MSM Malaysia Holdings Berhad Annual Report 2019

Another reason for high production cost during the year was the yet unutilised old stock of raw sugar which came at a higher price than current stocks. Since raw sugar contributes 80 - 85% of production cost, this led to a substantially higher production than our competitors. Moving forward, having completely consumed our old raw sugar stock, we are now in better position to compete with our competitors by using raw sugar based on current market price. Another key area to be addressed going ahead is the reduction of future fuel costs. Fuel savings are anticipated with the installation of two new biomass boilers by 2021. In order to maintain market leadership, MSM plans to be more competitive in price and secure consumer demand for its bestselling packet sizes. To optimise Johor capacity and capability, focus will be on increasing sales volume through development of new products such as liquid sugars, premix and flavoured syrups. Liquid sugar production capacity is targeted to increase from 3,500 tonnes/month to 20,000 tonnes/month; while the premix product capacity is targeted to grow from 180 tonnes/month to 1,200 tonnes/month. Ensuring Continuous Growth In line with the anticipated increase in production capacity, the refining division will need to prepare packing and storage capacity to prevent any possible bottleneck issues in our production process. Plans are underway towards constructing a new packing house and seeking more refined sugar warehouses. Several strategies towards enhancing cost efficiency are also ongoing towards improving refining margins. These include managing operation of production lines based on silos and refined sugar stock levels to control operation cost; maximising usage of own power generation using Turbine Generator so as to reduce energy cost from Tenaga Nasional Berhad; and negotiations with vendors of packing materials for cost reduction. At MSM Johor, rectification works are mostly completed and by end of 2019, operations has achieved better stability. The need for additional manpower is a priority in ramping up production to maximum capacity levels. Focus is also directed towards intensive training of new hires to ensure optimum plant processes in the near future. The Johor plant will continue to raise export volume of sugar related product such as liquid sugar, fine syrup and premix product to expand market possibilities and build new strengths for MSM. Once sale volume can be increased, lower refining cost and production cost can be achieved through higher daily melting rate as well as the increase in capacity utilisation. Achieving Operational Excellence The Group is proud of our safety achievements as we continue to improve operational excellence. LossTime Injury (LTI) targets at all three plants were surpassed. MSM Prai’s Safety team organised various safety activities including Fire Drill with Jabatan Bomba. Emergency Response Team (ERT) members were sent for Bomba trainings to equip the necessary skills in the event of fire and emergency situations. First aid training too was duly conducted. All this contributed to a Occupational, Safety & Health (OSH) Achievement in the plant’s operations with the number of accidents in 2019 dropped to 7 cases from 15 cases in 2018. During the year, usage of social media technology was also kicked off to disseminate information related factory operation for better coordination and response. In terms of leveraging on stakeholder engagements, the MSM Prai team also continued to strive for good rapport with KTM personnel to ensure smooth transfer of sugar from Prai to Sg Buloh by KTM train. MSM Perlis achieved 1,133,091 hours without Lost Time Injury and won the FGV President’s Award For Safety 2018/2019 as well as achieved 3 rd place for Best Safety Projectand 4 th place for Best Safety & Health Committee. The refinery was also nominated for the National Occupational Safety and Health Excellence Award 2019 by the Department of Occupational Safety and Health of Malaysia. Moving forward, MSM Perlis is committed to launch an array of safety programmes, risk assessments and departmental challenges to heighten safety awareness and inculcate safety first thinking as a culture. Following the examples set by MSM Prai and MSM Perlis, MSM Johor has outlined its 2020 OSH goals as follows: i) Target 400 and above EAR (Employee Action Request), compared to 306 items in 2019. This will catalyse prompt action to prevent potential hazards ii) Reduce LTI cases by 50%, which means a maximum 3 cases instead of 6 cases as recorded in 2019 iii) Prepare for ISO1400 certification iv 100% implementation of all legislation requirements such as noise monitoring and water analysis v) 100% implementation and enforcement on safety compliance at site especially special work (hot work, confine space work, heavy lifting and working at height) vi) 100% participation on safety improvements such as daily safety toolbox by department heads, leaders, area owners and operators vii) Get started on safety ownership programme familiarisation viii) Conduct related internal and external safety training 35 MANAGEMENT DISCUSSION & ANALYSIS 03