MSM Malaysia Holdings Berhad Annual Report 2019

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. During the year, MSM also restructured its borrowings with lenders to more efficiently manage its cash flow. Furthermore, planned measures to streamline operations and strengthen its balance sheet were implemented. As a result, non-core assets or plantation land was monetised to pare down debt. For the year ahead, the Board’s strategic direction for the Group continues to centre around the implementation of transformation plans through diversification into downstream segments. These include potential greenfield investments or mergers and acquisitions in food based businesses to further diversify the Group’s income stream and increase utilisation of MSM Johor’s capacity. These strategic initiatives are expected to gradually bear fruit from 2020 onwards. MANAGING RISKS AND ENSURING BUSINESS CONTINUITY At Board level, focus for the year was directed on strengthening Risk Management and Business Continuity Good governance continues to be a priority and towards this end, MSM has leveraged on governance activities organised by our parent company FGV Holdings Berhad, which allowed us to consolidate resources and limit the overlapping of efforts. The Group’s commitment to good corporate governance for the year culminated in the achievement of the Transparency and Integrity at FGV Group level. For the year 2020, MSM targets to pursue the corporate measures activities to comply with the MACC Section 17A. COMMITMENT TO OUR STAKEHOLDERS In order to protect the stability of the nation’s sugar supply, MSM continued to engage with authorities, to highlight the potential negative impacts of any sugar market liberalisation. These include potentially compromising our nation’s self-sustainability levels and strengths, especially since other countries continue to protect their respective sugar industries. Management (BCM). We sought to improve Risk Management policies, tools and frameworks, taking into account concerns and views of various stakeholders. Various mitigation steps have been taken depending on the type of risks registered in the MSM Risk Register. For example: i) Risk of default due to tight cash flow is mitigated by an agreement to step up principal repayment and debt restructuring. ii) Risk of excess supply of refined sugar is mitigated by revising and improving the Marketing Plan and Strategy. To this end, the sales team is aggressively working on penetrating new markets, optimising product segmentation and at the same time focusing on serving the existing market better. iii) Risk of unfavourable raw sugar price movement continues to be mitigated by constant monitoring, hedging and responsive purchase at achievable profit target price points. 5