MSM Malaysia Holdings Berhad Annual Report 2021

Increasing Average Selling Price and Domestic Market Demand Margins were also sustained through higher Average Selling Price (ASP) in the domestic market to compensate for higher input cost of production. This was made possible through equitable negotiation outcomes with customers which are also considered based on volume offtakes which contributed positively to the Group’s performance. FY2021’s higher operational profit for the year is generally from the improved ASP. Warehouse Space Constraints There was limited internal storage for higher levels of refined sugar reserves. The full warehouses led to a slowdown in production and increased operating cost per unit. MSM Johor is currently building an additional warehouse with a 10,000 MT capacity and MSM is also exploring to establish a Northern Distribution Centre. ImprovingYield and UF in MSM Johor Operations MSM Group intensified focus towards improving yield and utilisation factor (UF) of MSM Johor to lower refining and production costs. Operations in MSM Johor is back on track with the completion of its second boiler rectification work. MSM Johor has set strategic targets to improve its financial performance in FY2022 with plans to ramp up MSM Johor production after debottlenecking of processes. COVID-19 Causing Operational Disruptions There was a requirement for a temporary plant shutdown at MSM Prai caused by rising number of COVID-19 cases that led to a potential disruption of Domestic sugar supply. To ensure sustainability of sugar supply and food security, MSM decided to undertake a strategic stockpile level of reserves that included importation of refined sugar. Ensuring Environmental License to Operate MSM enforces that being caring for the environment gives countless benefits to the society and living habitats surrounding our operations. MSM has taken proactive engagement efforts with the communities with the following initiatives: In FY2021, the DOE agreed and approved that mudcakes generated as by-products by the refineries are no longer termed as Scheduled Waste. A trial programme between MSM Johor and FGV Fertiliser to turn mudcake into fertilisers was initiated in October 2021, and potential collaborations with third parties and the research community to supply and study mudcakes are being explored. MSM Prai signed a Certificate of Collaboration with Penang’s DOE enabling green initiatives in preserving and conserving the environment on 13 October 2021. This was kicked off with a successful Mangrove replanting programme alongside the riverbank of Sungai Perai. Rising Natural Gas Cost Natural gas cost is a key component of MSM’s refining cost. The domestic natural gas price is linked to the volatility of Brent Crude Oil futures. MSM is hedging this risk with Brent linked derivatives like options and futures contracts. SUSTAINABILITY JOURNEY HOWWE ARE GOVERNED FINANCIAL STATEMENTS ADDITIONAL INFORMATION 51