) (1,485) (10,366) (325,486) (10,396) (352,534)
At 31 December 45,797 14,169 98,876 3,106,513 159,735 3,425,090
Accumulated depreciation
At 1 January – 14,172 61,636 2,236,138 – 2,311,946
Charge for the financial year – 203 2,362 186,819 – 189,384
Effect of exchange rate changes – (1,356) (5,982) (222,880) – (230,218)
At 31 December – 13,019 58,016 2,200,077 – 2,271,112
Accumulated impairment losses

At 1 January – – – 460,878 – 460,878
Effect of exchange rate changes – – – (43,734) – (43,734)
At 31 December – – – 417,144 – 417,144
Carrying amount
At 31 December 45,797 1,150 40,860 489,292 159,735 736,834
110
ANNUAL
REPORT
2017

13 PROPERTY, PLANT AND EQUIPMENT (continued)
Plant,
machinery,
equipment
Freehold Land and motor Work-in-
land improvements Buildings vehicles progress Total
2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Cost or deemed cost

At 1 January 50,598 15,654 109,242 3,430,984 8,945 3,615,423
Additions – – – – 14,666 14,666
Write-off – – – (5,983) – (5,983)
Reclassification – – – 2,177 (2,177) –
At 31 December 50,598 15,654 109,242 3,427,178 21,434 3,624,106
Accumulated depreciation
At 1 January – 13,834 59,173 2,052,203 – 2,125,210
Charge for the financial year – 338 2,463 188,953 – 191,754
Write-off – – – (5,018) – (5,018)
At 31 December – 14,172 61,636 2,236,138 – 2,311,946
Accumulated impairment losses

At 1 January/At 31 December – – – 460,878 – 460,878
Carrying amount
At 31 December 50,598 1,482 47,606 730,162 21,434 851,282
Property, plant and equipment as at 31 December 2017 are pledged as security for borrowings as disclosed in Note 27.
14 PREPAID LEASE PAYMENTS

2017 2016
RM’000 RM’000
As at 1 January 1,824 1,843

Amortisation for the financial year (22) (19)
Effect of exchange rate changes (170) –
As at 31 December 1,632 1,824
Prepaid lease payments as at 31 December 2017 are pledged as security for borrowings as disclosed in Note 27.
111
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
15 INTANGIBLE ASSETS
05 2017 2016
RM’000 RM’000
Cost
At 1 January 54,967 –
Additions 7,534 54,967
Effect of exchange rate changes (5,639) –
At 31 December 56,862 54,967
Accumulated amortisation
At 1 January 3,523 –
Amortisation for the financial year 16,282 3,523
Effect of exchange rate changes (1,376) –
At 31 December 18,429 3,523
Carrying amount
At 31 December 38,433 51,444
Intangible assets relate to costs incurred by the Company in setting up its standalone IT systems following the divestment
by SOHL in the previous financial year.
The useful life of IT development and software is 3 years (2016: 3 years).
The amortisation of IT development and software costs are included in the “depreciation and amortisation” line item in
profit or loss.
16 INVENTORIES
2017 2016
RM’000 RM’000
Crude oil 653,215 462,065
Petroleum products 432,524 339,134

Less: Reversal/(allowance) for inventories 482 (482)
433,006
338,652
Materials 24,093 25,102

Allowance for inventories (369) –
23,724
25,102
1,109,945
825,819
112
ANNUAL
REPORT
2017

16 INVENTORIES (continued)
Included within crude oil is stock in transit as at 31 December 2017 of RM149,492,000 (2016: RM70,833,835).
Inventories as at 31 December 2017 are pledged in favour of a vendor to secure credit lines for crude oil purchases.
Amounts in excess of the vendor credit lines are pledged as security for borrowings as disclosed in Note 27.
17 TRADE RECEIVABLES
2017 2016
RM’000 RM’000
Gross trade receivables 1,082,584 950,686

Less: Provision for impairment (1,306) –
Trade receivables 1,081,278 950,686
The credit terms range between 15 to 30 days (2016: 15 to 30 days).
(i) Ageing of trade receivable balances as at the reporting date that are past due but not impaired are as follows:
2017 2016
RM’000 RM’000
Neither past due nor impaired 1,017,086 926,486

1 to 30 days past due but not impaired 46,123 4,979
30 to 180 days past due but not impaired 5,191 15,006
More than 180 days past due but not impaired 12,878 4,215
64,192
24,200
1,081,278
950,686
(ii) Receivables that are neither past due nor impaired

Trade receivables that are neither past due nor impaired relate to customers with no recent history of default.
Management believes these balances are collectible as the customers are of good credit quality. As such, no allowance
for impairment of trade receivables is recognised.
(iii) Receivables that are past due but not impaired

As at 31 December 2017, trade receivables amounting to RM64,193,000 (2016: RM24,200,000) were past due
but not impaired. Management is of the view that these amounts will be recoverable based on historical collection
trends.
113
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
17 TRADE RECEIVABLES (continued)
05 (iv) Receivables that are impaired
Movement on the allowance for impairment of trade receivables is as follows:
2017 2016
RM’000 RM’000
As at 1 January – –
Provision for impairment 1,383 –
Effect of exchange rate changes (77) –
As at 31 December 1,306 –
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned
above. The Company does not hold any collateral as security.
Trade receivables as at 31 December 2017 are pledged in favour of a vendor to secure credit lines for crude oil
purchases. Amounts in excess of the vendor credit lines are pledged as security for borrowings as disclosed in
Note 27.
18 OTHER RECEIVABLES AND PREPAYMENTS

2017 2016
RM’000 RM’000
Goods and Service Tax (‘GST’) receivable 160,235 –

Other receivables 3,582 29,610
Prepayments 2,479 11,904
166,296
41,514
The carrying amounts of financial assets (excluding prepayments and GST) at the end of reporting date approximated
their fair values.
19 DERIVATIVE FINANCIAL ASSETS/(LIABILITIES)

Contract/
notional
amount Assets Liabilities
USD’000 RM’000 RM’000
2017
Cash flow hedges
- Refining margin swap contracts 40,826 3,498 (5,619)
Financial liabilities at fair value through profit or loss

- Forward foreign exchange contracts 55,000 – (1,462)
- Forward priced commodity contracts 51,030 – (7,731)
The Company did not hold any derivative financial instruments as at 31 December 2016.
114
ANNUAL
REPORT
2017

