KHAZANAH Nasional Bhd has declared a RM1 billion dividend to the government after returning to the black last year.

In the first full year of its refreshed mandate, the national sovereign wealth fund reported a turnaround in its overall performance, with higher divestment gains, lower impairments and robust portfolio returns contributing to its record profit.

It achieved a RM7.36 billion profit from its operations, compared to a loss of RM6.27 billion in 2018.

Gains from divestments, meanwhile, increased to RM9.9 billion from 2018’s RM1.4 billion.

Khazanah also reported lower impairments for the year under review at RM4.9 billion from RM7.3 billion the previous year.

It saw its financial position strengthened with expenses reduced by 28.2% to RM484 million from RM674 million in 2018.

“Our 2019 performance was achieved against a backdrop of uncertainties in the global landscape, which saw a prolonged Brexit process as well as the heightening of the US-China trade war,” said managing director Shahril Ridza Ridzuan in a statement today.

“This was made more challenging by the continued low-returns environment and generally slower economic growth.”

Despite these challenges, he said, the fund made significant progress to deliver on its mandate to grow Malaysia’s long-term wealth.

Khazanah achieved solid progress across multiple areas, including generating returns in line with long-term targets for its commercial fund, delivering financial and strategic outcomes for assets in its strategic fund, and bolstering its financial position through operating expenditure reduction and debt repayment.

Debt was reduced by 17% to RM45.8 billion from 2018’s RM55.2 billion, while realisable asset value cover improved from 2.4 times to three.

Its inter-generational wealth fund, namely the commercial fund, generated a time-weighted rate of return of 8.3%, surpassing the long-term targeted rate of return equivalent to the consumer price index of 3% on a five-year rolling basis.

The commercial fund’s net asset value stood at RM73.1 billion as of December 31 last year.

“One year into its portfolio-rebalancing exercise, Khazanah has progressed significantly towards diversifying the commercial fund under its refreshed mandate, and is well-positioned to increase its investment activities in 2020,” said Shahril Ridza.

As for the strategic fund, it generated an overall return of 2.9% versus its targeted rate of return of the 10-year Malaysian government securities yield on a five-year rolling basis.

Khazanah said it realised financial and strategic outcomes for specific assets despite the sluggish 2019 market.

“Khazanah conducted regular engagements with the government to enhance the regulatory landscape, as well as refreshed and strengthened the leadership bench in investee companies, and commenced restructuring initiatives to improve financial performance and unlock value.” – March 2, 2020.