MSM Malaysia Holdings Berhad Annual Report 2019

CHAIRMAN’S STATEMENT Dear Valued Stakeholders, MSM Malaysia Holdings Berhad (MSM) is today the eighth largest sugar refiner in the world by capacity, with the commercialisation of MSM Sugar Refinery (Johor) Sdn Bhd (MSM Johor) in April 2019. Whilst this may have been an advantageous situation under different circumstances, the truth of the matter is, in the prevailing market and with persistent national and industry-related challenges, this expanded capacity has not as yet delivered positive value to the Group and its stakeholders. The main reasons for this are, the continued sugar surplus in the global market which has adversely affected prices, and intensified competition within the domestic market as a result of the issuance of several approved import permits (APs) to non-refiners. Keeping the situation in mind, your Board and Management are focused on Attaining Balance to strengthen MSM’s position as market leader and to build future sustainability. In this regard, key progress was made in redirecting investments and efforts towards opportunities in the export market. Also, new controls have been put in place to ensure that speculative decision-making and previous errors of judgement will not be repeated. 2019 MARKET CHALLENGES As predicted, the issue of new APs and the liberalisation of the local market has resulted in stiff competition, taking its toll on MSM’s financial performance in 2019. Revenue dropped 9% to RM2 billion in Financial Year (FY) 2019 from RM2.2 billion in FY 2018, while the Group registered a net loss of RM299.77 million in FY 2019, compared to a profit of RM35.66 million a year ago. Both the nation’s sugar players experienced overcapacity in production levels as a result of new entrants flooding the local market. As running plants at an optimum level would have led to a stock build-up and an unnecessary tie-up of working capital, MSM focused on enhancing its business platform by seeking a strategic balance in the export market. This will also help to secure a more sustainable future for the Group going ahead. SHAPING NEW STRENGTHS As a result of the new operating challenges, the Group was able to reshape its thinking and approach, thus resulting in new achievements. In the second half of 2019, MSM Johor succeeded in the development of value-added products such as premix and liquid sugar. This extends the Group’s capabilities, increases product offerings and opens up new markets for growth. REVENUE RM2 billion MSM Malaysia Holdings Berhad | Annual Report 2019 4