19 DERIVATIVE FINANCIAL ASSETS/(LIABILTIES) (continued)
Derivatives designated in hedging relationship:
(a) Refining margin swap contracts
T he Company purchases crude on an ongoing basis as the Company requires continuous supply of crude to
produce petroleum. As a result of the volatility in crude price, the Company held refining margin swaps designated
as hedge of highly probable forecast crude purchases or firm commitments to reduce the volatility of cash flows.
The contracts are intended to hedge the volatility of the purchase price of crude for a period between 1 to 4
months based on existing purchase agreements. There were no highly probable transactions for which hedge
accounting had previously been used, which is no longer expected to occur.
The cash flow hedges of the highly probable forecast crude purchases or firm purchase commitments were
assessed to be highly effective and as at 31 December 2017, a net unrealised loss of RM2,272,000, with a related
deferred tax asset of RM545,000 was included in other comprehensive income in respect of these contracts. The
ineffectiveness portion recognised in “other operating gains/(losses)” in the profit or loss during the financial year
was RM25,000, as disclosed in Note 9.
The amount removed from other comprehensive income during the period and included in the carrying amount
of the hedging items as a basis adjustment was immaterial for the financial year ended 31 December 2017. The
amounts retained in other comprehensive income at 31 December 2017 are expected to mature and affect the
profit or loss by a loss in 2018.
Derivatives not designated in hedging relationship:
(a) Forward foreign exchange contracts
The Company enters into forward foreign currency contracts to protect the Company from movements in exchange
rates by establishing the rate at which foreign currency asset or liability will be settled. Forward currency contracts
are mainly used to hedge cash receipts and cash payments denominated in currency other than USD.
(b) Forward priced commodity contracts
During the current financial year, the Company entered into crude purchase contracts. The delivery and control
of the crude is transferred at delivery date. The Company recognised the purchase of the crude as inventory on
delivery date based on the forward priced of the crude. The variability in the payable associated with the crude price
gives rise to an embedded derivative which is not closely related to the purchase contract. The embedded derivative
is separated from the variable payables relating to the purchase of inventory. The Company has elected to adjust
and reflect subsequent changes in the fair value of the embedded derivative as part of the cost of inventory.
115
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REPORT
2017

02
FINANCIAL REPORTS
03
04
20 CASH AND CASH EQUIVALENTS
05 2017 2016
RM’000 RM’000
Deposits with licensed banks 310,000 328,900

Bank balances 202,907 26,712
Less: Restricted cash (20,021) (11,096)
492,886
344,516
The deposits held at call with banks earn interest at a rate of 3.2% (2016: 3.17%) and matured on 2 January 2018
(2016: 3 January 2017). Included within bank balances is an amount held in a debt service accrual account of
RM10,021,000 (2016: RM11,096,000), as required by the new term loan agreements and RM10,000,000 (2016: RM nil)
security deposit placed with a local licensed bank for trade facilities.
21 SHARE CAPITAL
2017 2016
RM’000 RM’000
Authorised 300,000,000 units of ordinary shares

At 1 January 300,000 300,000
Transition to no authorised share capital regime on 31 January 2017 under
the Companies Act 2016 (300,000) –
At 31 December – 300,000
Issued and fully paid 300,000,000 units of ordinary shares

At 1 January/ At 31 December 300,000 300,000
The new Companies Act 2016 (the “Act”) which came into operation on 31 January 2017, abolished the concept of
authorised share capital and par value of share capital. There is no impact on the numbers of ordinary shares in issue or
the relative entitlement of any of the members as a result of this transition.
22 PERFORMANCE SHARE PLAN (PSP) FROM ROYAL SHELL DUTCH SHELL PLC (RDS)
Prior to the acquisition of 51% of the issued and paid up share capital of the Company by MHIL from SOHL, performance
share plans (“PSP”) were awarded to eligible employees based on their sustained performance and formed part of their
remuneration package. Nominated employees were awarded a conditional notional number of RDS shares. A number
of real shares may be transferred to them depending on the outcomes of prescribed performance conditions over a
three-year period beginning on January 1 of the award year.
The purchases of shares were originally funded by RDS, which was then recovered from those entities in which the services
were provided. These were effectively remuneration costs which were treated the same as any other remuneration cost.
All PSP initially funded by RDS had been repaid by the Company to RDS in the previous financial year.
116
ANNUAL
REPORT
2017

23 RETAINED EARNINGS
The Company is able to distribute dividends out of its entire retained earnings under the single-tier system.
24 OTHER RESERVES
(a) Cash flow hedge
The cash flow hedge is used to record gains and losses on derivatives that are designated and qualify as cash flow
hedges and that are recognised in other comprehensive income. Amounts are reclassified to profit or loss when the
associated hedged transaction affects profit or loss.
2017 2016
RM’000 RM’000
At 1 January – –
Fair value loss (2,272) –
Income tax relating to other components of other comprehensive income 545 –
At 31 December (1,727) –
(b) Exchange translation reserves

The exchange translation reserves represent the exchange differences arising from the translation of the financial
statements of the Company whose functional currency is different from the presentation currency.
25 TRADE AND OTHER PAYABLES

2017 2016
RM’000 RM’000
Trade payables 134,367 278,935

Accruals for crude oil and petroleum products 366,613 245,244
Sundry accruals 44,517 48,663
Accruals for consumables and services 8,526 19,189
Accruals for capital expenditure 33,274 50,323
GST payable – 9,525
587,297
651,879
The Company’s trade payables are non-interest bearing, unsecured, except for a balance amounting to RM232,710,000
(2016: RM240,270,818) which is secured by a charge against the Company’s hydrocarbon inventories and receivables
as mentioned in Notes 16 and 17. The credit terms for trade payables range from 30 to 45 days (2016: 30 to 45 days).
26 AMOUNTS DUE TO IMMEDIATE HOLDING COMPANY

As at 31 December 2017, amounts owing to immediate holding company is unsecured, interest free and repayable
on demand. The Directors regard Malaysia Hengyuan International Limited (“MHIL”) as the Company’s immediate
holding company following the acquisition of 51% of the issued and paid-up capital of the Company by MHIL on
22 December 2016.
Following the acquisition of 51% of the issued and paid-up capital of the Company by MHIL from SOHL on 22 December
2016, all balances with companies affiliated to Royal Dutch Shell Plc had been classified within trade and other 117
receivables/payables.
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
27 BORROWINGS
05 2017 2016
RM’000 RM’000
Term loans (secured)

- Term Loan I 721,862 884,529
- Term Loan II 483,146 532,384
1,205,008 1,416,913
Less: Amount repayable within 12 months (79,103) (87,324)
Amount repayable after 12 months 1,125,905 1,329,589
The remaining maturities of the borrowings are as follows:

Within 1 year 79,103 87,324
More than 1 year and less than 2 years 126,268 85,644
More than 2 years and less than 5 years 999,637 1,243,945
1,205,008
1,416,913
As at 31 December 2017 and 31 December 2016, the Company does not have any unsecured borrowings.
The Company obtained a 5-year USD240,000,000 term loan facility in 2011 and a RM450,000,000 term loan in 2015.
Both term loans required full repayment of the outstanding balance in the event the shareholding of SOHL fell below
51% of the issued and paid up share capital of the Company.
On 22 December 2016, the Company refinanced all of its outstanding term loans and revolving credit balance on that
date pursuant to the terms of the loan agreements following the completion of the share sale between SOHL and MHIL,
using new term loan facilities that were drawndown on the same date.
Details of these new term loans are set out below:
USD200,000,000 Term Loan I
This loan was fully drawndown in the previous financial year. It is repayable in half yearly instalments, with the first
instalment falling due on 21 June 2017. The principal is repayable in the following tranches:
• 10% of the principal amount in the first 3 consecutive years from the first utilisation date.
• 20% of the principal amount repayable in the 4th year.
• Balance principal amount repayable in year 5.
The loan requires repayment of the outstanding balance in the event that MHIL cease to hold, directly or indirectly,
beneficial ownership of 51% or more of the share capital of the Company.
The loan is subject to interest at LIBOR + 3.5% per annum;
118
ANNUAL
REPORT
2017

