MSM Malaysia Holdings Berhad Annual Report 2019

BUSINESS REVIEW Performance At a Glance Performance 2019 2018 2017 Rubber Replacement (seedlings) 0 19,696 232,222 Fertiliser Cost (RM) 0 184/ha 421/ha Development Cost (RM) 1,035/ha 2,736/ha 3,261/ha Mango Planting Area (ha) 0 10.7 7.4 DISPOSAL OF ASSET MSM’s plantation sector in year 2019 faced cash flow constraints and adverse climate not conducive for planting and replacement. Given the cumulative years of low returns on this segment, Plantation was identified as candidate under the Group’s Monetising Non-Core Assets strategy. The Board had approved the disposal of plantation land measuring 4,454 ha to any interested parties by way of open tender on January 2019. On 8 October 2019, MSM signed a sales and purchase agreement with F&N Agrivalley Sdn Bhd for the sale of plantation land in Chuping, Perlis for RM156 million. There are conditions precedent which must be fulfilled before the deal is concluded. However, on 9 April 2020, MSM Perlis Sdn Bhd has exercised its rights to rescind the sale and purchase agreement since F&N has not fulfilled the first Condition Precedent by the expiry of the Conditional Period as well as the Extended Conditional Period. With this new development, we will continuously keep a lookout for a new strategic plan to monetise this asset. The entire process was conducted in a transparent manner. We were clear from the outset that the disposal should bring benefit not just to MSM but also to the state of Perlis and the communities that live in the area, to balance commercial and social values. The disposal is in the best interest of the Group as the land generates negligible revenues but requires unsustainable financial commitments due to the high operating costs of maintaining the plantation activities. All retrenched employees are fairly compensated and some of them have been retained to assist in completing the paperwork and assets disposal before the ultimate closure of the plantation division. PLANTATION A core priority during a challenging 2019 was the need to accumulate sufficient cash flow to service our debt post completion of MSM Johor refinery. Amongst the many stop-gap initiative implemented, was the need to monetise non-core assets such as plantations. With Board approval of the disposal and in anticipation of the closure, the main planting and maintenance activities namely replacement and manuring were stopped altogether during the year under review. MSM Malaysia Holdings Berhad | Annual Report 2019 40