MSM Malaysia Holdings Berhad Annual Report 2020

GROUP CHIEF EXECUTIVE OFFICER REVIEW Generally, the business community in Malaysia is experiencing tighter cash flow due to enforced business closures as part of the government’s movement control order (MCO) from March to May 2020. For the food and beverage sector, manufacturers started regulating productions which directly affects the consumption of sugar. Domestic economic recovery has also been further hampered with the Conditional Movement Control Order (CMCO) announced in quarter 4 (Q4) of 2020 due to the third wave of COVID-19. This has caused a drop in domestic sugar consumption for the wholesale and industry segment for 2020. The sharp slowdown in economic activities is expected to contract Malaysia’s GDP by at least 3.1% in 2020 according to World Bank projections. 2020 PERFORMANCE REVIEW Overall, MSM’s financial performance was mainly affected by lower sugar consumption in the domestic wholesale and industry segment due to MCO since late March 2020. During the year under review, the Group’s domestic sales volume dropped by 110,000 tonnes or 13% lower compared to the prior year and revenue loss was approximately RM118 million. During the initial phase of MCO, most of the domestic customers suspended their operations whilst DURING THE INITIAL PHASE OF MCO, MOST OF THE DOMESTIC CUSTOMERS SUSPENDED THEIR OPERATIONS WHILST THE INDUSTRY CUSTOMERS WERE FACING EXPORT SUPPLY CHAIN DISRUPTIONS. NONETHELESS, CONSUMPTION TRENDS HAVE BEEN IMPROVING SINCE Q3 2020 BASED ONTHE POSITIVE OPERATIONAL EARNINGS OFTHE GROUP SINCE JULY 2020. “ “ 2020 MARKET OVERVIEW Global and local markets were hit by an unprecedented impact from COVID-19 in 2020 that continues to reverberate into 2021. This has changed the landscape of business and challenged many industries, some of which, such as travel and hospitality, are recording immense setbacks following the travel bans and other virus containment measures imposed by the Government. the Industry customers were facing export supply chain disruptions. Nonetheless, consumption trends have been improving since Q3 2020 based on the positive operational earnings of the Group since July 2020. The weak sales volume in Domestic segment has been supplemented by an increased Export segment sales volume. The refined sugar volume has recorded a significant increase by almost threefold the volume recorded last year mainly influenced by increase Premium which contributed to an increase in revenue of more than RM200 million whilst new export products such as Liquid Sugar (LS), Fine Syrup (FS) and Premix Sugar (PS) contributed to an increase in revenue of approximately more than RM80 million. On the operations and reliability front, MSM continued to deliver up to customer expectations during the year and ensured sufficient sugar supply towards the nation. One of the highlights of the year was the celebration of ‘Gula Prai’ as a trusted brand, with over 50 years of experience in sugar refining industries. Through the tagline ‘Sweetening the lives of Malaysians since 1964’, a refreshed brand positioning was introduced to strengthen brand positioning and create top of mind awareness of Malaysia’s longest serving sugar brand. Towards this end, MSM also introduced a new packaging for ‘Gula Prai’ to reflect the brands long heritage in Malaysia. MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 23 SUSTAINABILITY REPORT EFFECTIVE LEADERSHIP CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION DETAILS OF THE ANNUAL GENERAL MEETING