27 BORROWINGS (continued)
This facility is secured by:
• A corporate guarantee by Shandong Hengyuan Petrochemical Company Limited, an intermediate holding company;
• A first legal charge over the shares of MHIL in the Company;
• A first legal charge under the National Land Code 1965 over all the real estate of the Company;
• A debenture creating first fixed and floating charges over all present and future assets and undertakings of the
Company;
• A first legal charge and absolute assignment over all the present and future rights, interests and benefits of the
Company in and to the Product Offtake Agreement with two customers and the Joint Facilities Operating Agreement
with another party and all project accounts including revenue accounts and debt service accrual account;
• A legal charge over the hydrocarbon assets and receivables of the Company; and
• A first legal charge and absolute assignment over all the present and future rights, interests and benefits of the
Company in and to the Crude Oil Supply Agreement with a vendor.
USD150,000,000 Term Loan II
The Company drew down USD120,119,093 of this term loan in the previous financial year. The loan is repayable
in half yearly instalments, with the first instalment falling due on 21 June 2019. The principal is repayable in the
following tranches:
• 10% of the principal amount in year 3
The Company is allowed to draw on this facility up to the lesser of USD150,000,000 and an amount equivalent to 85%
of cash deposits placed by Shandong Hengyuan Petrochemical Company Limited (an intermediate holding company),
with the lender.
The loan is subject to interest at LIBOR + 2.0% per annum.
The effective interest rates of the Company’s term loans at the end of the reporting period ranged from 3.79% to 5.29%
(2016: 3.62% to 5.27%) per annum.
The fair value of borrowings outstanding as at 31 December 2016 and 31 December 2017 approximated its
carrying amount.
119
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
28 DEFERRED TAXATION
05 Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities and when the deferred taxes relate to the same tax authority.
The movements in deferred tax during the financial year are as follows:
2017 2016
RM’000 RM’000
As at 1 January – –
Credited/(charged) to profit or loss (Note 10):
- property, plant and equipment (20,757) (88,870)
- unrealised foreign exchange (775) –
- derivative financial assets (668) –
- inventories (22) (1,180)
- trade receivables 332 (182)
- unused tax losses (29,529) 87,786
- other payables and accruals 4,785 2,826
- derivative financial liabilities 3,000 –
- performance share plan – (380)
(43,634)
–
Credited to other comprehensive income (Note 24)
- cash flow hedges 545 –
Effect of exchange rate changes 1,047 –
As at 31 December (42,042) –
Deferred tax liabilities (before offsetting):

- property, plant and equipment (106,592) (90,728)
- unrealised foreign exchange (732) –
- derivative financial assets (839) –
(108,163) (90,728)
Offsetting 66,121 90,728
As at 31 December (after offsetting) (42,042) –
Deferred tax assets (before offsetting):

- unused tax losses 54,981 87,786
- inventories 89 116
- other payables and accruals 7,184 2,826
- derivative financial liabilities 3,553 –
- trade receivables 314 –
66,121 90,728
(66,121) (90,728)
Offsetting
As at 31 December (after offsetting) – –

120
ANNUAL
REPORT
2017

28 DEFERRED TAXATION (continued)
The amount of deferred tax assets which have not been recognised (stated at gross amounts) are as follow:
2017 2016
RM’000 RM’000
Tax losses carried forward – 651,317

Unabsorbed reinvestment allowance – 130,245
The benefits of unutilised tax losses and reinvestment allowances can be carried forward indefinitely and will be obtained
when the Company derives future assessable income of a nature and of an amount sufficient for these carried forward
tax losses, and reinvestment allowance to be utilised respectively.
29 SIGNIFICANT RELATED PARTIES DISCLOSURES

For the purposes of these financial statements, parties are considered to be related to the Company if the party has
the ability, directly or indirectly, to control the Company or exercise significant influence over the Company in making
financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or
common significant influence. Related parties may be individuals or other entities.
Key management personnel are defined as those persons having authority and responsibility for planning, directing and
controlling the activities of the Company either directly or indirectly.
Prior to the acquisition of 51% of the issued and paid up share capital of the Company by MHIL from SOHL, related
parties of the Company comprised of Royal Dutch Shell Plc (“RDS”) and its related companies. Subsequent to the
acquisition of the Company by MHIL from SOHL, related parties of the Company comprise of Shandong Hengyuan
Petrochemical Group Company Limited and its related companies.
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other
significant related party transactions. The transactions described below were carried out on agreed terms.
2017 2016
RM’000 RM’000
Transactions with affiliates of Shandong Hengyuan

Petrochemical Company Limited:
(a) Expenses:
(i) Technical advisory charges (7,629) –
(ii) Central management and administrative charges (7,417) –
Transactions with affiliates of Royal Dutch Shell Plc:

(a) Income:
(i) Sale of refined products to subsidiaries of RDS – 7,992,712
(ii) Tariff revenue on the use of properties/facilities from subsidiaries of RDS – 17,405
(iii) Intellectual property buyout from subsidiaries of RDS – 21,640
121
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
29 SIGNIFICANT RELATED PARTIES DISCLOSURES (continued)
05 Transactions with affiliates of Royal Dutch Shell Plc: (continued)
2017 2016
RM’000 RM’000
(b) Expenses:
(i) Purchase of crude and products from subsidiaries of RDS – (7,605,245)
(ii) Central management and administrative charges by subsidiaries of RDS – (53,570)
(c) Refinery process licence fee charged by a subsidiary of RDS – (11,210)
Key management personnel are the persons who have authority and responsibility for planning, directing and controlling
the activities of the Company either directly or indirectly. Key management personnel of the Company include the Board
of Directors and senior management personnel of the Company.
2017 2016
RM’000 RM’000
Compensation for key management personnel:

- salaries, bonus and allowances 4,898 5,298
- fees 928 421
- defined contribution plan 270 362
- benefits in kind – 15
- shared based payments – 74
30 CONTINGENT LIABILITIES
The Company is a member of an oil spill fund, namely the International Oil Pollution Compensation (“IOPC”) 1992 Fund.
The purpose of the Fund is to help compensate parties that suffer financial loss as a result of oil spill from tankers. The
members make contributions to the Funds depending on specific global oil spill incidents, which give rise to payments of
compensation by the Funds. The contingent liability is unsecured, and as at the date of this report, there are no material
claims outstanding.
31 CAPITAL COMMITMENTS
Approved capital expenditure for property, plant and equipment not provided for in the financial statements are
as follows:
2017 2016
RM’000 RM’000
Approved and contracted for 542,382 20,705

