LOD Financial Leasing Plc.

Mrs. Nov Chandara

Chairperson

The recovery from the COVID-19 pandemic allowed the world economy to rebound in 2022, but several challenges remain such as supply chain disruptions due to lockdown measures in China and the ongoing Russia-Ukraine war causing a hike in prices of goods, particularly in fuel and raw materials. These factors pushed global inflation to 8.8% and lowered the earlier global growth projection of 4.4% to 3.2% according to world bank report.

In Cambodia, the Royal Government’s introduction of the “Living with COVID-19” strategy after the success of vaccination campaign has ensured the resumption of domestic economic activities. A series of economic and financial measures and the relaxation of regulatory forbearance in the banking sector in place have supported and sped up the recovery of Cambodia's economy. These favorable domestic conditions coupled with an increasing external demand have accelerated Cambodia's economic growth to 5.1% in 2022. According to the National Bank of Cambodia, the growth rate was driven by a 9.4% increase in the manufacturing sector, 15.2% in hotels and restaurants, 6.1% in transportation and 4.5% in wholesale and retail trades. Meanwhile, exports grew by 19.8%, much faster than that of imports, 8%, and tourism. Revenues noticeably grew at a 6.6% rate, while remittances from Cambodian workers working overseas increased by 4%. Moreover, foreign direct investment inflows rebounded by 4%, mainly due to the garment and food processing sectors. Exchange rate remained stable. The average inflation rate in 2022 reached 5.3%, higher than that in 2021 (2.9%) due to higher fuel and food prices.

At the same time, the major constraint that remained was the difficulty in collecting lease repayments, which implied increasing the lease portfolio at risk. This last point is still valid at year-end, and three quarters of respondents still report an increase in RAP. In added to this is the deterioration of the epidemiological situation in the world in the fall of 2022, as evidenced by the responses gathered in December 2022. The epidemic containment measures taken according to local contexts may once again have consequences on the activities of LOD Leasing and our clients, and a return to normalcy is not yet on the agenda. However, these new complications and their implications are not new.

Thus, we have limited impact on LOD' risk indicators. The slightly increase in PAR drawed more attention to risk management committee  as well as in recovery levels, does not reflect a further major deterioration in LOD' financial situation. This relative balance also corresponds to the LOD' state of mind as they approach 2022. Despite an unstable context and all the obstacles, it entails, the vast majority of our partners expect their activity to grow in the new year, in terms of both portfolio volume and the number of clients. 

We really appreciate for our staffs and management’ contribution and the support from other shareholders during this unprecedented time. we have taken necessary measures to protect our employees and reduce the influences on our business. Our employees embrace new skills, patience and develop new attitudes which have improved the way we operate. We have managed to use the pandemic as an opportunity for change, and we can emerge from this in a stronger and better position.