MSM Malaysia Holdings Berhad Annual Report 2020

BUSINESS REVIEW MAINTAINING MARKET LEADERSHIP Maintaining leadership on the domestic front proved challenging in FY2020 as intense competition from imported refined sugars pressured margins and reduced average selling price. Wholesale volume dropped by 34% due to low demand and reduced operating hours in food and beverage outlets as well as less social and public gatherings, following movement restriction orders and travel bans to curb the COVID-19 pandemic. However, Industry volume increased by 10% as our customers were mostly essential services with uninterrupted operations. Sales and marketing activities centered on increasing demand from this sector by minimising service failures, delivering with reliability to all of our customers, and enhanced engagements to build customer loyalty. To take on the additional production from MSM Johor, export was a core strategy that took off in 2020. Committed focus and sustained efforts were directed towards securing regional market opportunities. This proved to be an equally competitive arena in which MSM had to contend with low market prices of integrated sugar producers such as India and Thailand. MSM’s strategy in winning export market share was to package the market price with sustainable product quality, various types of packaging selections and enhanced after-sales service. As a result, the Group’s export achievements were the highlight of the year as the total volume for export sales increased over 225% in FY2020. In addition, the export premium increased as well from an average of USD124/tonnes in 2019 to USD134/tonnes in 2020. ENSURING CONTINUOUS GROWTH The current highly price sensitive market calls for delicate strategies going forward which requires MSM to address the constrained supply of premium sugar and stockholding units (SKUs) limitation from MSM Johor which currently restricts our capabilities to support domestic requirements. More time and capital investments are required in forging our strengths on these fronts. To buffer Wholesale demand, we are seeking a consolidation of wholesalers for efficient fulfilment of demand. This will be facilitated by flexible price mechanism through rebates, bundling and ‘door to door’ offers. Strategic partnerships and OEM arrangements with major wholesalers will also be our way forward as these allow us to maximise margins by leveraging on their strengths and logistic assets. On the Industry front, we target to capture more small medium industries (SMI) with better price offerings and an assured supply of premium quality sugar. Towards export growth, the key priorities for 2021 is to maintain resilient in the existing market especially SEA country with main focus in Vietnam, Singapore, Philippines and Indonesia. In addition, MSM is planning for the new market explorations not only for refined sugar but other sugar related product such as Liquid Sugar and Fine Syrup. ACHIEVING OPERATIONAL EXCELLENCE During the year, in achieving operational excellence, sales and marketing teams are working closer with customers to realise further improvements in service levels. Sales teams have buckled down to assure “On Time In Full” services for every order. Greater engagement has also been forged to communicate raw sugar price movements via regular customer updates on NY11 terminal tagging. In securing more opportunities for value added products, ongoing investments are being made to increase MSM Johor’s production capacity. For refined sugar exports, the strategy is to enhance operational efficiency in order to compete with Thailand’s leading position as the export leader. Close monitoring and fast response to Thailand premium prices is key as any major hike in Thailand’s production will make our pricing uncompetitive. We are also engaging in a multi-pronged penetration strategy to make new in-roads and develop potential markets in Asia to mitigate the risk of dependence on just one country. These include direct negotiations with state owned enterprises and companies, as well as collaborations with local agents in targeted markets and international trade houses. MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 42 CHAIRMAN’S STATEMENT DELIVERING VALUE MSM OVERVIEW MANAGEMENT DISCUSSION & ANALYSIS GROUP FINANCIAL REPORT