Approved but not contracted for 204,579 30,451
122
ANNUAL
REPORT
2017

32 SEGMENTAL INFORMATION
The Company is principally engaged in the business of refining and manufacturing of petroleum products in Malaysia,
which is a single business segment. The Company’s primary operations are also concentrated within Malaysia, hence
operating within a single geographical segment. Accordingly, no segmental information is considered necessary for
analysis by business or by geographical segments.
This is consistent with the internal management reports reviewed by the Board of Directors (chief operating decision
maker of the Company) where performance of the Company is measured based on refining margins and profit before
tax recognised as a single business and geographical segment.
33 FINANCIAL INSTRUMENTS BY CATEGORY

2017 2016
RM’000 RM’000
Financial assets
Financial assets measured at fair value through profit or loss
- Derivative financial assets 3,498 –
Loans and receivables at amortised cost

- Trade receivables 1,081,278 950,686
- Other receivables excluding prepayment and statutory assets 3,582 29,610
- Deposit with licensed banks 310,000 328,900
- Bank balances 202,907 26,712
1,597,767 1,335,908
Total
1,601,265 1,335,908
Financial liabilities
Financial liabilities measured at fair value through profit or loss
- Derivative financial liabilities 14,812 –
Other financial liabilities at amortised cost

- Trade and other payables excluding statutory liabilities 586,705 642,354
- Amounts due to holding company 14,200 –
- Borrowings 1,205,008 1,416,913
1,805,913 2,059,267
1,820,725 2,059,267
123
ANNUAL
REPORT
2017

02
FINANCIAL REPORTS
03
04
34 DIVIDENDS
05 On 27 February 2018, the Directors declared a single-tier interim dividend of RM0.02 per share, amounting to RM6,000,000
in respect of the financial year ended 31 December 2017. The dividend is payable on 17 April 2018 to shareholders
registered on the Record of Depositors at the close of business on 20 March 2018. These financial statements do not
reflect the interim dividend which will be accounted for in the financial year ending 31 December 2018.
The Company did not declare any dividend for the financial year ended 31 December 2016.
35 EVENTS OCCURING AFTER THE REPORTING DATE

On 23 January 2018, the Company accepted financing facilities consisting a mix of term loan and revolving credit facilities
of up to USD430,000,000 or RM1,700,000,000. The term loan will be utilised towards refinancing the Company’s
existing term loan and also to partially finance its planned capital expenditure. The revolving credit facility will support
the Company’s working capital needs. The term loan will be repaid in instalments throughout the tenure of the five
year facility.
36 APPROVAL OF FINANCIAL STATEMENTS

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on
16 April 2018.
124
ANNUAL
REPORT
2017

COMPANY PROPERTIES
Land
Land area Age of Land Improvement Building Net book
(square properties/ Date of last NBV NBV NBV value
No Tenure Address feet) Description buildings evaluation RM’000 RM’000 RM’000 RM'000
1 Freehold 1236 – 1238 76,973 A club house and 53 years 01.01.1991 1,077 1,965 3,042
GRN 62766 – 62768 training centre
87, Jln Resthouse
Port Dickson
2 Freehold Lot 3 HS(D) 1310 6,284,186 Refinery 54 years 01.01.1991 22,194 1,271 42,021 65,486
Jln Pantai
Port Dickson
3 Freehold Lot 138 39,115 Oil Spill 53 years 01.01.1991 262 333 595
GRN 51925 Response Centre
Port Dickson
4 Freehold Lot 798 GM 3203 49,955 Tank Farm 29 years 01.01.1991 140 140
Kg Arab
Port Dickson
5 Freehold Lot 196 GM 3208 242,845 Reserved Land 30 years 01.01.1991 687 687
Kg Gelam
Port Dickson
Kg Gelam
Port Dickson
7 Freehold PT 1369 HSD 35655 1,725,885 Reserved Land, 31 years 01.01.1991 5,666 5,666
Port Dickson Tank Farm
8 Freehold PT 1370 HSD 35656 378,384 Reserved Land, 31 years 01.01.1991 1,242 330 1,572
Port Dickson TA Office
9 Freehold PT 1371 HSD 35657 132,030 Reserved Land 31 years 01.01.1991 433 433
Port Dickson
10 Freehold PT 10747 HSD 35658 205,558 Reserved Land 31 years 03.09.1991 594 594
Port Dickson
11 Freehold Lot 12284 & 12290 112,052 Refinery 22 years 31.08.2000 480 480
GM 1961, GM 3201
Port Dickson
12 Freehold LoT 596 GRN 244911 100,826 Tank Farm 22 years 31.08.2000 593 593
Port Dickson
13 Freehold Lot 5471 – 5494 188,799 Tank Farm 20 years 31.08.2000 1,259 1,259
GM 994 – 1017
Lot 5496 – 5540
GM 1019 – 1063
Port Dickson
Port Dickson
125
ANNUAL
REPORT
2017

01 COMPANY PROPERTIES
02
OTHER INFORMATION
03
04
Land
05 (square properties/ Date of last NBV NBV NBV value
15 Freehold Lot 12425 – 12456 212,544 Tank Farm 21 years 31.08.2000 1,216 1,216
GRN 146936 –146967
Lot 5441 HSD 4418
Lot 12458 – 12486
GRN 146968 – 146996
Port Dickson
16 Freehold Lot 834 GRN 70791 353,110 Reserved Land 22 years 31.08.2000 1,705 1,705
Port Dickson
17 Freehold Lot 6674 GM 2774 97,726 For Pipeline 28 years 01.01.1991 585 585
Port Dickson To Jetty
Kg Gelam To Jetty
Port Dickson
Kg Gelam To Jetty
Port Dickson
Kg Gelam To Jetty
Port Dickson
Kg Gelam To Jetty
Port Dickson
25 Freehold Lot 909 GRN 69309 86,768 For Pipeline 26 years 01.01.1991 431 431
26 Freehold Lots 178 – 180 448,673 For Pipeline 26 years 01.01.1991 2,172 2,172
GM 3196 – 3198 To Jetty
Port Dickson
Kg Gelam To Jetty
Port Dickson
28 Freehold Lot 3948 – 3951 5,042 Refinery Buffer 21 years 30.04.2001 344 344
GM 2619 – 2622 Zone
126 Port Dickson
ANNUAL
REPORT
2017

