MSM Malaysia Holdings Berhad Annual Report 2019

MARKET LANDSCAPE MARKET OVERVIEW 2019 Global sugar production for 2019/2020 is expected to reduce by 6 million tonnes (from the previous season of 2018/2019) to 178 million tonnes due to lower production in India and Thailand (the world’s second and third largest sugar producers after Brazil). Brazil’s production remains almost unchanged compared to the previous season of 2018/2019 at about 26 million tonnes, and is expected to produce more sugar in the next season due to the slump in oil prices which consequently makes ethanol production unattractive. Thailand which has been affected by dry-weather in key planting areas, is expected to produce 8.2 million tonnes for the season of 2019/2020 as compared to 14.6 million tonnes in the previous season. Global sugar consumption is expected to be flattish and almost unchanged from the previous season of 2018/2019 at about 182 million tonnes as countries utilise the surpluses and carry-stocks from previous seasons. Sugar consumption for the next season of 2020/2021 is expected to increase but on a smaller quantum due to the worldwide movement restriction imposed (as an effort to curb the Covid-19 pandemic) and its impact on restaurateurs, hoteliers and the F&B Industry. Consumption for the next season of 2020/2021 is forecasted to be around 184.5 million tonnes against 185 million tonnes of sugar production. 2019/2020 SUGAR OVERVIEW COUNTRY OVERVIEW USA Production is estimated to have reduced 4% to 7.8 million tonnes due to poor harvest conditions resulting in lower sugar beet production. The largest reductions are centred in the Red River Valley in the States of North Dakota and Minnesota. Louisiana cane sugar production is also reduced due to expected lower sugarcane yields and lower recovery rate. Imports at 2.9 million tonnes are up slightly, consumption is forecast relatively flat, but stocks are estimated to decline to 1.2 million tonnes. BRAZIL Brazil’s production is estimated to remain almost unchanged at about 26.6 million tonnes as millers produced more ethanol instead of sugar from the sugarcane. This scenario is expected to change in the next season due to the drop in oil prices where millers will be inclined to produce more sugar instead of ethanol from the sugarcane. Ethanol is a substitute for petrol in Brazil. Exports are projected to drop by about 1 million tonnes to 18.6 million tonnes which is the lowest in the past 12 years. Exports have not been competitive against the country’s own domestic consumption and against ethanol production. The country’s stockpile increased by about 80,000 tonnes for the season. INDIA Production is estimated to decline by about 5 million tonnes to 29.3 million tonnes this season due to lower planting areas and lower yield. Consumption is expected to be healthy of around 28.5 million tonnes amid its growing economy. Exports are expected to reach 5 million tonnes as the Indian government provides subsidy to cover exports costs such as handling charges, freight charges, upgrading works on exports facilities and marketing costs amongst others. Stocks are expected to be over twice the ideal requirement of two to three months and will be pivotal in supporting its increasing consumption in times of lower production. EU Production is forecasted to increase by about 120,000 tonnes to 17.9 million tonnes for the season. Consumption in the EU is seen to be healthy with a deficit of about half a million tonnes against production. Stock are forecasted to be around 1 million tonnes. THAILAND Production inThailand is expected to be at a 10-year-low and decline by about 6 million tonnes this season (from 14.2 million tonnes last season to around 8.2 million tonnes this season) due to reduced planting areas and lower yield amid lower-than-expected precipitation in the country. Consumption numbers remains stable as the slight increase in consumption of sugar as a household item offsets the weaker demand of non-alcoholic beverages and canned pineapples for this season. Exports out of Thailand remains scarce, leading to the much higher premium compared to Brazilian sugar. Sugar production for the next season is expected to reduce by another 20% due to prolonged dry weather in key planting areas. MSM Malaysia Holdings Berhad | Annual Report 2019 30