Land
(square properties/ Date of last NBV NBV NBV value
29 Freehold Lot 3974 – 3977 5,042 Refinery 21 years 30.04.2001 344 344
GM 2632 – 2635 Buffer Zone
Port Dickson
30 Freehold Lot 4961 – 4968 34,789 Refinery 21 years 30.04.2001 1,268 1,268
Port Dickson
Port Dickson
32 Freehold Lot 10533 GM 1653 2,002 Refinery 24 years 31.08.2000 20 20
Kg Gelam Buffer Zone
Port Dickson
GM 1770 –1788 & Buffer Zone
Lot 12105 GM 2959
Kg Gelam
Port Dickson
34 Freehold Lot 12104 GM 2859 570 Refinery 24 years 31.08.2000 61 61
Kg Gelam Buffer Zone
Port Dickson
35 Freehold Lot 1312 – 1314 49,729 Reserved Land 53 years 01.01.1991 336 336
GM 1600 – 1602
Lot 1317 – 1318
GM 1605 – 1606
Port Dickson
36 Freehold Lot 764 GRN 65945 9,009 Reserved Land 54 years 01.01.1991 61 61
Port Dickson
Port Dickson
Port Dickson
39 Leasehold PT 9451 HSD 29075 2,822,620 Jetty Land 25 years 10.04.2004 1,783 494 2,277
Mukim Port Dicksn
15,067,542 52,381 1,271 45,143 98,795
Notes:
The above values reflect the original transacted amounts of each property, denominated in RM. These amounts have not been
revised to account for the change to USD functional currency effective 1 January 2017.
127
ANNUAL
REPORT
2017

ANALYSIS OF SHAREHOLDINGS
01
02 AS AT 19 MARCH 2018
OTHER INFORMATION
03
04
Issued and Paid-up Capital : RM300,000,000 comprising 300,000,000 ordinary shares
Class of Shares : Ordinary shares
05
Voting Rights : One vote per ordinary share held
No. of Holders No. of Shares

Size of Holdings Malaysia & Foreign % Malaysia & Foreign %
1 – 99 860 5.321 5,833 0.002
100 – 1,000 6,474 40.060 4,460,951 1.487
1,001 – 10,000 7,263 44.942 26,789,639 8.930
10,001 – 100,000 1,391 8.607 38,273,501 12.758
100,001 – 14,999,999 (*) 172 1.064 77,401,074 25.800
15,000,000 and above (**) 1 0.006 153,069,002 51.023
Total 16,161 100.000 300,000,000 100.000
Remark: *Less than 5% of Issued Shares

**5% and above of Issued Shares
LIST OF TOP 30 SHAREHOLDERS
No. Name Shareholdings %

1 RHB Nominees (Tempatan) Sdn Bhd 153,069,002 51.023
Malaysia Hengyuan International Limited
2 Kam Loong Mining Sdn Bhd 4,800,000 1.600
3 Foo Khen Ling 4,398,000 1.466
4 Kenanga Investment Bank Berhad 3,643,100 1.214
Ivt (EDSP-NAGA 8-DO)
5 CIMB Group Nominees (Tempatan) Sdn Bhd 3,516,700 1.172
CIMB Bank Berhad (EDP 2)
6 Maybank Investment Bank Berhad 2,184,000 0.728
Ivt (9)
7 Tan Kah Hock 2,107,000 0.702
8 RHB Nominees (Tempatan) Sdn Bhd 1,863,700 0.621
Pledged Securities Account For Ashfak Ahmad Bin Alarakha
9 CIMSEC Nominees (Tempatan) Sdn Bhd 1,650,000 0.550
CIMB Bank For Deva Dassan Solomon (My1091)
10 Alliancegroup Nominees (Tempatan) Sdn Bhd 1,426,000 0.475
Pledged Securities Account for Helina Shanti Solomon (7001761)
11 HSBC Nominees (Asing) Sdn Bhd 1,278,600 0.426
JPMCB NA For New York State Common Retirement Fund
12 Citigroup Nominees (Tempatan) Sdn Bhd 1,265,947 0.422
128 Employees Provident Fund Board
ANNUAL
REPORT
2017

No. Name Shareholdings %
Pledged Securities Account For Inbamanay A/P M J Arumanayagam
(8061712)
Pledged Securities Account For Deva Dassan Solomon
(8041850)
15 Cartaban Nominees (Asing) Sdn Bhd 1,009,900 0.337
Exempt An For State Street Bank & Trust Company
(West CLT OD67)
16 Ashfak Ahmad Bin Alarakha 978,500 0.326
17 RHB Nominees (Tempatan) Sdn Bhd 970,000 0.323
Ashfak Ahmad Bin Alarakha
18 Wong Siew Fah 910,000 0.303
19 RHB Investment Bank Berhad 890,500 0.297
IVT “SW BOOK 1”
20 Citigroup Nominees (Asing) Sdn Bhd 846,300 0.282
CBNY For DFA Emerging Markets Small Cap Series
UBS AG For Arrowstreet International Equity - Alpha Extension Fund
22 Eletechnics Sdn Bhd 800,000 0.267
23 Malaysia Nominees (Tempatan) Sendirian Berhad 790,000 0.263
Lee Foundation, States of Malaya (00-00197-000)
24 Alliancegroup Nominees (Tempatan) Sdn Bhd 770,000 0.257
Pledged Securities Account For Selina Sharmalar Solomon
(8112136)
CBNY For Emerging Market Core Equity Portfolio DFA Investment Dimensions
Group Inc
26 UOB Kay Hian Nominees (Asing) Sdn Bhd 725,750 0.242
Exempt An For UOB Kay Hian Pte Ltd ( A/C Clients )
27 HLB Nominees (Tempatan) Sdn Bhd 711,400 0.237
Pledged Securities Account For Deva Dassan Solomon
28 Law King Yong 700,000 0.233
29 Reuben Tan Cherh Chung 700,000 0.233
30 HSBC Nominees (Asing) Sdn Bhd 692,000 0.230
TNTC For Stichting Blue Sky Active Equity Emerging Markets Global Fund
Total 196,381,799 65.460

129
ANNUAL
REPORT
2017

01 ANALYSIS OF SHAREHOLDINGS
AS AT 19 MARCH 2018
02
OTHER INFORMATION
03
04
SUBSTANTIAL SHAREHOLDERS HOLDINGS
05 No. Name Investor ID Shareholdings %
RHB Nominees (Tempatan) Sdn Bhd

1 259064V 153,069,002 51.023
Malaysia Hengyuan International Limited
Total 153,069,002 51.023
DIRECTORS’ AND CHIEF EXECUTIVE’S SHAREHOLDINGS

Total Percentage
No. Name
Shareholdings (%)
1 Wang YouDe 0 0.00
2 Wang ZongQuan 0 0.00
3 Lim Tau Kien 0 0.00
4 Alan Hamzah Sendut 0 0.00
5 Fauziah Hisham 0 0.00
6 Liang Kok Siang 0 0.00
7 David Keat 0 0.00
Total 0 0.00
130
ANNUAL
REPORT
2017

ADDITIONAL CORPORATE GOVERNANCE
DISCLOSURES
DIRECTORS’ MEETING ATTENDANCE

FOR THE FINANCIAL YEAR ENDED 2017
BOARD AND GENERAL MEETINGS
Board General
Name of Directors
Meetings Meetings
Wang YouDe 7/7 3/3

Wang ZongQuan 7/7 3/3
Lim Tau Kien (a) 3/3 –
Alan Hamzah Sendut (a) 3/3 –
Fauziah Hisham (b) 3/3 –
Liang Kok Siang (b) 3/3 –
Martinus Joseph Marinus Aloysius Stals (Maarten Stals) (c) 7/7 3/3
Datuk Yvonne Chia (d) 4/4 3/3
Heng Heyok Chiang @ Heng Hock Cheng (d) 4/4 2/3
Datuk Zainun Aishah binti Ahmad (d) 4/4 3/3
Sun JianYun (d) 4/4 3/3
Dato’ Seri Talaat Bin Haji Husain (e) 3/4 0/3
David Lau Nai Pek (e) 3/4 2/3
Total Number of Board Meetings in 2017: 7

Total Number of General Meetings: 3
Notes:
(a) Lim Tau Kien and Alan Hamzah Sendut were appointed as Directors of HRC on 25 May 2017.
(b) Fauziah Hisham and Liang Kok Siang were appointed as Directors of HRC on 1 June 2017.
(c) Maarten Stals resigned as Managing Director of HRC with effect from 1 March 2018.
(d) Datuk Yvonne Chia, Heng Heyok Chiang @ Heng Hock Cheng, Datuk Zainun Aishah binti Ahmad and Sun JianYun
resigned as Directors of HRC on 1 June 2017.
(e) Dato’ Seri Talaat bin Haji Husain and David Lau Nai Pek retired as Directors of HRC on 24 May 2017.
131
ANNUAL
REPORT
2017

01 ADDITIONAL CORPORATE GOVERNANCE DISCLOSURES
02
OTHER INFORMATION
03
04
BOARD AUDIT COMMITTEE MEETINGS
05 Name of Members Attendance
Alan Hamzah Sendut (Chair) 2/2

Lim Tau Kien 2/2
Fauziah Hisham 2/2
Liang Kok Siang 2/2
Wang ZongQuan (f) 1/1
Datuk Yvonne Chia (g) 5/5
Heng Heyok Chiang @ Heng Hock Cheng (g) 5/5
Datuk Zainun Aishah binti Ahmad (g) 5/5
Dato’ Seri Talaat Bin Haji Husain (g) 4/5
David Lau Nai Pek (g) 4/5
Total number of BAC meetings in 2017: 7
Notes:
The attendance records of each Director reflects the number of meetings attended in the year 2017 over the number of
meetings held during his / her tenure as a BAC member.
(f) Wang ZongQuan resigned as a member of the BAC on 24 November 2017.
(g) Datuk Yvonne Chia, Heng Heyok Chiang @ Heng Hock Cheng, Datuk Zainun Aishah binti Ahmad, Dato’ Seri Talaat bin
Haji Husain and David Lau Nai Pek resigned / retired as members of the BAC on the date of their resignation / retirement as
Directors.
BOARD NOMINATING AND REMUNERATION COMMITTEE

The Nominating Committee (NC) and Remuneration Committee (RC) of HRC were combined to become a single
committee known as the Board Nominating and Remuneration Committee on 5 December 2017. Lim Tau Kien, Wang YouDe
and Fauziah Hisham were appointed as members of the BNRC on the same date.
Name of Members NC Attendance RC Attendance
Lim Tau Kien (Chair) 1/1 –

Wang YouDe 3/3 2/2
Fauziah Hisham (h) – –
Alan Hamzah Sendut (i) – –
Liang Kok Siang (j) – –
Dato’ Seri Talaat Bin Haji Husain (k) 2/2 2/2
132 Datuk Zainun Aishah binti Ahmad (k) 3/3 2/2
ANNUAL Total number of Nominating Committee meetings in 2017: 3

REPORT Total number of Remuneration Committee meetings in 2017: 2
2017

Notes:
The attendance records of each Director reflects the number of meetings attended in the year 2017 over the number of meet-
ings held during his / her tenure as a BNRC member.
(h) Fauziah Hisham was appointed as the RC Chair on 1 June 2017. No RC meetings were held during her tenure as
RC Chair. She was appointed as a member of the BNRC upon its establishment on 5 December 2017.
(i) Alan Hamzah Sendut was appointed as a member of the NC on 1 June 2017. He resigned as a member of the NC when
the BNRC was established on 5 December 2017. No NC meetings were held during his tenure as a member of the NC.
(j) Liang Kok Siang was appointed as a member of the RC on 1 June 2017. He resigned as a member of the RC when the
BNRC was established on 5 December 2017. No RC meetings were held during his tenure as a RC member.
(k) Dato’ Seri Talaat bin Haji Husain and Datuk Zainun Aishah binti Ahmad retired / resigned as members of the NC and RC on
the date of their retirement / resignation as Directors.
BOARD RISK MANAGEMENT COMMITTEE
Name of Members Attendance
Wang ZongQuan (Chair) 1/1

Alan Hamzah Sendut 1/1
Liang Kok Siang 1/1
The BRMC was established on 29 November 2017 and held its first meeting on 30 November 2017.
133
ANNUAL
REPORT
2017

01 ADDITIONAL CORPORATE GOVERNANCE DISCLOSURES
02
OTHER INFORMATION
03
04
DIRECTORS’ TRAINING
05 A summary of the in-house continuing education programmes and external trainings attended by the Directors of HRC for the
financial year ended 2017 are set out below:
1 January 2017 to • The Inside Story of the Annual Report: What Directors Must Know (Mandarin), organised by
31 March 2017 Bursatra Sdn Bhd
• Boards and C-Level Executives: Balancing Trust and Tension, organised by Malaysian Institute of
Corporate Governance (MICG)
• ACGA’s CG Watch 2016: Ecosystems Matter, organised by The Iclif Leadership and Governance
Centre (ICLIF) and the Malaysian Directors Academy (MINDA)
1 April 2017 to • Mandatory Accreditation Programme for Directors of Public Listed Companies, organised by ICLIF
30 June 2017 • The New Malaysian Code on Corporate Governance - How To Walk The Talk?, organised by
MICG
• Assessment of the Board, Board Committees and Individual Directors – Taking Stock of
Performance, organised by MICG
• Briefing on the New Companies Act 2016 by Suruhanjaya Syarikat Malaysia (Companies
Commission of Malaysia), organised by UEM Group Berhad
1 July 2017 to • Digital Technology in the Capital Market – What’s Coming Your Way, organised by the Securities
30 September 2017 Industry Development Corporation (SIDC)
• Mandatory Accreditation Programme for Directors of Public Listed Companies
• Financial Institutions Directors’ Education Programme, organised by ICLIF
• CEP Training Programme on Oil Price and Margins Risk Management, Foreign Exchange Market
Outlook and MOPS Price Assessment Methodology, organised by the Company
• Capital Market Conference 2017, organised by the Malaysian Institute of Accountants (MIA)
• Boards in the Digital Economy, organised by SIDC
1 October 2017 to • Governance & Leadership in Technology Disruption, organised by MICG

31 December 2017 • 2018 Budget: Implications to the Malaysian Economy and Capital Market, organised by SIDC in
collaboration with Hong Leong Investment Bank Berhad
• Corporate Board Symposium 2017, organised by MIA The Corporate Intelligence: A Director’s
Understanding & Access to Evidence-Based Foresight
• The Corporate Intelligence: A Director’s Understanding & Access to Evidence-Based Foresight,
organised by MINDA
134
ANNUAL
REPORT
2017

DIRECTORS’ REMUNERATION FOR THE FINANCIAL YEAR ENDED 2017
Salary, Bonus
and Salary Attendance
Related Director’s and other
Benefits Fees remuneration Total
Name of Members (RM ‘000) (RM ‘000) (RM ‘000) (RM ‘000)
Wang YouDe – 80 29 109

Wang ZongQuan – 90 23 113
Lim Tau Kien – 66 14 80
Alan Hamzah Sendut – 78 12 90
Fauziah Hisham – 64 11 75
Liang Kok Siang – 59 11 70
Martinus Joseph Marinus Aloysius Stals
(resigned on 1 March 2018) 1,909 – – 1,909
Datuk Yvonne Chia
– 46 17 63
(resigned on 1 June 2017)
Heng Heyok Chiang @ Heng Hock Cheng
– 41 15 56
Datuk Zainun Aishah binti Ahmad
– 46 21 67
Sun JianYun
– 33 64 97
Dato’ Seri Talaat Bin Haji Husain
– 43 12 55
(retired on 24 May 2017)
David Lau Nai Pek
– 39 14 53
(retired on 24 May 2017)
1,909 685 243 2,837
Notes:
The Director of the Company were insured against certain liabilities under a Directors’ and Officers’ liability insurance policy for
which the Company paid an aggregate sum of RM60,000.
MATERIAL CONTRACTS
There were no material contracts entered into by HRC involving the interests of Directors, the CEO and the major shareholder
either still subsisting at the end of the financial year ended 31 December 2017 or entered into since the end of the previous
financial year.
135
ANNUAL
REPORT
2017

RECURRENT RELATED PARTY
01
02
TRANSACTIONS
OTHER INFORMATION
03
04
In compliance with paragraph 10.09(2)(b) of the Listing Requirements, the Company had obtained a mandate from
its shareholders to enter into recurrent related party transactions of a revenue or trading nature with its related parties
05 (RRPT Mandate) at the general meetings held on 26 May 2016 and 24 May 2017. The RRPT Mandate will expire at the
conclusion of the forthcoming Annual General Meeting.
The details of the recurrent related party transactions entered into pursuant to the RRPT Mandate in the financial year ended
2017 are set out below.
Total value
of actual
No Name Type of Transaction transactions
FY 2017
(RM)
1 Shell Malaysia Trading Sale of petroleum products by HRC

Sendirian Berhad
Service charge by HRC for the operation of multi product
pipeline feeder facilities
8,049,846,126
Lease of HRC’s lubricant oil blending plant facilities
Service charge by HRC for the provision of throughput
services
Purchase of petroleum products by HRC 419,606
2 Shell Timur Sdn Bhd Sale of petroleum products by HRC 1,886,188,655
3 Shell International Eastern Sale of petroleum products by HRC 334,935,891

Trading Company (SIETCO)
SIETCO is a registered Purchase of crude oil by HRC
business of Shell Eastern Purchase of petroleum products by HRC
Trading (Pte) Ltd 8,324,727,497
Provision of oil and oil products price risk management
services to HRC
4 Shell Eastern Trading (Pte) Sale of petroleum products by HRC 326,005,614

Ltd, trading under the name
and style of Shell Eastern
Chemicals (Singapore)
136
ANNUAL
REPORT
2017

Total value
of actual
No Name Type of Transaction transactions
FY 2017
(RM)
5 Shell Global Solutions Provision of general business and technical support 11,167,038
International B.V. services to HRC
Provision of licensing and project design services and 1,989,960

catalyst supply to HRC
6 Shell Global Solutions Provision of general business and technical support 7,206,933
(Malaysia) Sdn Bhd services to HRC
7 Infineum Singapore Pte Ltd Purchase of chemical products by HRC 3,393,261
8 Shell Malaysia Limited Provision of central management and administrative 275,707

services to HRC
9 Malaysia Hengyuan Provision of central management, business support and 7,417,000

International Limited administrative services to HRC
Provision of technical advisory and consultancy services 7,629,000

and research and development advisory services to HRC
10 Mercuria Energy Trading Pte Purchase of crude oil and petroleum products by HRC
Ltd 20,841,701
Sale of petroleum products by HRC
Notes:
(a) As disclosed in the Circular to Shareholders dated 9 May 2017, the entities in Items 1-8 are part of the Shell group of
companies (Shell Group). The Shell Group is deemed by HRC as parties related to HRC via Maarten Stals, who was the
Managing Director of HRC and an employee of Shell Global Solutions (Malaysia) Sdn Bhd, seconded to the Company.
Shell Global Solutions (Malaysia) Sdn Bhd and these companies have a common ultimate holding company, which is
Royal Dutch Shell plc. Maarten Stals resigned as the Managing Director of HRC on 1 March 2018. Pursuant to the Listing
Requirements, the Company deems the Shell Group as a party related to HRC until 1 September 2018.
(b) Malaysia Hengyuan International Limited is a major shareholder of the Company.
(c) For the period of 24 May 2017 until 1 December 2017, the Company deemed Mercuria Energy Trading Pte Ltd as a
party related to HRC via Sun JianYun, who was a non-executive Director of HRC and an employee of Mercuria (China)
Investment Co. Ltd. Mercuria Energy Trading Pte Ltd and Mercuria (China) Investment Co. Ltd. are both indirect wholly
owned subsidiaries of Mercuria Energy Group Limited. Sun JianYun resigned as a Director of HRC on 1 June 2017. Pursuant
to the Listing Requirements, Mercuria Energy Trading Pte Ltd ceased to be a related party of HRC on 1 December 2017.
137
ANNUAL
REPORT
2017

This page has been intentionally left blank.
PROXY FORM
Hengyuan Refining Company Berhad
(No. 3926-U)
CDS Account No. of

No. of shares held
authorised nominee
I/We _________________________________________________________________________________________________________________________
(Full name in block letters)
I.C/Passport/Company No._____________________________________________________________________________________________________
of ___________________________________________________________________________________________________________________________
(Address in full)
being a member of Hengyuan Refining Company Berhad, do hereby appoint_____________________________________________________
_____________________________________________________________________ NRIC/Passport No. _______________________________________
of ___________________________________________________________________________________________________________________________
(Address in full)
or failing him/her,_____________________________________________________________________________________________________________
NRIC/Passport No.__________________________________________________________________of________________________________________
(Address in full)
_____________________________________________________________________________________________________________________________
or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Fifty-Ninth Annual
General Meeting of Hengyuan Refining Company Berhad (the Company) will be held at Ballroom 2, Sime Darby Convention
Centre, 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Thursday, 24 May 2018 at 10.00 a.m. and at any adjournment thereof.
No. Resolutions For Against
Ordinary Business
1. To re-elect Wang ZongQuan as Director.
2. To re-elect Mr Alan Hamzah Sendut as Director.
3. To re-elect Ms Lim Tau Kien as Director.
4. To re-elect Puan Fauziah Hisham as Director.
5. To re-elect Mr Liang Kok Siang as Director.
6. To re-appoint Messrs PricewaterhouseCoopers PLT as Auditors of the Company and to authorise the
Directors to fix their remuneration.
Special Business
7. To approve payment of Non-Executive Directors’ fees and benefits of up to RM2,900,000 for the period
from 1 January 2018 until 30 June 2019.
8. Authority to Allot and Issue Shares pursuant to Sections 75 and 76 of the Companies Act 2016.
9. Proposed Authority for Share Buy-Back.
10. Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or
Trading Nature.
11. Requisitioned resolution to approve a final single tier dividend of 43.5 cents per share in respect of the
financial year end 31 December 2017.
12. Requisitioned resolution to approve a formal dividend policy of allocating at least 15% of the Company’s
profit after tax, excluding exceptional items to be distributed to its shareholders as dividend payment.
Please indicate with an “x” in the spaces provided how you wish your vote to be cast. If no instruction as to voting is given, the Proxy
will vote as he or she thinks fit, or abstain from voting at his or her discretion.
For appointment of two proxies, percentage of shareholdings

Dated this _________ day of _________ 2018
to be represented by the proxies:
No. of Shares Percentage

_______________________________________ Proxy 1 %
Signature/ Common Seal of Shareholder(s)
Proxy 2 %
Contact No. ___________________________
Total 100%
NOTES:-
1. Pursuant to Section 334 of the Companies Act 2016, 6. The signature to the instrument appointing a proxy or
a member of a company shall be entitled to appoint proxies executed outside Malaysia must be attested
another person as his proxy to exercise all or any of by a solicitor, notary public, consul or magistrate.
his rights to attend, participate, speak and vote at
7. The instrument appointing a proxy and the power
a meeting of members of the company. A member
of attorney or other authority (if any) under which
may appoint more than one (1) proxy in relation to
it is signed or notarised must be deposited at the
a meeting, provided that the member specifies the
Company’s Share Registrar’s Office situated at Unit 32-
proportion of the member’s shareholdings to be
01, Level 32, Tower A, Vertical Business Suite, Avenue
represented by each proxy.
3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala
2. Where a Member of the Company is an exempt Lumpur or its Customer Service Centre at Unit G-3,
authorised nominee who holds ordinary shares in Ground Floor, Vertical Podium, Avenue 3, Bangsar
the Company for multiple beneficial owners in one South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur
securities account (Omnibus Account), there is no limit not less than 48 hours before the time for holding the
to the number of proxies which the exempt authorised Meeting or adjourned meeting.
nominee may appoint in respect of each Omnibus
8. Only an originally signed proxy form deposited at
Account it holds.
Tricor Investor & Issuing House Services Sdn Bhd, will
3. Where an exempt authorised nominee appoints entitle the proxy holder to attend and vote at the
two (2) or more proxies, the proportion of Meeting. Photocopies of signed proxy form will
shareholdings to be represented by each proxy must not be accepted for the purposes of the Meeting.
be specified in the instrument appointing the proxies. Additional proxy forms are available to Members
upon request in writing to the Company.
4. A proxy need not be a Member of the Company.
There shall be no restriction as to the qualification of 9. The Date of Record of Depositors for the purpose of
the proxy. determining Members’ entitlement to attend, vote
and speak at the Meeting is 17 May 2018.
5. The instrument appointing a proxy shall be in writing
and signed by the appointor or by his attorney who
is authorised in writing. In the case of a corporation,
the instrument appointing a proxy or proxies must
be made under seal or signed by an officer or an
attorney duly authorised.

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59

Powering a Sustainable Future

A stronger TEAM 75 Independent Auditors’ Report

16 Board of Directors 80 Statement of

30 Management Discussion &

2 million 1.34 million Product Quality Incidents (PQI):

HENGYUAN REFINING COMPANY BERHAD

Board of Directors Board Risk Share Registrar

Lim Tau Kien

HENGYUAN REFINING COMPANY BERHAD

HENGYUAN REFINING COMPANY BERHAD

HENGYUAN REFINING COMPANY BERHAD

31 March 2017 30 June 2017 30 September 2017

HENGYUAN REFINING COMPANY BERHAD

NOTICE IS HEREBY GIVEN that the Fifty-Ninth Annual General Meeting

HENGYUAN REFINING COMPANY BERHAD

8. PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE FOR RECURRENT (Ordinary Resolution 10)

HENGYUAN REFINING COMPANY BERHAD

BY ORDER OF THE BOARD

HENGYUAN REFINING COMPANY BERHAD

HENGYUAN REFINING COMPANY BERHAD

STATEMENT ACCOMPANYING NOTICE OF

HENGYUAN REFINING COMPANY BERHAD

Achieved Better Board Composition and

01 Mr Wang YouDe 04 Mr Alan Hamzah Sendut

HENGYUAN REFINING COMPANY BERHAD

Date of appointment Date of appointment

HENGYUAN REFINING COMPANY BERHAD

Date of appointment Date of appointment

HENGYUAN REFINING COMPANY BERHAD

Date of appointment Date of appointment

HENGYUAN REFINING COMPANY BERHAD

01 David Keat 05 Johan bin Jainudin 09 Low Peng Peng

HENGYUAN REFINING COMPANY BERHAD

01 David Keat 02 Foo Ai Li

03 Zulhazmi bin Mohamad 04 William Chen Jung Huei

Appointed with effect from

HENGYUAN REFINING COMPANY BERHAD

05 Johan bin Jainudin 06 Zackaria bin Abdulah

Appointed with effect from Appointed with effect from

07 Sudhakaran Ayyappan 08 Shalina binti Sabtu

Appointed with effect from

HENGYUAN REFINING COMPANY BERHAD

11 Surya Gunawan bin Suharman

HENGYUAN REFINING COMPANY BERHAD

8% Fuel Oil Component

”2017 was a very positive year

HENGYUAN REFINING COMPANY BERHAD

Petrochemical Company Limited

41.1million margin & financial performance

HENGYUAN REFINING COMPANY BERHAD

HRC staff conducting safety checks . DIVIDEND POLICY

HENGYUAN REFINING COMPANY BERHAD

The Board decided to approve the interim dividend of LOOKING AHEAD

HENGYUAN REFINING COMPANY BERHAD

HENGYUAN REFINING COMPANY BERHAD

Crude Tanks Merox

Crude Distillers 45% - Diesel

HENGYUAN REFINING COMPANY BERHAD

1.2 Objectives & Strategies

HENGYUAN REFINING COMPANY BERHAD

HENGYUAN REFINING COMPANY BERHAD

HRC staff conducting routine operational inspection at site.